How to create a financial forecast for a chimney sweeping company?

If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your chimney sweeping company.

Putting together a chimney sweeping company financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.

In this practical guide, we'll cover everything you need to know about building financial projections for your chimney sweeping company. 

We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.

Let's dive in!

Why create and maintain a financial forecast for a chimney sweeping company?

In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your chimney sweeping company becomes handy.

Creating a chimney sweeping company financial forecast forces you to take stock of where your business stands and where you want it to go. 

Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your chimney sweeping company.

Having this clear plan in place will give you the confidence needed to move forward with your business’s development. 

Having an up-to-date financial forecast for a chimney sweeping company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall. 

Finally, your chimney sweeping company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.

What information is used as input to build a chimney sweeping company financial forecast?

A chimney sweeping company's financial forecast is only as good as the inputs used to build it.  

If you are creating (or updating) the forecast of an existing chimney sweeping company, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.

If you are building financial projections for a chimney sweeping company startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.

For a new venture, you will also need a precise list of the resources needed to keep the chimney sweeping company running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later). 

Let's now take a closer look at the elements that make up your chimney sweeping company's financial forecast.

The sales forecast for a chimney sweeping company

The sales forecast, also called topline projection, is normally where you will start when building your chimney sweeping company financial forecast.

Creating a coherent sales projection boils down to estimating two key drivers:

• The average price 
• The number of monthly transactions

To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing chimney sweeping companies), and consider the elements below:

After the sales forecast comes the operating expenses budget, which we will now look into in more detail.

The operating expenses for a chimney sweeping company

The next step is to estimate the expenses needed to run your chimney sweeping company on a day-to-day basis.

These will vary based on the level of sales expected, and the location and size of your business. 

But your chimney sweeping company's operating expenses should include the following items at a minimum:

This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small chimney sweeping company might not have the same level of expenditure as a larger one, for example.

What investments are needed to start or grow a chimney sweeping company?

Once you have an idea of how much sales you could achieve and what it will cost to run your chimney sweeping company, it is time to look into the equipment required to launch or expand the activity.

For a chimney sweeping company, capital expenditures and initial working capital items could include:

Again, this list will need to be adjusted according to the specificities of your chimney sweeping company.

The financing plan of your chimney sweeping company

The next step in the creation of your financial forecast for your chimney sweeping company is to think about how you might finance your business.

You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.

Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.

Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.

What tables compose the financial plan for a chimney sweeping company?

Now let's have a look at the main output tables of your chimney sweeping company's financial forecast.

The profit & loss forecast

The forecasted profit & loss statement will enable you to visualise your chimney sweeping company's expected growth and profitability over the next three to five years.

A financially viable P&L statement for a chimney sweeping company should normally show:

• Sales growing above inflation
• Stable or expanding (ideally) profit margins
• A net profit

This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.

The projected balance sheet

Your chimney sweeping company's projected balance sheet provides a snapshot of your business’s financial position at year-end.

It is composed of three types of elements: assets, liabilities and equity:

• Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.

The cash flow projection

The cash flow forecast of your chimney sweeping company will show how much cash the business is expected to generate or consume over the next three to five years.

There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:

• Operating cash flow: how much cash is generated by the chimney sweeping company's operations
• Investing cash flow: what is the business investing to expand or maintain its equipment 
• Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)

Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your chimney sweeping company is adequately funded.

Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your chimney sweeping company's financial plan. 

Which tool should you use to create your chimney sweeping company's financial projections?

Building a chimney sweeping company financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.

Using online financial forecasting software to build your chimney sweeping company's projections

The modern and easiest way is to use professional online financial forecasting software such as the one we offer at The Business Plan Shop.

There are several advantages to using specialised software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You have access to complete financial forecast templates
• You get a complete financial forecast ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck
• It’s cost-efficient and much cheaper than using an accountant or consultant (see below)

If you are interested in this type of solution, you can try our forecasting software for free by signing up here.

Hiring a financial consultant or chartered accountant

Hiring a consultant or chartered accountant is also an efficient way to get a professional chimney sweeping company financial projection.

As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.

The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.

If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).

Why not use a spreadsheet such as Excel or Google Sheets to build your chimney sweeping company's financial forecast?

Creating an accurate and error-free chimney sweeping company financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.

Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes. 

Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon. 

Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer. 

Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.

Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection software like The Business Plan Shop is built for this.

Use our financial projection templates for inspiration

The Business Plan Shop has dozens of financial forecast templates available.

Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.

Whether you are just starting out or already have your own chimney sweeping company, looking at our financial forecast template is a good way to:

• Understand what a complete business plan should look like
• Understand how you should model financial items for your chimney sweeping company

Takeaways

1. A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
2. Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
3. Using financial forecasting software makes it easy to create and maintain up-to-date projections for your chimney sweeping company.

You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a chimney sweeping company. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!

Also on The Business Plan Shop

• Example of financial projections
• How to create a turnover forecast for a business?
• Financial forecast for a business idea

Know someone who runs or wants to start a chimney sweeping company? Share our financial projection guide with them!