How to create a financial forecast for a concierge services company?
Creating a financial forecast for your concierge services 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 concierge services 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 concierge services company?
The financial projections for your concierge services company act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your concierge services company's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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What information is used as input to build a concierge services company financial forecast?
A concierge services 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 concierge services 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 concierge services 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 concierge services 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 concierge services company's financial forecast.
The sales forecast for a concierge services company
From experience, it is usually best to start creating your concierge services company financial forecast by your sales forecast.
To create an accurate sales forecast for your concierge services company, you will have to rely on the data collected in your market research, or if you're running an existing concierge services company, 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:
- Economic Conditions: The state of the economy can greatly impact the average price and number of monthly transactions for your concierge services company. During times of economic downturn, individuals may be more hesitant to spend money on luxury services, leading to a decrease in both price and transactions. On the other hand, during times of economic prosperity, individuals may have more disposable income and be more willing to pay for concierge services, resulting in an increase in both price and transactions.
- Tourism Trends: If your concierge services company operates in a popular tourist destination, tourism trends can have a significant impact on your sales forecast. During peak tourist seasons, you may see an increase in both the average price and number of monthly transactions as visitors look for convenient and personalized services. However, during off-peak seasons, your prices and transactions may decrease as there are fewer tourists in the area.
- Competition: The level of competition in your area can also affect your sales forecast. If there are many other concierge services companies offering similar services, you may need to adjust your prices to remain competitive, which could lead to a decrease in your average price. Additionally, if your competitors are offering promotions or discounts, you may see a decrease in your transactions as potential customers may choose to go with a lower-priced option.
- Seasonal Demand: Your concierge services may experience seasonal fluctuations in demand, which can impact your sales forecast. For example, if you offer services such as event planning or holiday decorating, you may see an increase in transactions and prices during peak seasons. However, during slower seasons, you may need to adjust your prices or offer additional services to maintain a steady level of transactions.
- Demographics: The demographics of your target market can also play a role in your sales forecast. For example, if your concierge services cater primarily to older or wealthier individuals, your average price may be higher due to their willingness to pay for convenience and luxury. On the other hand, if your target market is younger or more budget-conscious, you may need to adjust your prices to attract more customers and maintain a steady number of transactions.
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.
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The operating expenses for a concierge services company
The next step is to estimate the costs you’ll have to incur to operate your concierge services company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your concierge services company's operating expenses should normally include the following items:
- Staff Costs: This includes salaries and benefits for your concierge staff, such as receptionists, personal assistants, and event coordinators.
- Accountancy Fees: You may need to hire an accountant to keep track of your finances and file taxes for your concierge services company.
- Insurance Costs: As a concierge services company, you may need to have liability insurance to protect against any potential damages or lawsuits.
- Software Licenses: To manage reservations, appointments, and other tasks, you may need to purchase software licenses for scheduling and customer relationship management (CRM) systems.
- Banking Fees: Your concierge services company will likely have to pay fees for banking services, such as wire transfers, credit card processing, and account maintenance.
- Marketing and Advertising Expenses: To promote your concierge services and attract clients, you may need to invest in marketing and advertising efforts, such as creating a website, printing brochures, or running social media ads.
- Office Rent: If you have a physical office space for your concierge services company, you will need to budget for monthly rent or lease payments.
- Office Supplies: You will need to purchase office supplies, such as stationery, printer ink, and pens, to keep your concierge services running smoothly.
- Telephone and Internet Costs: Your concierge services company will likely need to have phone and internet services for communication with clients and vendors.
- Transportation Expenses: Depending on the services you offer, you may need to budget for transportation costs, such as gas, car rentals, or public transportation fees.
- Professional Memberships and Subscriptions: To stay updated on industry trends and network with other concierge services professionals, you may want to join professional organizations or subscribe to industry publications.
- Training and Development: It's important to invest in the continued training and development of your concierge staff to ensure they provide top-notch services to your clients.
- Legal Fees: If you need to consult with a lawyer for any legal matters related to your concierge services company, you will need to budget for legal fees.
- Travel Expenses: If your concierge services involve travel, you will need to budget for transportation, accommodation, and other related expenses.
- Miscellaneous Expenses: There may be other miscellaneous expenses that arise, such as office maintenance, equipment repairs, or unexpected fees, that you should budget for.
This list is not exhaustive by any means, and will need to be tailored to your concierge services company's specific circumstances.
What investments are needed to start or grow a concierge services company?
Once you have an idea of how much sales you could achieve and what it will cost to run your concierge services company, it is time to look into the equipment required to launch or expand the activity.
For a concierge services company, capital expenditures and initial working capital items could include:
- Office Equipment: This includes items such as computers, printers, scanners, and office furniture. These are necessary for the daily operations of your concierge services company and will likely be one of your biggest capital expenditures.
- Vehicle(s): Depending on the type of services you offer, you may need to purchase one or more vehicles for your concierge business. This could include a luxury car or van for transportation services, or a small fleet of cars for running errands and completing tasks for clients.
- Property Renovations: If you plan on leasing or purchasing a physical location for your concierge services company, you may need to make renovations or improvements to the space. This could include things like painting, flooring, and updating the space to fit your business needs.
- Technology Upgrades: As a concierge services company, it's important to stay up-to-date with technology in order to provide the best services to your clients. This could include investing in a new customer relationship management (CRM) system, updating your website, or implementing new software for scheduling and communication.
- Security Systems: In order to protect your clients and their personal information, it may be necessary to invest in security systems for your office space and/or vehicles. This could include installing cameras, alarm systems, and other security measures to ensure the safety and privacy of your clients.
Again, this list will need to be adjusted according to the specificities of your concierge services 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 concierge services company
The next step in the creation of your financial forecast for your concierge services 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 concierge services company?
Now let's have a look at the main output tables of your concierge services company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your concierge services company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a concierge services 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 concierge services company'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 concierge services 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 concierge services 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 concierge services 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 concierge services 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 concierge services company's financial forecast?
Using the right tool or solution will make the creation of your concierge services company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your concierge services 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional concierge services 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 concierge services company's financial forecast?
Creating an accurate and error-free concierge services 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 concierge services 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 concierge services 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
- Financial forecast for a business idea
- How to create a turnover forecast for a business?
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Founder & CEO at The Business Plan Shop Ltd
