How to create a financial forecast for a furniture repair shop?
Creating a financial forecast for your furniture repair shop, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your furniture repair shop is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a furniture repair shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your furniture repair shop and ensure that it can be financially viable in the years to come.
A financial plan for a furniture repair shop enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date furniture repair shop forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your furniture repair shop's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 furniture repair shop financial forecast?
A furniture repair 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 furniture repair shop.
If you are creating (or updating) the forecast of an existing furniture repair 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 furniture repair 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 furniture repair 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 furniture repair shop's financial forecast.
The sales forecast for a furniture repair shop
From experience, it is usually best to start creating your furniture repair shop financial forecast by your sales forecast.
To create an accurate sales forecast for your furniture repair shop, you will have to rely on the data collected in your market research, or if you're running an existing furniture repair shop, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Location: The location of your furniture repair shop can greatly impact your average price and number of monthly transactions. A shop located in a high-income neighborhood may be able to charge higher prices for their services, while a shop located in a lower-income area may need to offer more affordable prices to attract customers.
- Competition: The level of competition in your area can also affect your average price and number of monthly transactions. If there are many other furniture repair shops in your vicinity, you may need to lower your prices to remain competitive. On the other hand, if you are the only shop in the area, you may be able to charge higher prices.
- Economy: The state of the economy can have a significant impact on your business. During a recession, people may be more likely to repair their furniture rather than buying new, which could lead to an increase in your number of monthly transactions. However, a strong economy may mean that people have more disposable income to spend on new furniture, potentially decreasing your average price and number of transactions.
- Seasonality: The time of year can also affect your business. For example, during the holiday season, people may be more likely to entertain and want their furniture in top condition, leading to an increase in transactions. On the other hand, during the summer months, people may be more focused on outdoor activities and less likely to need furniture repairs.
- Customer demographics: The demographics of your target customer base can also impact your sales. For instance, if you primarily cater to older, retired individuals, they may have more disposable income and be willing to pay higher prices for quality repairs. On the other hand, if your target customers are young professionals, they may be more budget-conscious and prefer lower prices.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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 furniture repair shop
The next step is to estimate the costs you’ll have to incur to operate your furniture repair shop.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your furniture repair shop's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, and benefits for your employees, such as furniture repair technicians, customer service representatives, and administrative staff.
- Rent: The cost of renting a space for your furniture repair shop.
- Utilities: This includes electricity, water, and gas for your shop.
- Supplies and materials: The cost of purchasing tools, equipment, and materials needed for furniture repairs.
- Marketing and advertising: This includes any expenses related to promoting your furniture repair shop, such as creating flyers, running ads, or sponsoring local events.
- Accountancy fees: The cost of hiring an accountant to prepare your financial statements and assist with tax planning.
- Insurance: You will need insurance to protect your business from any potential risks, such as property damage or liability claims.
- Software licenses: This includes any software programs needed to run your business, such as accounting software or scheduling tools.
- Banking fees: The cost of maintaining a business bank account and any transaction fees associated with it.
- Maintenance and repairs: The cost of maintaining and repairing any equipment or tools used in your furniture repair shop.
- Professional development: This includes any training or education expenses for yourself and your employees to stay updated on the latest furniture repair techniques.
- Taxes and licenses: You will need to pay taxes and obtain any necessary licenses to operate your furniture repair shop.
- Legal fees: The cost of hiring a lawyer for any legal advice or assistance for your business.
- Office supplies: This includes items like paper, pens, and printer ink needed for daily operations.
- Credit card processing fees: If you accept credit card payments, you will need to pay processing fees for each transaction.
This list is not exhaustive by any means, and will need to be tailored to your furniture repair shop's specific circumstances.
What investments are needed to start or grow a furniture repair shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your furniture repair shop, it is time to look into the equipment required to launch or expand the activity.
For a furniture repair shop, capital expenditures and initial working capital items could include:
- Equipment: As a furniture repair shop owner, you will need various equipment to properly repair and restore furniture. This may include items such as sanders, saws, drills, and other power tools. You may also need specialized equipment for upholstery, such as sewing machines and fabric cutters.
- Workshop/Studio Space: In order to operate a furniture repair shop, you will need a designated space to work on furniture. This may involve renting or purchasing a workshop or studio space. In addition, you may need to invest in shelving, workbenches, and other storage solutions to keep your tools and supplies organized.
- Vehicles: If you plan on offering on-site repairs or pick-up/delivery services, you may need to invest in a vehicle for your business. This could include a van or truck to transport furniture, or a smaller vehicle for running errands and picking up supplies.
- Inventory: Depending on the specific services you offer, you may need to invest in inventory for your furniture repair shop. This could include items such as wood, fabric, padding, and other materials needed for repairs. You may also need to purchase furniture pieces to use for practice or to sell in your shop.
- Computer/Software: While not a physical asset, investing in a computer and relevant software can greatly benefit your furniture repair shop. This can include accounting software, design programs, and scheduling tools to help you manage your business more efficiently.
Again, this list will need to be adjusted according to the specificities of your furniture repair 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 furniture repair shop
The next step in the creation of your financial forecast for your furniture repair 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 furniture repair shop?
Now let's have a look at the main output tables of your furniture repair shop's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your furniture repair shop is likely to be in the years to come.
For your furniture repair shop to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established furniture repair shops, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your furniture repair shop's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your furniture repair shop. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 furniture repair 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 furniture repair 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 furniture repair shop 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 furniture repair shop's financial forecast?
Creating your furniture repair 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 projection software to build your furniture repair shop'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 furniture repair shop 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 furniture repair shop's financial forecast?
Creating an accurate and error-free furniture repair shop 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 furniture repair 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
- 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 furniture repair shop 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 furniture repair shop, 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 revenues for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
