How to create a financial forecast for a computer repair shop?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your computer repair shop.
Putting together a computer repair shop financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your computer repair shop.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a computer repair shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your computer repair shop and ensure that it can be financially viable in the years to come.
A financial plan for a computer repair shop 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 computer repair shop 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 computer repair shop'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 computer repair shop financial forecast?
A computer repair shop'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 computer repair shop.
If you are creating (or updating) the forecast of an existing computer repair shop, 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 computer repair shop 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 computer repair shop 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 computer repair shop's financial forecast.
The sales forecast for a computer repair shop
From experience, it usually makes sense to start your computer repair shop's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your computer repair shop (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 computer repair shop'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:
- Seasonal Demand: The average price and number of monthly transactions for a computer repair shop may be affected by seasonal demand. For example, during the holiday season, there may be an increase in demand for computer repair services as people purchase new computers or need help with setting up new devices. This can lead to an increase in both the average price and number of monthly transactions for your business.
- Technological Advancements: As technology continues to evolve, the average price and number of monthly transactions for a computer repair shop may be affected. For instance, the average price may decrease as newer and more efficient methods of repairing computers are developed. On the other hand, the number of monthly transactions may increase as more people are in need of repairs due to the constant changes and updates in technology.
- Competition: The average price and number of monthly transactions for your computer repair shop may also be influenced by the level of competition in your area. If there are several other computer repair shops in your vicinity, you may need to adjust your prices in order to stay competitive. This can result in a decrease in the average price and an increase in the number of monthly transactions as customers may be more inclined to choose your services.
- Economic Factors: Economic factors, such as a recession or an economic boom, can impact the average price and number of monthly transactions for your computer repair shop. During a recession, people may be more hesitant to spend money on repairs, leading to a decrease in both the average price and number of monthly transactions. Conversely, during an economic boom, people may have more disposable income and be more willing to invest in repairs, resulting in an increase in both the average price and number of monthly transactions.
- Customer Loyalty: The level of customer loyalty your computer repair shop has can also affect the average price and number of monthly transactions. If you have a strong base of loyal customers who trust your services, they may be more likely to refer others to your business, resulting in an increase in the number of monthly transactions. Additionally, loyal customers may be willing to pay a higher price for your services due to the trust and satisfaction they have with your business.
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.
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 computer repair shop
The next step is to estimate the expenses needed to run your computer repair shop 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 computer repair shop's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and training for all employees working at the computer repair shop. You will need to budget for technicians, customer service representatives, and administrative staff.
- Accountancy fees: As a business owner, you will need to hire an accountant to help you manage your finances and taxes. This expense may include bookkeeping, tax preparation, and financial advice.
- Insurance costs: It is important to protect your business from potential risks such as property damage, liability claims, and data breaches. You may need to purchase various types of insurance, including general liability, professional liability, and cyber insurance.
- Software licences: In order to provide computer repair services, you will need to invest in software licences for various applications and tools. This may include anti-virus software, diagnostic tools, and remote access software.
- Banking fees: Running a business involves managing finances and making regular transactions. You will need to budget for banking fees such as monthly service charges, transaction fees, and wire transfer fees.
- Rent: If you do not own the building where your computer repair shop is located, you will need to budget for monthly rent payments. This expense may also include utilities such as electricity, water, and internet.
- Marketing and advertising: In order to attract customers, you will need to invest in marketing and advertising efforts. This may include creating a website, running online ads, and printing flyers or business cards.
- Equipment and supplies: As a computer repair shop, you will need to purchase equipment and supplies such as tools, replacement parts, and cleaning products. These expenses may be ongoing as you need to replenish your supplies regularly.
- Training and certifications: To stay competitive and provide quality services, you may need to invest in training and certifications for you and your employees. This may include courses, workshops, and certification exams.
- Telephone and internet: As a business, you will need to communicate with customers and suppliers regularly. You will need to budget for telephone and internet expenses, which may include monthly service charges and long-distance fees.
- Professional fees: There may be times when you need to seek professional advice or services, such as legal or HR consulting. You will need to budget for these fees, which may be charged hourly or with a flat rate.
- Maintenance and repairs: Just like any other equipment, your computer repair tools and machines will require maintenance and repairs from time to time. You will need to budget for these expenses, which may include replacement parts and labor costs.
- Taxes and licenses: As a business owner, you will need to pay various taxes and obtain necessary licenses to operate legally. This may include income tax, sales tax, and business licenses.
- Office supplies: You will need to purchase office supplies such as paper, printer ink, and pens to keep your business running smoothly. These expenses may seem small, but they can add up over time.
- Travel expenses: Depending on the location of your computer repair shop and the services you offer, you may need to travel to meet with clients or attend industry events. You will need to budget for travel expenses such as transportation, accommodation, and meals.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small computer repair shop might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a computer repair shop?
Your computer repair 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 computer repair shop, these could include:
- Computer hardware: This includes desktop computers, laptops, servers, and other necessary equipment for repairing and troubleshooting computer issues. These assets are essential for running a computer repair shop and will likely be one of your largest capital expenditures.
- Software licenses: In addition to hardware, computer repair shops also need various software programs to diagnose and fix computer problems. This could include operating systems, antivirus software, and other specialized diagnostic tools. Keep in mind that these licenses may need to be renewed periodically, so be sure to factor that into your expenditure forecast.
- Workshop tools and equipment: Depending on the types of repairs you plan to offer, you may need to invest in specialized tools and equipment for your workshop. This could include things like soldering irons, multimeters, and other tools for hardware repairs.
- Furniture and fixtures: While not as essential as the other items on this list, furniture and fixtures can still be considered capital expenditures for a computer repair shop. This could include desks, chairs, shelving, and other items needed to set up your workspace.
- Inventory and spare parts: As a repair shop, you will likely need to keep a supply of common spare parts on hand for quick repairs. These could include things like hard drives, RAM, and cables. Be sure to include the cost of purchasing and restocking these items in your expenditure forecast.
Again, this list will need to be adjusted according to the size and ambitions of your computer repair 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 computer repair shop
The next step in the creation of your financial forecast for your computer repair 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 computer repair shop?
Now let's have a look at the main output tables of your computer repair shop's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your computer repair shop is likely to be in the years to come.
For your computer repair shop 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 computer repair shops, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your computer repair shop'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 cash flow forecast
Your computer repair shop'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 computer repair shop:
- 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 computer repair shop'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 computer repair shop'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 computer repair shop's financial forecast?
Using the right tool or solution will make the creation of your computer repair shop's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your computer repair shop's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection 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 computer repair 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 computer repair shop's financial forecast?
Creating an accurate and error-free computer repair 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 computer repair 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 computer repair shop
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 computer repair shop.
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 computer repair shop. 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 create a turnover forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a computer repair shop? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
