How to create a financial forecast for a cleaning products manufacturer?
Developing and maintaining an up-to-date financial forecast for your cleaning products manufacturing business 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 cleaning products manufacturing business 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 cleaning products manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your cleaning products manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a cleaning products manufacturing business 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 products manufacturing business 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 products manufacturing business'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 needed to build a cleaning products manufacturing business financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a cleaning products manufacturing business, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the cleaning products manufacturing business on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing cleaning products manufacturing business, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your cleaning products manufacturing business's financial forecast.
The sales forecast for a cleaning products manufacturing business
From experience, it is usually best to start creating your cleaning products manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your cleaning products manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing cleaning products manufacturing business, 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:
- Changes in consumer preferences: As consumers become more environmentally conscious, they may be willing to pay a higher price for eco-friendly cleaning products, resulting in an increase in average price per transaction for your business.
- Competition: The entrance of new competitors in the cleaning products market may result in lower prices for similar products, potentially decreasing your average price and affecting your sales forecast.
- Raw material costs: Fluctuations in the cost of raw materials, such as chemicals and packaging, can impact the cost of manufacturing your products, ultimately affecting your pricing strategy and average price per transaction.
- Seasonal demand: The demand for cleaning products may vary throughout the year, with higher demand during spring cleaning season and lower demand during the winter months. This can affect your monthly transactions and average price per transaction.
- Changes in regulations: Changes in government regulations, such as stricter environmental regulations or labeling requirements, may result in additional costs for your business and potentially impact your pricing strategy and average price per transaction.
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 cleaning products manufacturing business
The next step is to estimate the costs you’ll have to incur to operate your cleaning products manufacturing business.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your cleaning products manufacturing business's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, benefits, and training costs for your employees.
- Accountancy fees: You will need to hire an accountant to help you with bookkeeping, tax preparation, and financial consulting.
- Insurance costs: You need to have insurance to protect your business from potential risks, such as liability, property damage, and worker's compensation.
- Software licenses: Your business will likely need software to manage inventory, orders, and finances. You will have to pay for licenses to use these programs.
- Banking fees: You will have to pay fees for banking services such as maintaining a business bank account, wire transfers, and credit card processing.
- Raw materials: As a cleaning products manufacturer, you will need to purchase raw materials like chemicals, packaging materials, and containers.
- Rent and utilities: This includes the cost of renting a manufacturing facility, as well as utilities like electricity, water, and heating.
- Transportation costs: You will need to transport your products to customers or distributors, so you will have to factor in the cost of shipping or hiring a delivery service.
- Marketing and advertising: To promote your business and products, you will have to invest in marketing and advertising strategies like social media ads, print ads, and trade shows.
- Packaging and labeling: Your products will need to be packaged and labeled, so you will have to pay for materials and printing costs.
- Maintenance and repairs: To keep your manufacturing equipment and facilities in good working condition, you will have to budget for maintenance and repairs.
- Office supplies: You will need basic office supplies like paper, ink, and pens for day-to-day operations.
- Legal fees: You may need to consult with a lawyer for legal advice or to handle any legal issues that may arise.
- Training and development: Investing in training and development for your employees can help improve their skills and productivity.
- Taxes: As a business owner, you will have to pay taxes on your profits, so you will need to budget for this expense.
This list is not exhaustive by any means, and will need to be tailored to your cleaning products manufacturing business's specific circumstances.
What investments are needed to start or grow a cleaning products manufacturing business?
Your cleaning products manufacturing business 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 cleaning products manufacturing business, these could include:
- Machinery and equipment: This includes the cost of purchasing or leasing equipment such as mixers, containers, and packaging machines for your cleaning products manufacturing business.
- Production facility: The cost of acquiring or renting a production facility is a significant capital expenditure for a cleaning products manufacturing business. This may include renovations, equipment installation, and utility connections.
- Raw materials: As a cleaning products manufacturing business, you will need to purchase raw materials in bulk to produce your products. This can include chemicals, fragrances, and packaging materials.
- Distribution vehicles: If you plan on distributing your cleaning products to retailers or directly to customers, you may need to purchase delivery trucks or vans. This is an important capital expenditure to consider in your forecast.
- Inventory: Building up an inventory of cleaning products is necessary for any manufacturing business. This may include purchasing or leasing warehouse space to store your products.
Again, this list will need to be adjusted according to the size and ambitions of your cleaning products manufacturing 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.
The financing plan of your cleaning products manufacturing business
The next step in the creation of your financial forecast for your cleaning products manufacturing business 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 products manufacturing business?
Now let's have a look at the main output tables of your cleaning products manufacturing business's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy cleaning products manufacturing business's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established cleaning products manufacturing business will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your cleaning products manufacturing business'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 products manufacturing business. 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 products manufacturing business'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 products manufacturing business:
- 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 products manufacturing business'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 products manufacturing business'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 products manufacturing business's financial projections?
Building a cleaning products manufacturing business 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 products manufacturing business'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 products manufacturing business 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 products manufacturing business's financial forecast?
Creating an accurate and error-free cleaning products manufacturing business 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 forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own cleaning products manufacturing business, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your cleaning products manufacturing business future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a cleaning products manufacturing business, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to project revenues for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting a cleaning products manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
