How to create a financial forecast for a facility maintenance company?
Developing and maintaining an up-to-date financial forecast for your facility maintenance company is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a facility maintenance company financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a facility maintenance 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 facility maintenance company becomes handy.
Creating a facility maintenance 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 facility maintenance 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 facility maintenance 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 facility maintenance 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 needed to build a facility maintenance company financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a facility maintenance company, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the facility maintenance company on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing facility maintenance company, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your facility maintenance company's financial forecast.
The sales forecast for a facility maintenance company
The sales forecast, also called topline projection, is normally where you will start when building your facility maintenance 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 facility maintenance companies), and consider the elements below:
- Seasonal demand: As a facility maintenance company, your business may experience fluctuations in demand depending on the season. For example, during the winter months, there may be an increase in demand for snow removal services, while in the summer, demand for landscaping and outdoor maintenance services may be higher.
- Economic trends: Economic conditions can have a significant impact on the average price of your services and the number of monthly transactions. For instance, during times of economic downturn, businesses may be more inclined to cut back on facility maintenance services to reduce costs, resulting in a decrease in both price and transactions for your company.
- Industry competition: The level of competition in your industry can also affect your business's average price and monthly transactions. If there are many other facility maintenance companies in your area, you may need to lower your prices to remain competitive, which can lead to a decrease in average price and an increase in transactions.
- Client retention: The rate at which you retain clients can have a direct impact on your average price and monthly transactions. If you have a high client retention rate, you may be able to charge higher prices as clients value your services and are willing to pay more for them. On the other hand, if your retention rate is low, you may need to lower your prices to attract new clients, resulting in a decrease in average price and an increase in transactions.
- Technological advancements: Advancements in technology can also impact your business's average price and monthly transactions. For example, if new technology allows for more efficient and cost-effective methods of facility maintenance, you may be able to offer your services at a lower price, resulting in an increase in transactions. Additionally, if your competitors adopt new technology, you may need to adjust your prices to remain competitive, which can affect your average price and transactions.
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 facility maintenance company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your facility maintenance company 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 facility maintenance company will include some of the following items:
- Staff costs: This includes the salaries, wages, benefits, and training expenses for your facility maintenance team. You will need to budget for both full-time and part-time employees, as well as any contract workers or freelancers.
- Accountancy fees: As a facility maintenance company, you will need to keep track of your financial records and ensure compliance with tax laws. This may require hiring an accountant or outsourcing your bookkeeping and tax preparation to a third party.
- Insurance costs: It is important to protect your business and employees from potential risks and liabilities. Insurance costs may include general liability insurance, workers' compensation insurance, and property insurance for your equipment and vehicles.
- Software licenses: In order to efficiently manage your operations, you may need to invest in software for scheduling, invoicing, and other administrative tasks. These software licenses may come with monthly or annual fees.
- Banking fees: Maintaining a business bank account and processing transactions may come with fees, such as monthly maintenance fees, transaction fees, and wire transfer fees.
- Vehicle expenses: If your facility maintenance company requires the use of vehicles for transportation of equipment and materials, you will need to budget for fuel, maintenance, and insurance costs for these vehicles.
- Equipment and supply costs: Your facility maintenance company will need to purchase and maintain various equipment and supplies, such as cleaning tools, repair tools, and spare parts.
- Marketing and advertising expenses: In order to attract new clients and grow your business, you may need to invest in marketing and advertising efforts, such as creating a website, printing business cards, or running online ads.
- Training and development: In order to stay competitive and provide high-quality services, you may need to invest in training and development programs for your employees.
- Rent or lease payments: If you do not own your business space, you will need to budget for monthly rent or lease payments.
- Utilities: Your facility maintenance company will need to pay for utilities, such as electricity, water, and internet, in order to operate.
- Legal fees: If you require legal advice or representation for your business, you may need to budget for legal fees.
- Professional memberships and certifications: Joining professional organizations and obtaining industry certifications may help your facility maintenance company gain credibility and access to resources, but may come with membership or certification fees.
- Office supplies and expenses: This may include costs for office supplies, such as paper and ink, as well as office furniture and maintenance.
- Employee benefits: In addition to salaries and wages, you may need to budget for employee benefits, such as health insurance, retirement plans, and paid time off.
This list will need to be tailored to the specificities of your facility maintenance company, but should offer a good starting point for your budget.
What investments are needed to start or grow a facility maintenance company?
Once you have an idea of how much sales you could achieve and what it will cost to run your facility maintenance company, it is time to look into the equipment required to launch or expand the activity.
For a facility maintenance company, capital expenditures and initial working capital items could include:
- Facility Maintenance Equipment: This includes items such as cleaning equipment, tools, and machinery used for maintenance tasks such as repairs, painting, and landscaping.
- Building Improvements: This category includes any upgrades or renovations to the building that are necessary for safety or functionality reasons. Examples may include replacing old plumbing or electrical systems, installing new windows or doors, or repairing roofing and flooring.
- Vehicle Fleet: Many facility maintenance companies have a fleet of vehicles for transporting employees and equipment to job sites. These vehicles require regular maintenance, repairs, and replacements, all of which should be included in the expenditure forecast.
- Technology and Software: As technology continues to advance, facility maintenance companies may need to invest in new software, hardware, or equipment to improve efficiency and productivity. This could include items such as computer systems, mobile devices, or specialized software for managing work orders and schedules.
- Furniture and Fixtures: In addition to equipment and vehicles, a facility maintenance company may also have an office space that requires furniture and fixtures. This could include desks, chairs, shelving, and other necessary items for the day-to-day operations of the business.
Again, this list will need to be adjusted according to the specificities of your facility maintenance 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 facility maintenance company
The next step in the creation of your financial forecast for your facility maintenance 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 facility maintenance company?
Now let's have a look at the main output tables of your facility maintenance company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your facility maintenance company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a facility maintenance 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 facility maintenance 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 facility maintenance 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 facility maintenance 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 facility maintenance 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 facility maintenance 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 facility maintenance company's financial forecast?
Creating your facility maintenance company's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your facility maintenance 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional facility maintenance company 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 facility maintenance company's financial forecast?
Creating an accurate and error-free facility maintenance company 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 facility maintenance 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 facility maintenance 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 facility maintenance 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 project revenues for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
