How to create a financial forecast for a fish and chips shop?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your fish and chips shop.
Putting together a fish and chips shop 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 fish and chips shop.
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 fish and chips shop?
The financial projections for your fish and chips shop 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 fish and chips shop'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 solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
What information is used as input to build a fish and chips shop financial forecast?
A fish and chips shop'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 fish and chips shop.
If you are creating (or updating) the forecast of an existing fish and chips shop, 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 fish and chips shop 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 fish and chips shop 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 fish and chips shop's financial forecast.
The sales forecast for a fish and chips shop
The sales forecast, also called topline projection, is normally where you will start when building your fish and chips shop 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 fish and chips shops), and consider the elements below:
- Seasonal Demand: As a fish and chips shop owner, you know that the demand for your products fluctuates depending on the season. During the summer months, when more people are out and about, you can expect an increase in the number of monthly transactions. On the other hand, during the colder months, the demand may decrease, affecting your average price as you may need to lower it to attract customers.
- Competition: The presence of other fish and chips shops in your area can also affect your sales forecast. If you have several competitors offering similar products at lower prices, it may be challenging to maintain your average price. On the other hand, if you are the only fish and chips shop in the area, you may be able to charge a higher price, resulting in a higher average price and potentially more monthly transactions.
- Tourist Season: If your fish and chips shop is located in a popular tourist destination, the influx of tourists during peak season can greatly impact your sales forecast. With more tourists in the area, you may see an increase in both the average price and number of monthly transactions. However, during the off-season when there are fewer tourists, your sales may decrease, affecting your forecast.
- Quality of Ingredients: The quality of your ingredients can greatly impact your average price and number of monthly transactions. If you use fresh, high-quality ingredients, you may be able to charge a premium price, resulting in a higher average price. On the other hand, if you use lower-quality ingredients, you may need to lower your prices, which can affect your average price and number of transactions.
- Changes in Consumer Preferences: As a business owner, you need to stay updated on the latest food trends and consumer preferences. For example, if there is a sudden increase in demand for healthier options, you may need to adjust your menu to include more nutritious options. This can affect your average price and potentially attract new customers, resulting in more monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a fish and chips shop
The next step is to estimate the costs you’ll have to incur to operate your fish and chips shop.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your fish and chips shop's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and payroll taxes for your employees, such as cooks, servers, and cashiers.
- Food and supplies: This covers the cost of ingredients for your dishes, as well as packaging materials, cleaning supplies, and other necessary items.
- Rent: This is the cost of leasing your restaurant space, including utilities and maintenance fees.
- Accountancy fees: You may need to hire an accountant to help you with bookkeeping, tax preparation, and other financial tasks.
- Insurance costs: This includes general liability insurance to protect your business in case of accidents or lawsuits.
- Marketing and advertising: You may need to spend money on advertising, promotions, and other marketing efforts to attract customers to your fish and chips shop.
- Equipment maintenance: Your fryers, grills, and other kitchen equipment will need regular maintenance and repairs to keep them functioning properly.
- Software licenses: You may need to purchase licenses for point-of-sale systems, accounting software, and other programs to help you run your business.
- Banking fees: This includes charges for processing credit and debit card payments, as well as any other fees associated with your business bank account.
- Waste disposal: You will need to pay for trash removal services to keep your restaurant clean and sanitary.
- Licenses and permits: You may need to obtain various licenses and permits, such as a food service permit, to legally operate your fish and chips shop.
- Training and development: It's important to invest in ongoing training and development for your employees to ensure high-quality service and food.
- Utilities: This includes electricity, gas, water, and other necessary utilities for your restaurant.
- Legal fees: You may need to consult with a lawyer for legal advice or assistance with contracts, leases, or other legal matters.
- Taxes: You will need to pay various taxes, such as income tax and sales tax, as required by law.
This list is not exhaustive by any means, and will need to be tailored to your fish and chips shop's specific circumstances.
What investments are needed to start or grow a fish and chips shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your fish and chips shop, it is time to look into the equipment required to launch or expand the activity.
For a fish and chips shop, capital expenditures and initial working capital items could include:
- Equipment and Machinery: This includes items such as deep fryers, grills, ovens, refrigerators, and freezers. These are essential for cooking and storing food, and are considered fixed assets as they have a long lifespan.
- Furniture and Fixtures: This includes tables, chairs, countertops, display cases, and other items that are used for customer seating and displaying food. These are necessary for creating a comfortable and inviting atmosphere for customers.
- Renovations and Improvements: This includes any renovations or improvements made to the physical space of the fish and chips shop, such as painting, flooring, lighting, or plumbing upgrades. These can increase the value of the property and improve the overall appearance of the shop.
- Signage and Branding: This includes the cost of designing and installing exterior and interior signage, as well as any branding materials such as logos, menus, and uniforms. This is important for creating a strong brand identity and attracting customers.
- POS System: This refers to a point of sale system, which includes hardware and software used for processing transactions, managing inventory, and tracking sales. This is a crucial tool for efficiently running a fish and chips shop and keeping track of sales data.
Again, this list will need to be adjusted according to the specificities of your fish and chips shop.
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 fish and chips shop
The next step in the creation of your financial forecast for your fish and chips shop 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 fish and chips shop?
Now let's have a look at the main output tables of your fish and chips shop'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 fish and chips shop'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 fish and chips shop will look different than for a startup.
The projected balance sheet
Your fish and chips shop'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 fish and chips shop 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 fish and chips shop'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 fish and chips shop is appropriately capitalised.
Need a solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
Which tool should you use to create your fish and chips shop's financial forecast?
Creating your fish and chips shop's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your fish and chips shop's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection 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 fish and chips shop 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 fish and chips shop's financial forecast?
Creating an accurate and error-free fish and chips shop 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 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 fish and chips shop, 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 projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your fish and chips shop.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a fish and chips shop. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
Need inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
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