How to create a financial forecast for a cured meat delicatessen?

If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your cured meat delicatessen.

Putting together a cured meat delicatessen 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 cured meat delicatessen. 

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 cured meat delicatessen?

The financial projections for your cured meat delicatessen 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 cured meat delicatessen'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.

What information is needed to build a cured meat delicatessen 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 cured meat delicatessen, 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 cured meat delicatessen 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 cured meat delicatessen, 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 cured meat delicatessen's financial forecast.

The sales forecast for a cured meat delicatessen

From experience, it usually makes sense to start your cured meat delicatessen's financial projection with the revenues forecast.

The inputs used to forecast your sales will include the historical trading data of your cured meat delicatessen (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 cured meat delicatessen'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:

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. 

The operating expenses for a cured meat delicatessen

The next step is to estimate the expenses needed to run your cured meat delicatessen 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 cured meat delicatessen's operating expenses should include the following items at a minimum:

This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small cured meat delicatessen might not have the same level of expenditure as a larger one, for example.

What investments are needed to start or grow a cured meat delicatessen?

Once you have an idea of how much sales you could achieve and what it will cost to run your cured meat delicatessen, it is time to look into the equipment required to launch or expand the activity.

For a cured meat delicatessen, capital expenditures and initial working capital items could include:

Again, this list will need to be adjusted according to the specificities of your cured meat delicatessen.

The financing plan of your cured meat delicatessen

The next step in the creation of your financial forecast for your cured meat delicatessen 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 cured meat delicatessen?

Now let's have a look at the main output tables of your cured meat delicatessen's financial forecast.

The projected profit & loss statement

The projected profit & loss shows how profitable your cured meat delicatessen is likely to be in the years to come.

For your cured meat delicatessen 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 cured meat delicatessens, 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 cured meat delicatessen'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 cured meat delicatessen. 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 cured meat delicatessen 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 cured meat delicatessen'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 cured meat delicatessen 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 cured meat delicatessen's financial plan. 

Which tool should you use to create your cured meat delicatessen's financial forecast?

Using the right tool or solution will make the creation of your cured meat delicatessen's financial forecast much easier than it sounds. Let’s explore the main options.

Using online financial forecasting software to build your cured meat delicatessen'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

Outsourcing the creation of your cured meat delicatessen financial forecast is another possible solution.

This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.

Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000. 

Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra. 

If you decide to outsource your forecasting:

• Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively. 
• Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).

Why not use a spreadsheet such as Excel or Google Sheets to build your cured meat delicatessen's financial forecast?

Creating an accurate and error-free cured meat delicatessen 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.

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

1. A financial forecast shows expected growth, profitability, and cash generation metrics for your cured meat delicatessen.
2. Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
3. 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 cured meat delicatessen. Don't hesitate to contact us if you have any questions!

Also on The Business Plan Shop

• Financial forecast example
• How to create a turnover forecast for a business?
• Financial forecast template for a business idea

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