How to create a financial forecast for a coke oven products manufacturer?
Developing and maintaining an up-to-date financial forecast for your coke oven 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 coke oven 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 coke oven products manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your coke oven products manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a coke oven 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 coke oven 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 coke oven 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 used as input to build a coke oven products manufacturing business financial forecast?
A coke oven products manufacturing business's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing coke oven products manufacturing business.
If you are creating (or updating) the forecast of an existing coke oven products manufacturing business, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new coke oven products manufacturing business startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the coke oven products manufacturing business to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your coke oven products manufacturing business's financial forecast.
The sales forecast for a coke oven products manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your coke oven products manufacturing business 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 coke oven products manufacturers), and consider the elements below:
- Your coke oven products may experience an increase in demand due to a rise in infrastructure projects, such as the construction of roads and bridges, which require steel products made from coke oven by-products.
- The price of petroleum, which is used as a fuel in the coke oven production process, may fluctuate and affect your average price. An increase in petroleum prices may result in higher production costs and, therefore, a higher average price for your products.
- The introduction of new environmental regulations may require your business to invest in more advanced and expensive equipment, leading to an increase in your average price to cover these additional costs.
- The stability of the steel industry, which is a major consumer of coke oven products, may impact your monthly transactions. Any slowdown in the steel industry can result in a decrease in demand for your products and, therefore, a decrease in your monthly transactions.
- Your business's partnerships with steel manufacturers may also affect your average price and monthly transactions. If you have strong relationships with key players in the steel industry, you may be able to negotiate better prices for your products and secure more transactions.
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 coke oven products manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your coke oven products manufacturing business 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 coke oven products manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and training expenses for all employees, including managers, production workers, and administrative staff.
- Raw Materials: This expense covers the cost of purchasing coal, iron ore, and other raw materials used in the production of coke oven products.
- Utilities: This includes the cost of electricity, gas, and water used in the production process.
- Maintenance and Repairs: This expense covers the cost of repairing and maintaining equipment and machinery used in the manufacturing process.
- Transportation and Logistics: This includes the cost of transporting raw materials to the manufacturing facility and delivering finished products to customers.
- Rent and Leasing: This expense covers the cost of renting or leasing the manufacturing facility and any equipment or vehicles used in the production process.
- Marketing and Advertising: This includes expenses for promoting the company and its products, such as advertisements, trade shows, and marketing materials.
- Accountancy Fees: This expense covers the cost of hiring an accountant or accounting firm to handle financial reporting and tax preparation.
- Insurance Costs: This includes the cost of insuring the manufacturing facility, equipment, and workers against accidents, liability, and other risks.
- Software Licences: This expense covers the cost of purchasing and renewing software licences for programs used in the manufacturing process, such as accounting software and inventory management systems.
- Banking Fees: This includes fees for bank accounts, credit card processing, and other financial services used by the business.
- Legal Fees: This expense covers the cost of hiring a lawyer for legal advice and services related to the business, such as contract review and intellectual property protection.
- Training and Development: This includes expenses for training programs and professional development opportunities for employees.
- Office Supplies: This expense covers the cost of purchasing office supplies, such as paper, pens, and printer ink, used in day-to-day operations.
- Taxes and Licences: This includes taxes and fees paid to local, state, and federal governments for operating the business and obtaining necessary licenses and permits.
This list will need to be tailored to the specificities of your coke oven products manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a coke oven products manufacturing business?
Your coke oven 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 coke oven products manufacturing business, these could include:
- Coke ovens: These are the main fixed assets in a coke oven products manufacturing business. They are used to convert coal into coke, which is an essential component in the production of steel. The cost of purchasing and installing coke ovens can be a significant capital expenditure for your business.
- Conveyors and other material handling equipment: In order to transport the coal and coke throughout the manufacturing process, you will need to invest in conveyors and other material handling equipment. These can include bucket elevators, belt conveyors, and screw conveyors. These assets are crucial for the smooth operation of your business and can be a significant capital expenditure.
- Pollution control equipment: As a coke oven products manufacturing business, you will need to comply with strict environmental regulations. This may require you to invest in pollution control equipment such as dust collectors, scrubbers, and flue gas desulfurization systems. These assets can be expensive but are essential for the sustainability of your business.
- Furnaces and other heating equipment: In addition to coke ovens, you may also need to invest in other heating equipment such as blast furnaces, reheat furnaces, and annealing furnaces. These assets are used to heat and process the raw materials and can be a significant capital expenditure for your business.
- Infrastructure and buildings: Your manufacturing facility will require a variety of buildings and infrastructure, including warehouses, offices, and utility buildings. These fixed assets are necessary for the smooth operation of your business and can be a significant capital expenditure, especially if you need to purchase or construct new buildings.
Again, this list will need to be adjusted according to the size and ambitions of your coke oven 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 coke oven products manufacturing business
The next step in the creation of your financial forecast for your coke oven 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 coke oven products manufacturing business?
Now let's have a look at the main output tables of your coke oven products manufacturing business's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your coke oven products manufacturing business is likely to be in the years to come.
For your coke oven products manufacturing business 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 coke oven products manufacturers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your coke oven products manufacturing business'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 projected cash flow statement
A projected cash flow statement for a coke oven products manufacturing business is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your coke oven products manufacturing business's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the coke oven products manufacturing 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 coke oven products manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your coke oven products manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your coke oven 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 coke oven 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 coke oven products manufacturing business's financial forecast?
Creating an accurate and error-free coke oven 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 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 projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your coke oven products manufacturing business.
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 coke oven products manufacturing business. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to project revenues for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a coke oven products manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
