How to create a financial forecast for a dental equipment manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your dental equipment manufacturing business.
Putting together a dental equipment manufacturing business 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 dental equipment manufacturing business.
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 dental equipment manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your dental equipment manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a dental equipment manufacturing business 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 dental equipment manufacturing business 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 dental equipment manufacturing business'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 dental equipment manufacturing business financial forecast?
A dental equipment manufacturing business's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing dental equipment manufacturing business.
If you are creating (or updating) the forecast of an existing dental equipment manufacturing business, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new dental equipment manufacturing business startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the dental equipment manufacturing business to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your dental equipment manufacturing business's financial forecast.
The sales forecast for a dental equipment manufacturing business
From experience, it usually makes sense to start your dental equipment manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your dental equipment manufacturing business (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 dental equipment manufacturing business'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:
- Economic conditions: The state of the economy can greatly impact the average price and number of monthly transactions for your dental equipment manufacturing business. During times of economic downturn, dentists may be more cautious with their spending, resulting in lower prices and fewer transactions. Conversely, during periods of economic growth, dentists may be more willing to invest in new equipment, leading to higher prices and more transactions.
- Technological advancements: With rapid advancements in dental technology, it is important for your business to stay ahead of the curve. If new, more advanced equipment is introduced to the market, it may affect the average price of your products. Dentists may be willing to pay a higher price for equipment with cutting-edge technology, resulting in an increase in average price. Additionally, as technology improves, dentists may choose to upgrade their equipment more frequently, leading to an increase in monthly transactions.
- Competition: The level of competition in the dental equipment manufacturing industry can greatly impact your business's average price and number of monthly transactions. If there are many competitors offering similar products at lower prices, it may be necessary for your business to lower its prices in order to remain competitive. On the other hand, if your business has a unique product or holds a strong market position, you may be able to charge higher prices and attract more customers, resulting in an increase in average price and monthly transactions.
- Regulatory changes: Changes in regulations related to the dental industry can have a significant impact on your business's average price and monthly transactions. For example, if new regulations require dentists to invest in more advanced equipment, your business may be able to charge higher prices and see an increase in monthly transactions. However, if regulations become more stringent, it may result in higher production costs for your business, leading to an increase in average price but potentially a decrease in monthly transactions.
- Industry trends: Staying informed about industry trends is crucial for your dental equipment manufacturing business. For example, if there is a growing trend towards more environmentally friendly equipment, your business may need to invest in new technology or materials, resulting in a higher average price for your products. Additionally, if there is a trend towards more frequent equipment upgrades, it may lead to an increase in monthly transactions for your business.
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.
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 dental equipment manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your dental equipment manufacturing business 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 dental equipment manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, benefits, and taxes for your employees. As a dental equipment manufacturing business, you will need skilled employees such as engineers, technicians, and administrative staff.
- Accountancy Fees: It is important to have a professional accountant to manage your financial records, prepare tax returns, and provide financial advice for your business.
- Insurance Costs: As a manufacturer, you will need insurance to protect your business from any potential risks, such as product liability, property damage, and worker's compensation.
- Software Licences: To manage your operations efficiently, you will need software licenses for programs such as accounting, inventory management, and project management.
- Banking Fees: Your business will have banking fees for services such as checking accounts, wire transfers, and credit card processing.
- Rent/Lease Payments: You will need a facility to manufacture and store your dental equipment. This expense includes monthly rent or lease payments.
- Utilities: This includes electricity, water, and gas for your manufacturing facility.
- Raw Materials: As a manufacturer, you will need to purchase raw materials to produce your dental equipment.
- Machinery and Equipment Maintenance: Regular maintenance of your manufacturing equipment is necessary to ensure smooth operations and avoid costly repairs.
- Marketing and Advertising: To attract new customers and promote your business, you will need to allocate a budget for marketing and advertising expenses.
- Travel and Transportation: If your business involves attending trade shows or meeting with clients, you will need to budget for travel expenses such as airfare, hotel accommodations, and rental cars.
- Professional Fees: This includes fees for legal services, consulting, and other professional services that your business may need.
- Office Supplies and Expenses: This includes expenses for office supplies, printing, postage, and other office-related expenses.
- Training and Development: To keep your employees up-to-date with the latest industry trends and technologies, you may need to budget for training and development programs.
- Employee Benefits: In addition to salaries, your business may offer benefits such as health insurance, retirement plans, and paid time off.
This list will need to be tailored to the specificities of your dental equipment manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a dental equipment manufacturing business?
Once you have an idea of how much sales you could achieve and what it will cost to run your dental equipment manufacturing business, it is time to look into the equipment required to launch or expand the activity.
For a dental equipment manufacturing business, capital expenditures and initial working capital items could include:
- Dental chairs: These are essential for any dental equipment manufacturing business as they are used by dentists to provide treatment to patients. You will need to invest in high-quality, ergonomic dental chairs that can withstand frequent use and have adjustable features for patient comfort.
- Autoclaves: These are used to sterilize dental instruments and equipment to prevent the spread of infections. Investing in a reliable autoclave is crucial for maintaining the safety and hygiene standards of your dental equipment manufacturing business.
- X-ray machines: These are necessary for diagnosing dental issues and creating treatment plans for patients. As technology advances, it is important to invest in modern, digital x-ray machines that can provide accurate and detailed images.
- Dental handpieces: These are used by dentists to perform various procedures such as drilling, polishing, and cleaning. You will need to invest in high-quality, durable handpieces that can withstand frequent use and have interchangeable parts for versatility.
- Dental cabinetry: This includes cabinets, shelves, and drawers used to store dental instruments, supplies, and materials. Investing in well-designed and sturdy cabinetry will help you keep your dental equipment organized and easily accessible for efficient workflows.
Again, this list will need to be adjusted according to the specificities of your dental equipment manufacturing business.
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 dental equipment manufacturing business
The next step in the creation of your financial forecast for your dental equipment manufacturing business 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 dental equipment manufacturing business?
Now let's have a look at the main output tables of your dental equipment manufacturing business's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your dental equipment manufacturing business is likely to be in the years to come.
For your dental equipment manufacturing business 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 dental equipment manufacturers, 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 dental equipment manufacturing business'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 dental equipment manufacturing business. 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 projected cash flow statement
A projected cash flow statement for a dental equipment manufacturing business is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your dental equipment manufacturing business's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the dental equipment manufacturing 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 dental equipment manufacturing business's financial projections?
Building a dental equipment manufacturing business 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 dental equipment manufacturing business'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 dental equipment manufacturing business 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 dental equipment manufacturing business's financial forecast?
Creating an accurate and error-free dental equipment manufacturing business financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your dental equipment manufacturing business.
- 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 dental equipment manufacturing business. 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
- How to project revenues for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
