How to create a financial forecast for a floor and wall covering company?
Developing and maintaining an up-to-date financial forecast for your floor and wall covering 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 floor and wall covering 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 floor and wall covering 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 floor and wall covering company becomes handy.
Creating a floor and wall covering 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 floor and wall covering 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 floor and wall covering 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 floor and wall covering 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 floor and wall covering company financial forecast?
A floor and wall covering 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 floor and wall covering company.
If you are creating (or updating) the forecast of an existing floor and wall covering 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 floor and wall covering 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 floor and wall covering 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 floor and wall covering company's financial forecast.
The sales forecast for a floor and wall covering company
From experience, it usually makes sense to start your floor and wall covering company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your floor and wall covering company (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your floor and wall covering company's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Changes in the real estate market and home renovation trends can significantly impact the demand for floor and wall coverings. For instance, a rise in housing prices may lead to an increase in renovation projects, resulting in higher sales for your company.
- The availability of new and innovative floor and wall covering products can affect your average price. If your company offers unique and high-quality products, you may be able to charge a premium price and increase your profit margin.
- Economic conditions, such as inflation and interest rates, can affect the cost of raw materials and transportation, which may impact your average price. For example, an increase in the cost of materials may lead to a higher price for your products.
- Competition from other floor and wall covering companies in your area can impact your average price and number of monthly transactions. If there are many competitors offering similar products at lower prices, you may need to adjust your prices to remain competitive.
- Changes in consumer preferences and buying behavior can affect the number of monthly transactions for your business. For instance, if there is a shift towards environmentally-friendly products, you may need to adapt your product offerings to meet the demand and attract more customers.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 floor and wall covering company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your floor and wall covering 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 floor and wall covering company will include some of the following items:
- Rent and Utilities: You will need to budget for rent or mortgage payments on your office or showroom space, as well as utilities such as electricity, water, and internet.
- Inventory: As a floor and wall covering company, you will need to purchase and maintain a large inventory of products such as tiles, carpets, and wallpaper. This will include the cost of shipping and storage.
- Staff Costs: You will need to pay salaries or wages to your employees, including sales staff, installation technicians, and administrative staff.
- Accountancy Fees: You may choose to hire an accountant or bookkeeper to manage your financial records and file taxes. This will come with a cost.
- Insurance: It is important to have insurance to protect your business from any unexpected events such as accidents or damage to your inventory. This may include general liability insurance, workers' compensation insurance, and property insurance.
- Marketing and Advertising: To attract customers, you will need to invest in marketing and advertising efforts such as creating a website, social media ads, and print materials.
- Software Licenses: You may need to purchase software licenses for programs that help with tasks such as accounting, inventory management, and customer relationship management.
- Training and Development: It is important to invest in the training and development of your employees to ensure they have the necessary skills and knowledge to provide excellent customer service and installation services.
- Travel Expenses: If your business involves visiting clients' homes or attending trade shows, you will need to budget for travel expenses such as gas, airfare, and accommodations.
- Maintenance and Repairs: As a floor and wall covering company, you will need to maintain and repair any equipment or vehicles you use for installation or delivery.
- Professional Memberships and Subscriptions: You may choose to join professional organizations or subscribe to industry publications to stay up-to-date with the latest trends and techniques in the floor and wall covering industry.
- Banking Fees: You will need to pay fees for services such as opening and maintaining a business bank account, processing credit card payments, and wire transfers.
- Legal Fees: It is important to consult with a lawyer to ensure your business is compliant with all laws and regulations. This may come with a cost.
- Office Supplies: To run your business efficiently, you will need to purchase office supplies such as paper, ink, and pens.
- Employee Benefits: If you choose to offer benefits such as health insurance or retirement plans to your employees, this will come with a cost.
This list will need to be tailored to the specificities of your floor and wall covering company, but should offer a good starting point for your budget.
What investments are needed to start or grow a floor and wall covering company?
Your floor and wall covering 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 floor and wall covering company, these could include:
- Flooring and wall covering materials: This includes the cost of purchasing materials such as tiles, hardwood, carpet, and wallpaper that will be used for installation in clients' homes or businesses.
- Equipment and tools: As a floor and wall covering company, you will need specialized equipment and tools to properly install and finish flooring and wall coverings. This may include items such as saws, drills, nail guns, and sanders.
- Vehicles: Depending on the size and scope of your business, you may need to invest in company vehicles for transporting materials and equipment to job sites. This could include trucks or vans with custom modifications for carrying large items.
- Furniture and fixtures: In addition to the materials and equipment needed for installation, you may also need to purchase furniture and fixtures for your showroom or office space. This could include items such as display racks, desks, and chairs.
- Technology and software: As with any business, technology and software are essential for managing operations and staying competitive. This could include purchasing computers, software for design and project management, and accounting systems.
Again, this list will need to be adjusted according to the size and ambitions of your floor and wall covering 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 floor and wall covering company
The next step in the creation of your financial forecast for your floor and wall covering 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 floor and wall covering company?
Now let's have a look at the main output tables of your floor and wall covering 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 floor and wall covering 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 floor and wall covering company will look different than for a startup.
The projected balance sheet
Your floor and wall covering 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 projected cash flow statement
A projected cash flow statement for a floor and wall covering 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 floor and wall covering 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 floor and wall covering 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 floor and wall covering company's financial forecast?
Using the right tool or solution will make the creation of your floor and wall covering company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your floor and wall covering 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 floor and wall covering 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 floor and wall covering company's financial forecast?
Creating an accurate and error-free floor and wall covering 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 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 floor and wall covering company.
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 floor and wall covering company. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to project revenues for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a floor and wall covering company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
