How to create a financial forecast for a cleaning company?
Creating a financial forecast for your cleaning company, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your cleaning company is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a cleaning company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your cleaning company and ensure that it can be financially viable in the years to come.
A financial plan for a cleaning company enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date cleaning company forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your cleaning company's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 cleaning company financial forecast?
A cleaning 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 cleaning 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 cleaning 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 cleaning 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 cleaning company's financial forecast.
The sales forecast for a cleaning company
The sales forecast, also called topline projection, is normally where you will start when building your cleaning 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 cleaning companies), and consider the elements below:
- Seasonal Demand: As a cleaning company, your business may experience fluctuations in demand based on the time of year. For example, during the spring and fall seasons, there may be an increase in demand for deep cleaning services as people do their annual spring cleaning or prepare for the holidays.
- Economic Conditions: Economic conditions can also have an impact on the average price and number of monthly transactions for a cleaning company. During times of economic downturn, individuals and businesses may cut back on non-essential services like professional cleaning, leading to a decrease in demand and potentially lower prices.
- Competition: The level of competition in your local market can also affect your average price and number of monthly transactions. If there are many other cleaning companies in your area, you may need to lower your prices to remain competitive, which could result in a decrease in average price. Additionally, if your competitors are offering promotions or discounts, you may also need to adjust your prices to remain competitive.
- Customer Reviews and Referrals: Positive reviews and word-of-mouth referrals can have a significant impact on a cleaning company's average price and number of monthly transactions. Satisfied customers are more likely to refer your services to their friends and family, potentially leading to an increase in demand and the ability to charge higher prices.
- Changes in Cleaning Technology: Advancements in cleaning technology can also affect the average price and number of monthly transactions for a cleaning company. For example, if a new cleaning product or equipment is introduced that allows for more efficient and effective cleaning, you may be able to charge higher prices for your services. However, if your competitors adopt these new technologies before you do, you may need to lower your prices to remain competitive.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 cleaning company
The next step is to estimate the expenses needed to run your cleaning 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 cleaning company's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, and benefits for all employees, including cleaners, administrative staff, and managers.
- Accountancy fees: You will need to hire an accountant to help you keep track of your financial records, file taxes, and provide financial advice.
- Insurance costs: As a cleaning company, you will need to have insurance coverage for your employees, equipment, and liability to protect against any accidents or damages.
- Software licenses: To efficiently manage your business operations, you may need to invest in software for scheduling, invoicing, and managing customer information.
- Banking fees: You will need a business bank account to manage your finances, and there may be fees associated with transactions, wire transfers, and account maintenance.
- Cleaning supplies: This includes all the necessary materials and chemicals needed to perform cleaning services, such as mops, brooms, disinfectants, and trash bags.
- Equipment maintenance: Your cleaning equipment, such as vacuums, carpet cleaners, and buffers, will require regular maintenance to ensure they are in good working condition.
- Vehicle expenses: If your business requires you to travel to different locations, you will need to budget for vehicle expenses, including gas, insurance, and maintenance.
- Marketing and advertising: To attract new customers and promote your services, you may need to invest in marketing and advertising strategies, such as flyers, social media ads, and Google AdWords.
- Uniforms: Your employees will need to have professional and clean uniforms to represent your company, and this cost should be factored into your budget.
- Training and development: To ensure your employees are equipped with the necessary skills and knowledge, you may need to invest in training and development programs.
- Rent/lease: If you operate your business from a physical location, you will need to budget for rent or lease payments.
- Utilities: This includes electricity, water, and gas bills for your office space, as well as any other utilities needed for your business operations.
- Office supplies: You will need to purchase office supplies, such as paper, ink, and pens, to manage day-to-day operations and administrative tasks.
- Taxes and licenses: As a business owner, you will be responsible for paying taxes and obtaining necessary licenses for your cleaning company.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small cleaning company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a cleaning company?
Once you have an idea of how much sales you could achieve and what it will cost to run your cleaning company, it is time to look into the equipment required to launch or expand the activity.
For a cleaning company, capital expenditures and initial working capital items could include:
- Cleaning equipment: This includes items such as vacuums, carpet cleaners, and floor buffers. These are essential tools for any cleaning company and will likely need to be replaced or upgraded as they wear out over time.
- Company vehicle: If your cleaning company offers services that require transportation, such as window cleaning or pressure washing, you may need to purchase a company vehicle. This could include a van or truck to transport equipment and supplies.
- Uniforms and protective gear: In order to maintain a professional appearance and protect your employees, you may need to invest in uniforms and protective gear such as gloves, masks, and aprons. These items may need to be replaced periodically.
- Office equipment: A cleaning company may also need various office equipment, such as computers, printers, and software, to manage administrative tasks and communicate with clients. These items may also need to be upgraded or replaced over time.
- Storage and organization systems: As your cleaning company grows, you may need to invest in storage and organization systems to keep track of supplies and equipment. This could include shelving units, storage bins, and labeling systems.
Again, this list will need to be adjusted according to the specificities of your cleaning company.
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 cleaning company
The next step in the creation of your financial forecast for your cleaning 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 cleaning company?
Now let's have a look at the main output tables of your cleaning company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your cleaning company is likely to be in the years to come.
For your cleaning company to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established cleaning companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your cleaning company'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 cleaning company. 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 forecast
Your cleaning company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the cleaning company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your cleaning company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your cleaning company's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
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 cleaning company's financial projections?
Building a cleaning 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 projection software to build your cleaning company's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your cleaning company financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your cleaning company's financial forecast?
Creating an accurate and error-free cleaning company financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your cleaning company.
- 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 cleaning company. 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 create a sales forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
