How to create a financial forecast for a dance production company?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your dance production company.
Putting together a dance production company 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 dance production company.
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 dance production company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your dance production company and ensure that it can be financially viable in the years to come.
A financial plan for a dance production company 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 dance production company 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 dance production company'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 dance production company financial forecast?
A dance production 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 dance production 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 dance production 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 dance production 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 dance production company's financial forecast.
The sales forecast for a dance production company
From experience, it is usually best to start creating your dance production company financial forecast by your sales forecast.
To create an accurate sales forecast for your dance production company, you will have to rely on the data collected in your market research, or if you're running an existing dance production 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:
- Number of Performances: The number of performances you plan to have each month will have a direct impact on the average price and number of monthly transactions. If you have more performances, you can potentially sell more tickets and increase your revenue. However, if you have too many performances, you risk oversaturating the market and reducing demand for tickets.
- Type of Production: The type of dance production you offer can also affect your average price and number of monthly transactions. For example, a large-scale production with elaborate costumes and sets may demand higher ticket prices, but may also limit the number of performances you can have each month. On the other hand, a smaller, more intimate production with minimal production costs may allow for more frequent performances and lower ticket prices.
- Seasonal Demand: The time of year can also impact your average price and number of monthly transactions. For dance productions, there may be a higher demand during certain seasons, such as the holiday season or summer months when people are more likely to attend events and have more disposable income. This can lead to higher ticket prices and increased sales.
- Competition: The level of competition in your area can influence your average price and number of monthly transactions. If there are other dance production companies offering similar shows, you may need to adjust your prices or marketing strategies to remain competitive. On the other hand, if you are the only dance production company in the area, you may have more control over ticket prices and sales.
- Featured Dancers: The popularity and skill level of the featured dancers in your production can also impact your average price and number of monthly transactions. If you have well-known or highly skilled dancers, you may be able to charge higher ticket prices and attract more audiences. However, if your dancers are not as well-known or skilled, you may need to adjust your prices accordingly and may see a decrease in sales.
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 dance production company
The next step is to estimate the costs you’ll have to incur to operate your dance production company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your dance production company's operating expenses should normally include the following items:
- Staff Costs: This includes salaries for dancers, choreographers, and other production staff, as well as payroll taxes and benefits.
- Costumes and Props: Dance productions often require unique and elaborate costumes and props, which can be expensive to purchase or rent.
- Venue Rental: You will need to pay for a space to rehearse and perform your production, which can include costs for renting a theater, studio, or other performance venue.
- Marketing and Advertising: To attract an audience, you will need to invest in marketing and advertising, which can include print materials, digital ads, and promotional events.
- Travel and Accommodation: If your production involves touring or performing at multiple venues, you will need to budget for travel and accommodation expenses for your dancers and production staff.
- Music Licensing: If you are using copyrighted music in your production, you will need to obtain the proper licenses and pay any associated fees.
- Insurance Costs: It is important to have insurance to protect your production company and its assets, including liability insurance and coverage for equipment and costumes.
- Accountancy Fees: You may need to hire an accountant or bookkeeper to manage your company's finances and prepare tax returns.
- Software Licences: Dance production companies often use software for choreography, music editing, and other production needs, which may require purchasing licenses or subscriptions.
- Production Supplies: This includes things like lighting, sound equipment, and other technical supplies needed for your production.
- Banking Fees: You will likely have to pay fees for maintaining a business bank account and processing transactions, such as credit card payments.
- Legal Fees: It is important to consult with a lawyer to ensure your production company is operating within legal guidelines, which may include fees for contract drafting and review.
- Royalties and Performance Fees: If your production includes original choreography or music, you may need to pay royalties or performance fees to the creators.
- Office Expenses: This includes costs for office supplies, equipment, and utilities needed to run your production company.
- Training and Development: To maintain a high level of talent and creativity, you may need to invest in training and development programs for your dancers and production staff.
This list is not exhaustive by any means, and will need to be tailored to your dance production company's specific circumstances.
What investments are needed to start or grow a dance production company?
Creating and expanding a dance production company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a dance production company could include elements such as:
- Studio Space: This is one of the most important fixed assets for a dance production company. You will need to rent or purchase a space for rehearsals, classes, and performances. This includes flooring, mirrors, and sound equipment.
- Costumes and Props: As a dance production company, you will need to invest in costumes and props for your performances. This includes purchasing or renting costumes, as well as any props needed for specific dances.
- Lighting and Sound Equipment: In order to create a professional and visually appealing performance, you will need to invest in lighting and sound equipment. This includes stage lighting, speakers, microphones, and other necessary equipment.
- Transportation: Depending on the size and scope of your productions, you may need to invest in transportation for your dancers and equipment. This can include renting or purchasing a truck or van for transporting sets, costumes, and props.
- Costume and Set Storage: As your dance production company grows, you will need a dedicated space for storing costumes and sets. This could be a storage unit or a room within your studio space. It is important to budget for this expense as it will help protect your assets and keep them organized.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your dance production 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 dance production company
The next step in the creation of your financial forecast for your dance production 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 dance production company?
Now let's have a look at the main output tables of your dance production company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your dance production company is likely to be in the years to come.
For your dance production company 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 dance production companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your dance production 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 projection
The cash flow forecast of your dance production company 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 dance production company'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 dance production company 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 dance production company'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 dance production company's financial forecast?
Using the right tool or solution will make the creation of your dance production company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your dance production company's projections
The modern and easiest way is to use professional online financial forecasting 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 dance production 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 dance production company's financial forecast?
Creating an accurate and error-free dance production 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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own dance production company, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your dance production company.
- 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 dance production company. 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.
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- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
