How to create a financial forecast for a door-to-door sales 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 door-to-door sales company.
Putting together a door-to-door sales 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 door-to-door sales 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 door-to-door sales company?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your door-to-door sales company becomes handy.
Creating a door-to-door sales company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your door-to-door sales company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a door-to-door sales company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your door-to-door sales company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is used as input to build a door-to-door sales company financial forecast?
A door-to-door sales 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 door-to-door sales 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 door-to-door sales 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 door-to-door sales 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 door-to-door sales company's financial forecast.
The sales forecast for a door-to-door sales company
The sales forecast, also called topline projection, is normally where you will start when building your door-to-door sales company financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing door-to-door sales companies), and consider the elements below:
- Seasonal Demand: As a door-to-door sales company, your average price and number of monthly transactions may be affected by seasonal demand. For example, during the summer months, homeowners may be more open to purchasing outdoor products like lawn care equipment or pool supplies, leading to higher average prices and more monthly transactions.
- Economic Conditions: Economic conditions can also have a significant impact on your average price and number of monthly transactions. During times of economic downturn, consumers may be more hesitant to make large purchases, resulting in lower average prices and fewer monthly transactions.
- Competition: The level of competition in your industry can affect your average price and number of monthly transactions. If you have a lot of competitors in your area, you may need to lower your prices or increase your marketing efforts to attract customers, resulting in lower average prices and potentially more monthly transactions.
- Target Audience: The demographics and preferences of your target audience can also impact your average price and number of monthly transactions. For example, if your target audience is primarily younger individuals, they may be more price-sensitive and require lower average prices to make a purchase, resulting in fewer monthly transactions.
- Product Quality: The quality of your products can also play a role in your average price and number of monthly transactions. If you offer high-quality products, you may be able to charge higher prices, resulting in higher average prices and potentially more monthly transactions from satisfied customers who are willing to pay a premium for quality.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 door-to-door sales company
The next step is to estimate the expenses needed to run your door-to-door sales company 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 door-to-door sales company's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, commissions, and bonuses for your sales team, as well as any payroll taxes and benefits.
- Accountancy fees: You may need to hire an accountant to help you manage your financial records and taxes.
- Insurance costs: It's important to have liability insurance to protect your business in case of any accidents or lawsuits.
- Software licenses: You'll likely need to invest in sales software to track leads, manage customer information, and process orders.
- Banking fees: This includes charges for maintaining a business bank account, processing credit card payments, and wire transfer fees.
- Marketing and advertising: It's important to spread the word about your door-to-door sales company, so you may need to budget for advertising materials, such as flyers or brochures.
- Travel expenses: Your sales team will likely need to travel to different neighborhoods or cities to make sales, so you'll need to cover their transportation costs.
- Office supplies: This includes items such as pens, paper, and printer ink, which are essential for running your business.
- Training and development: It's important to invest in the ongoing training and development of your sales team to keep their skills sharp.
- Telephone and internet: Your sales team will need to communicate with potential customers, so you'll need to cover the cost of phone and internet services.
- Vehicle expenses: If your sales team uses company vehicles for door-to-door sales, you'll need to budget for gas, maintenance, and insurance.
- Office rent: If you have a physical office space for your business, you'll need to factor in the cost of rent or lease payments.
- Travel and entertainment: You may need to entertain potential clients or take them out for meals, so it's important to budget for these expenses.
- Legal fees: If you need to hire a lawyer for any legal advice or assistance, you'll need to budget for their fees.
- Utilities: This includes electricity, water, and gas, which are necessary for running your office and keeping your employees comfortable.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small door-to-door sales company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a door-to-door sales company?
Your door-to-door sales company 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 door-to-door sales company, these could include:
- Office Space: As a door-to-door sales company, you will need a physical location to operate from. This could include renting or purchasing office space, as well as any necessary renovations or repairs.
- Vehicles: Since your sales team will be going door-to-door, you will need to provide them with reliable transportation. This could include purchasing or leasing vehicles, as well as ongoing maintenance and repairs.
- Technology: In order to effectively track sales and communicate with your team, you will need to invest in technology. This could include buying or upgrading computers, software, and other necessary equipment.
- Inventory: Depending on the products or services you will be selling, you may need to purchase inventory to have on hand for your sales team. This could include samples, demonstration materials, or actual products.
- Furniture and Equipment: Your office space will also require furniture and equipment to operate efficiently. This could include desks, chairs, filing cabinets, and other necessary items.
Again, this list will need to be adjusted according to the size and ambitions of your door-to-door sales 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 door-to-door sales company
The next step in the creation of your financial forecast for your door-to-door sales 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 door-to-door sales company?
Now let's have a look at the main output tables of your door-to-door sales company'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 door-to-door sales company'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 door-to-door sales company will look different than for a startup.
The projected balance sheet
Your door-to-door sales 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 door-to-door sales 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 door-to-door sales 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 door-to-door sales 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 door-to-door sales 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 door-to-door sales company's financial projections?
Building a door-to-door sales company 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 door-to-door sales 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
Outsourcing the creation of your door-to-door sales company 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 door-to-door sales company's financial forecast?
Creating an accurate and error-free door-to-door sales 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 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 door-to-door sales 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 door-to-door sales 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.
Also on The Business Plan Shop
- Financial forecast example
- How to create a turnover forecast for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
