How to create a financial forecast for a close protection service company?
Creating a financial forecast for your close protection service 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 close protection service 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 close protection service 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 close protection service company becomes handy.
Creating a close protection service 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 close protection service 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 close protection service 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 close protection service 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.
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 close protection service company financial forecast?
A close protection service 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 close protection service 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 close protection service 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 close protection service 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 close protection service company's financial forecast.
The sales forecast for a close protection service company
From experience, it usually makes sense to start your close protection service company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your close protection service company (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your close protection service company's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Changing security threats: As the security landscape constantly evolves, the level of protection required by clients may increase, resulting in a higher average price for your services.
- Economic instability: In times of economic uncertainty, businesses and high-profile individuals may be more cautious with their spending, leading to a decrease in the number of monthly transactions for close protection services.
- Geopolitical events: Political instability or high-profile events in certain regions may result in an increase in demand for close protection services, leading to a higher number of monthly transactions and potentially higher prices.
- Competition: The presence of other close protection service companies in your target market may drive down prices as clients have more options to choose from. This can also lead to a decrease in the number of monthly transactions if clients are able to find more affordable services elsewhere.
- Technological advancements: The use of new and advanced technology in the security industry may result in higher prices for your services, as your company may need to invest in new equipment and training for your staff. This could also potentially lead to a decrease in the number of monthly transactions if clients are not willing to pay for these added expenses.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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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 close protection service company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your close protection service company 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 close protection service company will include some of the following items:
- Staff costs: Salaries, benefits, and training for close protection officers and administrative staff.
- Accountancy fees: Fees for professional accounting services to manage financial records and taxes.
- Insurance costs: Premiums for liability insurance, worker's compensation, and property insurance.
- Software licenses: Fees for software used for scheduling, client management, and security threat assessment.
- Banking fees: Charges for bank transactions, wire transfers, and credit card processing fees.
- Vehicle expenses: Fuel, maintenance, and insurance for vehicles used for close protection services.
- Equipment and gear: Costs for purchasing and maintaining necessary equipment and gear for close protection operations.
- Office rent: Rent for office space used for administrative tasks and client meetings.
- Marketing and advertising: Costs for promoting the close protection services through various marketing channels.
- Travel expenses: Costs for travel, accommodation, and meals for close protection officers while on assignment.
- Legal fees: Fees for legal services, contracts, and permits related to close protection operations.
- Uniforms and attire: Costs for purchasing and maintaining uniforms and attire for close protection officers.
- Training and education: Fees for ongoing training and education for close protection officers to maintain their skills and knowledge.
- Communication expenses: Costs for phone plans, internet services, and communication devices for close protection officers.
- Security equipment: Costs for security equipment such as cameras, alarms, and surveillance systems used for close protection operations.
This list will need to be tailored to the specificities of your close protection service company, but should offer a good starting point for your budget.
What investments are needed to start or grow a close protection service company?
Once you have an idea of how much sales you could achieve and what it will cost to run your close protection service company, it is time to look into the equipment required to launch or expand the activity.
For a close protection service company, capital expenditures and initial working capital items could include:
- Armored Vehicles: Armored vehicles are an essential capital expenditure for a close protection service company. These vehicles provide safe and secure transportation for clients and their protection team.
- Surveillance Equipment: Close protection service companies often invest in high-tech surveillance equipment, such as cameras, listening devices, and tracking devices. These tools are crucial for gathering intelligence and monitoring potential threats.
- Communication Devices: In order for a close protection team to stay in constant communication, they require reliable and advanced communication devices. This can include radios, satellite phones, and encrypted communication systems.
- Firearms and Ammunition: Close protection service companies often invest in firearms and ammunition for their protection team. This is necessary for their safety and the safety of their clients in high-risk situations.
- Protective Gear: Protective gear, such as bulletproof vests, helmets, and tactical gear, is essential for the safety and security of close protection teams. These items must be regularly maintained and replaced as needed.
Again, this list will need to be adjusted according to the specificities of your close protection service 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 close protection service company
The next step in the creation of your financial forecast for your close protection service 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 close protection service company?
Now let's have a look at the main output tables of your close protection service company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your close protection service company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a close protection service 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 close protection service company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 forecast
Your close protection service 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 close protection service 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 close protection service 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 close protection service 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 close protection service company's financial forecast?
Using the right tool or solution will make the creation of your close protection service company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your close protection service 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.
Calling in a financial consultant or chartered accountant
Enlisting the help of a consultant or accountant is also a good way to obtain a professional close protection service company financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your close protection service company's financial forecast?
Creating an accurate and error-free close protection service 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
- 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 close protection service company 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 close protection service company, 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 create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a close protection service company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
