How to create a financial forecast for a chocolate shop?
Developing and maintaining an up-to-date financial forecast for your chocolate shop is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a chocolate shop financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a chocolate shop?
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 chocolate shop becomes handy.
Creating a chocolate shop 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 chocolate shop.
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 chocolate shop 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 chocolate shop'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.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a chocolate shop financial forecast?
A chocolate shop'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 chocolate shop, 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 chocolate shop 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 chocolate shop 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 chocolate shop's financial forecast.
The sales forecast for a chocolate shop
From experience, it is usually best to start creating your chocolate shop financial forecast by your sales forecast.
To create an accurate sales forecast for your chocolate shop, you will have to rely on the data collected in your market research, or if you're running an existing chocolate shop, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- You will need to consider the seasonal demand for chocolate, as sales tend to be higher during certain holidays or events such as Valentine's Day, Easter, and Christmas. This may affect your average price and number of monthly transactions.
- The availability and quality of ingredients can also impact your business. If there is a shortage of cocoa beans or other key ingredients, it may affect your average price as you may need to source more expensive alternatives. Additionally, if the quality of your chocolate is not up to par, it may lead to a decrease in monthly transactions as customers may choose to go elsewhere for their chocolate fix.
- The location of your shop can also play a role in your average price and number of monthly transactions. If you are located in a busy shopping area or near tourist attractions, you may be able to charge a higher price and attract more customers. On the other hand, if you are in a less desirable location, you may need to adjust your prices and may see a decrease in transactions.
- The overall economy can also impact your business. In times of economic downturn, customers may be more price-sensitive and may be less likely to splurge on luxury items like chocolate. This may result in a decrease in both average price and number of monthly transactions. On the other hand, during times of economic prosperity, customers may be more willing to spend on indulgences like chocolate, leading to an increase in both average price and number of monthly transactions.
- The popularity of health and wellness trends may also affect your business. With the rise of health-conscious consumers, there may be a shift towards healthier or alternative options for chocolate, such as dark chocolate or vegan options. This may impact your average price and number of monthly transactions, as you may need to adjust your offerings to cater to these trends.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a chocolate shop
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your chocolate shop on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a chocolate shop will include some of the following items:
- Staff costs: This includes salaries, benefits, and any other expenses related to your employees, such as training or uniforms.
- Accountancy fees: You may need to hire an accountant to help you manage your financial records and taxes.
- Insurance costs: Protect your business with insurance that covers your inventory, equipment, and liability.
- Software licences: This expense includes any software programs you use to manage your business, such as accounting or inventory management software.
- Banking fees: You'll need to pay fees for services such as credit card processing, cash deposits, and check processing.
- Rent or lease payments: Your chocolate shop will need a physical location, which means paying rent or lease payments.
- Utilities: You'll need to pay for electricity, water, and other utilities to keep your shop running.
- Inventory costs: This includes the cost of purchasing and restocking your chocolate and other ingredients.
- Packaging materials: You'll need to purchase packaging materials, such as boxes and bags, to package your chocolates for sale.
- Marketing and advertising: Spread the word about your chocolate shop through marketing and advertising efforts, such as social media ads, flyers, and promotions.
- Cleaning and maintenance: Keep your shop clean and well-maintained with regular cleaning services and maintenance for equipment.
- Licenses and permits: You'll need to obtain necessary licenses and permits to legally operate your chocolate shop.
- Professional fees: This may include fees for legal advice, consulting services, or other professional services.
- Supplies: Stock up on essentials such as paper towels, cleaning supplies, and office supplies for your shop.
- Waste management: Properly dispose of any waste generated by your chocolate shop, such as packaging materials or food waste.
This list will need to be tailored to the specificities of your chocolate shop, but should offer a good starting point for your budget.
What investments are needed to start or grow a chocolate shop?
Your chocolate shop financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a chocolate shop, these could include:
- Equipment: This includes items such as refrigerators, display cases, chocolate tempering machines, and other specialized equipment necessary for the production and display of your chocolates.
- Furniture and Fixtures: You will need to invest in high-quality furniture and fixtures to create an inviting and comfortable environment for your customers. This may include tables, chairs, shelving, and lighting.
- Renovations and Remodeling: Depending on the location of your chocolate shop, you may need to make renovations or remodel the space to fit your specific needs. This could include installing a kitchen area, adding storage space, or upgrading the flooring and walls.
- Point of Sale (POS) System: A reliable POS system is essential for a successful chocolate shop. This includes hardware such as cash registers, barcode scanners, and credit card machines, as well as software for inventory management and sales tracking.
- Packaging and Branding: The packaging and branding of your chocolates are crucial for attracting customers and creating a memorable brand. This may include custom packaging, labels, and other branding materials.
Again, this list will need to be adjusted according to the size and ambitions of your chocolate shop.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your chocolate shop
The next step in the creation of your financial forecast for your chocolate shop 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 chocolate shop?
Now let's have a look at the main output tables of your chocolate shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your chocolate shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a chocolate shop 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
The projected balance sheet gives an overview of your chocolate shop's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your chocolate shop. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 chocolate shop 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 chocolate shop'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 chocolate shop 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 chocolate shop's financial plan.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your chocolate shop's financial projections?
Building a chocolate shop 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 chocolate shop'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 chocolate shop 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 chocolate shop's financial forecast?
Creating an accurate and error-free chocolate shop 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.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
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 chocolate shop, 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 chocolate shop
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your chocolate shop.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a chocolate shop. Don't hesitate to contact us if you have any questions!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Financial forecast example
- How to project revenues for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
