How to create a financial forecast for a consignment store?
Creating a financial forecast for your consignment store, 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 consignment store 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 consignment store?
The financial projections for your consignment store 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 consignment store'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.
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 consignment store 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 consignment store, 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 consignment store 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 consignment store, 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 consignment store's financial forecast.
The sales forecast for a consignment store
The sales forecast, also called topline projection, is normally where you will start when building your consignment store 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 consignment stores), and consider the elements below:
- Trends in Popular Brands: Keep an eye on popular brands that have a high demand in your area. If these brands are heavily consigned, you may see an increase in the average price of your items.
- Economy: Changes in the economy can greatly affect the buying habits of consumers. In times of economic downturn, you may see a decrease in the average price of items as customers look for more affordable options.
- Seasonal Trends: Certain seasons may see an increase or decrease in consignment sales. For example, summer months may see an increase in sales for clothing and accessories, while winter months may see a decrease in sales for these items.
- Competition: Keep an eye on other consignment stores in your area. If a new store opens up or an existing store has a sale or promotion, it may affect your average price or number of monthly transactions.
- Customer Demographics: The demographics of your target customers can also affect your sales. If your store is located in an area with a high population of younger individuals, you may see a higher demand for trendy and vintage items, while an older demographic may prefer more classic and timeless pieces.
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 consignment store
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your consignment store 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 consignment store will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other expenses related to your employees. As a consignment store, you may also need to budget for commissions or bonuses for your sales staff.
- Rent: The cost of renting your store location should be factored into your operating expenses. This can include base rent, utilities, and any additional fees for maintenance or repairs.
- Marketing and Advertising: In order to attract customers and promote your store, you may need to budget for marketing and advertising expenses. This can include online advertising, print ads, and promotional events.
- Inventory Costs: As a consignment store, you will need to budget for the cost of purchasing or acquiring inventory from consignors. This can include buying items outright or paying consignors a percentage of the sale price.
- Accounting and Bookkeeping Fees: To keep track of your finances and stay compliant with tax laws, you may need to hire an accountant or bookkeeper. This can be a recurring expense that should be factored into your operating budget.
- Insurance: It is important to protect your business and your assets with insurance. This can include liability insurance, property insurance, and workers' compensation insurance for your employees.
- Software Licenses: To help manage your store's operations, you may need to purchase software licenses for point-of-sale systems, inventory management, and accounting software.
- Banking Fees: As a business, you will likely have various banking fees such as transaction fees, monthly maintenance fees, and fees for using certain services like wire transfers.
- Supplies: In order to keep your store running smoothly, you may need to budget for supplies such as shopping bags, price tags, and office supplies.
- Legal Fees: As a business owner, you may need to consult with a lawyer for various reasons such as drafting contracts, dealing with legal disputes, and staying compliant with laws and regulations.
- Utilities: In addition to rent, you will also need to budget for utilities such as electricity, water, and gas for your store location.
- Maintenance and Repairs: As a store owner, you are responsible for maintaining and repairing your store location. This can include expenses for cleaning, repairs, and general upkeep.
- Credit Card Processing Fees: If you accept credit card payments from customers, you will need to budget for credit card processing fees charged by your payment processor.
- Professional Memberships: As a consignment store owner, you may benefit from joining professional associations or networks. These memberships may come with annual fees that should be included in your operating expenses.
- Taxes: It is important to budget for taxes, both income and sales taxes, as part of your operating expenses. Consult with a tax professional to determine your tax obligations as a consignment store.
This list will need to be tailored to the specificities of your consignment store, but should offer a good starting point for your budget.
What investments are needed to start or grow a consignment store?
Creating and expanding a consignment store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a consignment store could include elements such as:
- Store fixtures and displays: This includes items such as shelving, racks, display cases, and mannequins. These are necessary for showcasing and organizing your consignment items in a visually appealing way.
- Point of sale (POS) system: A POS system is essential for tracking sales, managing inventory, and processing payments. This can include hardware, software, and installation fees.
- Security system: It's important to protect your consignment store from theft and vandalism. A security system may include cameras, alarms, and monitoring services.
- Furniture and equipment: This can include items such as desks, chairs, computers, and printers. These are necessary for running the day-to-day operations of your store.
- Leasehold improvements: If you're leasing a space for your store, you may need to make improvements or renovations to make it suitable for your business. This could include painting, flooring, or installing new lighting.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your consignment store.
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 consignment store
The next step in the creation of your financial forecast for your consignment store 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 consignment store?
Now let's have a look at the main output tables of your consignment store's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your consignment store is likely to be in the years to come.
For your consignment store 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 consignment stores, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your consignment store'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 consignment store. 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 projection
The cash flow forecast of your consignment store will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the consignment store's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your consignment store is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your consignment store's financial plan.
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 consignment store's financial projections?
Building a consignment store 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 forecasting software to build your consignment store'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 consignment store 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 consignment store's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free consignment store financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your consignment store's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 consignment store, 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 consignment store
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 consignment store.
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 consignment store. 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 sales forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a consignment store? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
