How to create a financial forecast for a crematorium?
Developing and maintaining an up-to-date financial forecast for your crematorium 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 crematorium 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 crematorium?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your crematorium and ensure that it can be financially viable in the years to come.
A financial plan for a crematorium 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 crematorium 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 crematorium'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 needed to build a crematorium 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 crematorium, 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 crematorium 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 crematorium, 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 crematorium's financial forecast.
The sales forecast for a crematorium
From experience, it is usually best to start creating your crematorium financial forecast by your sales forecast.
To create an accurate sales forecast for your crematorium, you will have to rely on the data collected in your market research, or if you're running an existing crematorium, 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:
- Cremation rates: As more people choose cremation over traditional burials, the average price for cremation services may increase. This could be due to higher demand for cremation services and the need for additional equipment and staff to accommodate the increase in transactions.
- Competition: The presence of other crematoriums in the area may affect your business's average price and number of monthly transactions. If there are many competitors, you may need to adjust your prices to remain competitive and attract more customers.
- Cultural and religious beliefs: Different cultural and religious beliefs may influence the demand for cremation services. For example, if a particular community has a strong preference for traditional burials, your business may see a decrease in monthly transactions and average price.
- Economic conditions: Economic downturns may affect the average price and number of monthly transactions for your crematorium. During times of financial hardship, people may opt for less expensive burial options or delay cremation services until they can afford them.
- Environmental regulations: Changes in environmental regulations may impact your business's costs and, in turn, the average price for cremation services. For example, if stricter regulations are implemented, you may need to invest in more expensive equipment or make changes to your processes, which could lead to higher prices for customers.
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 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 crematorium
The next step is to estimate the expenses needed to run your crematorium 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 crematorium's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, and benefits for all employees, including crematory technicians, office staff, and maintenance personnel.
- Accountancy fees: You will need to hire an accountant to manage your financial records, prepare tax returns, and provide financial advice for your crematorium.
- Insurance costs: As a crematorium, you will need to have insurance to protect against any potential risks or accidents that may occur on your premises.
- Software licenses: You will need to purchase and maintain software licenses for programs such as cremation software, scheduling software, and accounting software.
- Banking fees: This includes fees for maintaining a business bank account, transaction fees, and any other banking services you may need.
- Utility costs: This includes electricity, water, and gas expenses for running the crematorium and its facilities.
- Maintenance costs: You will need to budget for regular maintenance and repairs for equipment and facilities to ensure they are in good working condition.
- Supplies: This includes purchasing supplies such as urns, caskets, and other materials needed for cremation services.
- Marketing and advertising: You will need to promote your crematorium through various marketing channels, such as online advertising, print media, and event sponsorships.
- Training and education: It is important to invest in ongoing training and education for your staff to ensure they are up-to-date with industry standards and practices.
- Professional fees: You may need to hire professionals such as lawyers, consultants, or HR specialists to assist with certain aspects of your business.
- Rent or mortgage: If you do not own the property where your crematorium is located, you will need to budget for rent or mortgage payments.
- Taxes and permits: You will need to pay taxes and obtain necessary permits and licenses to operate a crematorium.
- Transportation costs: This includes fuel, maintenance, and insurance for any vehicles used for transporting deceased individuals or materials.
- Cleaning and sanitation: It is important to maintain a clean and sanitary environment for your crematorium, so budget for cleaning supplies and services.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small crematorium might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a crematorium?
Once you have an idea of how much sales you could achieve and what it will cost to run your crematorium, it is time to look into the equipment required to launch or expand the activity.
For a crematorium, capital expenditures and initial working capital items could include:
- Cremation Equipment: This includes items such as cremation chambers, retorts, and other necessary equipment used for the cremation process.
- Facility Construction and Renovation: This can include costs for building a new crematorium facility or renovating an existing one to meet safety and regulatory requirements.
- Machinery and Vehicles: These items may include cremation urn loaders, casket handling equipment, and vehicles for transporting remains.
- Technology and Software: This may include investments in software for record keeping and management, as well as any necessary hardware such as computers and servers.
- Safety and Environmental Compliance: This includes costs for installing and maintaining fire suppression systems, exhaust systems, and other safety measures to ensure compliance with regulations.
Again, this list will need to be adjusted according to the specificities of your crematorium.
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 crematorium
The next step in the creation of your financial forecast for your crematorium 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 crematorium?
Now let's have a look at the main output tables of your crematorium's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your crematorium is likely to be in the years to come.
For your crematorium 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 crematoriums, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your crematorium'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 crematorium'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 crematorium:
- 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 crematorium'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 crematorium'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 crematorium's financial forecast?
Using the right tool or solution will make the creation of your crematorium's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your crematorium'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 crematorium 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 crematorium'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 crematorium 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 crematorium'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 crematorium, 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 crematorium
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your crematorium.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a crematorium. Don't hesitate to contact us if you 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
- Financial forecast example
- Example of financial forecast for business idea
- How to create a turnover forecast for a business?
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Founder & CEO at The Business Plan Shop Ltd
