How to create a financial forecast for a diner?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your diner.
Putting together a diner 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 diner.
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 diner?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your diner and ensure that it can be financially viable in the years to come.
A financial plan for a diner 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 diner 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 diner'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 diner financial forecast?
A diner'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 diner, 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 diner 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 diner 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 diner's financial forecast.
The sales forecast for a diner
From experience, it is usually best to start creating your diner financial forecast by your sales forecast.
To create an accurate sales forecast for your diner, you will have to rely on the data collected in your market research, or if you're running an existing diner, 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:
- Your diner's location and local competition can greatly impact your average price and number of monthly transactions. If you are located in an area with high foot traffic and limited competition, you may be able to charge higher prices and attract more customers. On the other hand, if you are surrounded by other diners offering similar menus, you may need to keep your prices competitive and focus on providing excellent service to stand out.
- The seasonality of certain ingredients can also affect your average price and number of monthly transactions. For example, if your diner specializes in using fresh, local produce, you may need to adjust your prices or menu offerings during certain times of the year when these ingredients are more expensive or less available. This can impact your customers' perception of your prices and potentially decrease the number of transactions during these periods.
- The overall economy can also play a role in your diner's average price and number of monthly transactions. During times of economic downturn, customers may be more price-sensitive and opt for cheaper dining options, resulting in a decrease in your average price and number of transactions. On the other hand, during times of economic growth, customers may be willing to spend more on dining out, allowing you to charge higher prices and potentially increase your number of transactions.
- The demographic of your target audience can also affect your diner's average price and number of monthly transactions. If your diner caters to a younger, budget-conscious crowd, you may need to keep your prices lower to attract and retain customers. However, if your target audience is more affluent, you may be able to charge higher prices and potentially increase your average transaction value.
- The quality and uniqueness of your menu offerings can also impact your average price and number of monthly transactions. If your diner offers a unique and high-quality menu, customers may be willing to pay higher prices and become repeat customers. On the other hand, if your menu is generic and lacks differentiation from other diners, customers may not be willing to pay as much or return for future visits.
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 diner
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your diner 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 diner will include some of the following items:
- Staff Costs: This includes the salaries, wages, and benefits of your employees, such as cooks, servers, and cashiers.
- Accountancy Fees: You will need to hire an accountant to help you keep track of your financial records and file your taxes correctly.
- Insurance Costs: You will need to have insurance to protect your diner from potential risks, such as accidents, property damage, and lawsuits.
- Software Licences: You may need to purchase software licences for your point-of-sale system, inventory management, and accounting software.
- Banking Fees: This includes fees for processing credit and debit card payments, as well as fees for maintaining a business bank account.
- Food and Beverage Costs: This includes the cost of ingredients, beverages, and other supplies needed to prepare and serve meals to your customers.
- Rent or Lease: If you do not own the building where your diner is located, you will need to pay rent or lease fees to your landlord.
- Utilities: You will need to pay for electricity, gas, water, and other utilities to keep your diner running.
- Advertising and Marketing: To attract new customers and promote your diner, you may need to spend money on advertising and marketing efforts, such as social media ads and flyers.
- Equipment Maintenance: This includes the cost of maintaining and repairing kitchen equipment, furniture, and fixtures.
- Cleaning Supplies: To maintain a clean and sanitary environment for your customers, you will need to purchase cleaning supplies, such as detergents, disinfectants, and paper products.
- Training and Development: You may need to invest in training programs and workshops for your employees to improve their skills and knowledge.
- Taxes and Licenses: You will need to pay taxes to the government and obtain necessary licenses and permits to operate your diner legally.
- Legal Fees: You may need to hire a lawyer for legal advice and assistance with contracts, leases, and other legal matters.
- Credit Card Processing Fees: You will need to pay fees to credit card companies for processing payments made with credit and debit cards.
This list will need to be tailored to the specificities of your diner, but should offer a good starting point for your budget.
What investments are needed to start or grow a diner?
Your diner 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 diner, these could include:
- Kitchen Equipment: This includes items such as commercial refrigerators, ovens, stoves, and fryers. These are essential for running a diner and should be of good quality to ensure efficient food preparation and storage.
- Furniture and Fixtures: This includes tables, chairs, booths, and other furnishings for the dining area. These items not only provide a comfortable and inviting atmosphere for customers, but they also contribute to the overall aesthetic of the diner.
- Point of Sale System: A reliable and efficient point of sale system is crucial for any diner. This includes hardware such as cash registers, credit card readers, and printers, as well as software for tracking sales, inventory, and employee hours.
- Building Renovations: If you are opening a new diner or purchasing an existing one, there may be necessary building renovations or upgrades that need to be done. This could include things like plumbing, electrical, or HVAC repairs, or even adding a drive-thru window.
- Signage and Exterior Upgrades: The exterior of your diner is the first thing customers will see, so it's important to make a good impression. This could include things like a new sign, outdoor seating area, or landscaping to enhance curb appeal.
Again, this list will need to be adjusted according to the size and ambitions of your diner.
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 diner
The next step in the creation of your financial forecast for your diner 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 diner?
Now let's have a look at the main output tables of your diner'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 diner'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 diner will look different than for a startup.
The projected balance sheet
Your diner'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 diner 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 diner'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 diner 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 diner'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 diner's financial forecast?
Using the right tool or solution will make the creation of your diner's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your diner'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional diner financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your diner's financial forecast?
Creating an accurate and error-free diner 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 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 diner, 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 diner.
- 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 diner. 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
