How to create a financial forecast for a facade renovation 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 facade renovation company.
Putting together a facade renovation 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 facade renovation 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 facade renovation company?
The financial projections for your facade renovation company 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 facade renovation company'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.
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 facade renovation company financial forecast?
A facade renovation company'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 facade renovation company.
If you are creating (or updating) the forecast of an existing facade renovation company, 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 facade renovation company 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 facade renovation company 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 facade renovation company's financial forecast.
The sales forecast for a facade renovation company
The sales forecast, also called topline projection, is normally where you will start when building your facade renovation 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 facade renovation companies), and consider the elements below:
- Local economy: The state of the local economy can have a direct impact on the number of renovation projects in your area. During times of economic growth, more people may have the disposable income to invest in facade renovations, leading to an increase in your average price and number of monthly transactions.
- Weather conditions: Extreme weather conditions, such as severe storms or harsh winters, can damage facades and create a higher demand for renovation services. This can lead to an increase in your average price and number of monthly transactions during these periods.
- Building regulations: Changes in building regulations or new laws may require building owners to renovate their facades to meet safety or environmental standards. This can lead to an increase in your average price and number of monthly transactions as building owners seek your services to comply with these regulations.
- Competition: The number and strength of competitors in your market can affect your average price and number of monthly transactions. If there are many other facade renovation companies in your area, you may need to adjust your prices or offer incentives to attract customers, potentially impacting your average price. On the other hand, having strong competition can also indicate a high demand for facade renovation services, leading to a potential increase in your number of monthly transactions.
- Seasonality: Facade renovations may be more common during certain seasons, such as spring or summer when the weather is more favorable for construction work. This can lead to fluctuations in your average price and number of monthly transactions throughout the year. Understanding and accounting for these seasonal trends can help you create a more accurate sales forecast.
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 facade renovation company
The next step is to estimate the expenses needed to run your facade renovation 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 facade renovation company's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, and benefits for your employees, such as project managers, contractors, and laborers.
- Accountancy Fees: You may need to hire an accountant to handle your bookkeeping, taxes, and financial statements.
- Insurance Costs: As a facade renovation company, you will need to have insurance coverage for liability, workers' compensation, and property damage.
- Software Licences: You may need to purchase software licenses for project management, design, and accounting purposes.
- Banking Fees: This includes fees for maintaining business bank accounts, wire transfers, and credit card processing.
- Marketing and Advertising: You may need to allocate funds for marketing and advertising efforts to attract potential clients and showcase your projects.
- Rent or Mortgage: If you have a physical office or warehouse, you will need to factor in rent or mortgage payments.
- Utilities: This includes electricity, water, and gas bills for your office or warehouse.
- Vehicle Expenses: If you have company vehicles, you will need to budget for fuel, maintenance, and insurance costs.
- Materials and Supplies: This includes the cost of purchasing materials and supplies for your renovation projects, such as paint, scaffolding, and tools.
- Subcontractor Costs: If you need to hire subcontractors for specialized tasks, you will need to factor in their fees.
- Training and Development: To stay competitive in the industry, it is essential to invest in training and development for your employees.
- Legal Fees: You may need to consult with a lawyer for contracts, permits, and other legal matters related to your business.
- Office Supplies: These are necessary for day-to-day operations, such as printer ink, paper, and stationery.
- Travel Expenses: If you need to travel for client meetings or site visits, you will need to budget for transportation, lodging, and meals.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small facade renovation company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a facade renovation company?
Your facade renovation 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 facade renovation company, these could include:
- Office equipment and furniture: This includes items such as desks, chairs, computers, and printers that are necessary for running your facade renovation company's office. These items are considered fixed assets and will likely need to be replaced or upgraded as your company grows.
- Tools and equipment: As a facade renovation company, you will need to invest in high-quality tools and equipment to complete your projects efficiently and effectively. This can include items such as scaffolding, ladders, power tools, and safety equipment.
- Vehicles: If your facade renovation company will be providing on-site services, you may need to purchase or lease vehicles for transportation of equipment and personnel. These vehicles will be considered fixed assets and should be included in your expenditure forecast.
- Building improvements: If you own the building where your facade renovation company is located, you may need to make improvements to it in order to accommodate your growing business. This can include things like renovations, upgrades to the building's exterior, or adding new features such as a showroom.
- Inventory: Depending on the scope of your facade renovation services, you may need to keep an inventory of materials and supplies. These items will be considered fixed assets and should be included in your capital expenditure forecast.
Again, this list will need to be adjusted according to the size and ambitions of your facade renovation 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 facade renovation company
The next step in the creation of your financial forecast for your facade renovation 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 facade renovation company?
Now let's have a look at the main output tables of your facade renovation company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your facade renovation company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a facade renovation company should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your facade renovation company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 projected cash flow statement
A projected cash flow statement for a facade renovation company 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 facade renovation company'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 facade renovation company 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 facade renovation company's financial projections?
Building a facade renovation 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 projection software to build your facade renovation company's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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 facade renovation 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 facade renovation company's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free facade renovation company financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your facade renovation company's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own facade renovation company, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your facade renovation company
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your facade renovation company future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a facade renovation company, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to project sales for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a facade renovation company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
