How to create a financial forecast for a construction equipment wholesaler?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your construction equipment wholesaler.
Putting together a construction equipment wholesaler 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 construction equipment wholesaler.
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 construction equipment wholesaler?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your construction equipment wholesaler and ensure that it can be financially viable in the years to come.
A financial plan for a construction equipment wholesaler 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 construction equipment wholesaler 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 construction equipment wholesaler'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 construction equipment wholesaler financial forecast?
A construction equipment wholesaler'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 construction equipment wholesaler, 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 construction equipment wholesaler 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 construction equipment wholesaler 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 construction equipment wholesaler's financial forecast.
The sales forecast for a construction equipment wholesaler
From experience, it is usually best to start creating your construction equipment wholesaler financial forecast by your sales forecast.
To create an accurate sales forecast for your construction equipment wholesaler, you will have to rely on the data collected in your market research, or if you're running an existing construction equipment wholesaler, 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:
- You may experience an increase in average price due to changes in the cost of raw materials, such as steel and aluminum, which are used in the manufacturing of construction equipment.
- Your average price may also be affected by fluctuations in foreign exchange rates, especially if you import equipment from other countries.
- Changes in demand for specific types of construction equipment, such as excavators or bulldozers, can also impact your average price. For example, if there is a sudden surge in demand for excavators, you may be able to charge a higher price for them.
- Your number of monthly transactions may be influenced by the overall health of the construction industry. If the industry is experiencing a downturn, you may see a decrease in the number of transactions as construction companies cut back on purchasing new equipment.
- The availability of financing options for construction equipment can also affect your number of monthly transactions. If financing becomes more difficult to obtain, customers may be hesitant to make large purchases, leading to a decrease in 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.
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 construction equipment wholesaler
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your construction equipment wholesaler 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 construction equipment wholesaler will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for your employees, such as sales representatives, warehouse workers, and administrative staff.
- Rent and utility expenses: You will need to pay for a warehouse or office space to store and display your equipment, as well as utilities such as electricity, water, and gas.
- Inventory costs: As a wholesaler, you will need to purchase and store a large inventory of construction equipment, which comes with costs such as purchasing, transportation, and storage fees.
- Marketing and advertising expenses: In order to attract customers and promote your business, you will need to invest in marketing and advertising efforts, such as creating a website, attending trade shows, and printing marketing materials.
- Accountancy fees: You will need to hire an accountant to manage your financial records, file tax returns, and provide financial advice.
- Insurance costs: As a wholesaler, you will need insurance to protect your business from potential risks, such as theft, damage to inventory, and liability for accidents on your premises.
- Software licenses: In order to manage your inventory, sales, and other business operations, you may need to purchase software licenses for accounting, inventory management, and customer relationship management.
- Shipping and transportation expenses: You will need to pay for shipping and transportation costs to deliver equipment to your customers or receive new inventory.
- Banking fees: As a business, you will need to maintain a bank account for managing finances, which may come with fees for transactions, wire transfers, and other services.
- Legal fees: You may need to hire a lawyer to assist with legal matters such as drafting contracts, resolving disputes, and ensuring compliance with regulations.
- Office supplies and equipment: You will need to purchase supplies such as paper, pens, and printer ink, as well as equipment such as computers and printers, to run your business.
- Training and development expenses: In order to keep up with industry trends and provide excellent service to your customers, you may need to invest in training and development for your employees.
- Travel and entertainment expenses: As a wholesaler, you may need to travel to meet with suppliers or attend trade shows, which comes with costs such as airfare, accommodation, and meals.
- Taxes and licenses: You will need to pay for business taxes and obtain necessary licenses to operate your business legally.
- Maintenance and repair costs: You will need to maintain and repair your equipment to ensure it is in good working condition and can be sold to customers.
This list will need to be tailored to the specificities of your construction equipment wholesaler, but should offer a good starting point for your budget.
What investments are needed to start or grow a construction equipment wholesaler?
Your construction equipment wholesaler 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 construction equipment wholesaler, these could include:
- Heavy equipment: This includes large machinery such as excavators, bulldozers, and cranes that are essential for construction projects. These machines can be quite expensive but are necessary for your business to operate efficiently.
- Fleet vehicles: As a construction equipment wholesaler, you will need to transport your equipment to your customers' locations. This may require purchasing or leasing a fleet of trucks or trailers to transport your inventory. Keep in mind the cost of maintenance, fuel, and insurance when considering this capital expenditure.
- Warehouse or storage space: As your business grows, you may need to invest in additional warehouse or storage space to store your inventory. This could include purchasing or renting a larger facility or expanding your current space to accommodate your growing business needs.
- Computer systems and software: In today's digital age, having efficient and up-to-date computer systems and software is crucial for running a successful wholesale business. This could include investing in new computers, servers, and software programs that will help you manage your inventory, orders, and finances.
- Office equipment and furniture: While this may seem like a minor expense, investing in quality office equipment and furniture can greatly improve the efficiency and productivity of your business. This could include items such as desks, chairs, printers, and other essential office equipment.
Again, this list will need to be adjusted according to the size and ambitions of your construction equipment wholesaler.
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 construction equipment wholesaler
The next step in the creation of your financial forecast for your construction equipment wholesaler 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 construction equipment wholesaler?
Now let's have a look at the main output tables of your construction equipment wholesaler's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy construction equipment wholesaler's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established construction equipment wholesaler will look different than for a startup.
The projected balance sheet
Your construction equipment wholesaler'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 projection
The cash flow forecast of your construction equipment wholesaler 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 construction equipment wholesaler'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 construction equipment wholesaler 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 construction equipment wholesaler'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 construction equipment wholesaler's financial projections?
Building a construction equipment wholesaler 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 construction equipment wholesaler'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.
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 construction equipment wholesaler 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 construction equipment wholesaler's financial forecast?
Creating an accurate and error-free construction equipment wholesaler 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 construction equipment wholesaler 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 construction equipment wholesaler, 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 project sales for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a construction equipment wholesaler? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
