How to create a financial forecast for a furniture store?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your furniture store.
Putting together a furniture store 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 furniture store.
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 furniture store?
The financial projections for your furniture store 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 furniture store'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 furniture store financial forecast?
A furniture store'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 store.
If you are creating (or updating) the forecast of an existing furniture store, 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 store 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 store 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 store's financial forecast.
The sales forecast for a furniture store
The sales forecast, also called topline projection, is normally where you will start when building your furniture store 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 furniture stores), and consider the elements below:
- Seasonal Trends: As a furniture store owner, you know that certain times of the year are busier than others. For example, the holiday season tends to be a peak time for furniture purchases as people prepare to host guests and decorate their homes. This can lead to an increase in the average price of furniture as demand rises.
- Economic Conditions: Economic factors such as inflation, unemployment rates, and consumer confidence can greatly impact the average price of furniture and the number of monthly transactions. During times of economic downturn, people may be less likely to make big purchases like furniture, leading to a decrease in both price and transactions.
- Housing Market: The state of the housing market can also have a significant impact on your furniture store's sales forecast. When the housing market is strong and there is a high demand for new homes, people are more likely to purchase new furniture to furnish their homes. This can lead to an increase in both the average price and number of transactions.
- Competition: The presence of competitors in your local market can affect your sales forecast. If there are many other furniture stores in your area, you may need to lower your prices to stay competitive, leading to a decrease in the average price of furniture. On the other hand, if you are the only furniture store in the area, you may be able to charge higher prices and see an increase in average price and transactions.
- Trends and Styles: The popularity of certain furniture styles and trends can greatly impact your sales forecast. For example, if there is a sudden increase in demand for mid-century modern furniture, you may need to adjust your inventory to meet this demand, potentially leading to an increase in average price and transactions for those items.
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 furniture store
The next step is to estimate the expenses needed to run your furniture store 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 furniture store's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, and benefits for all employees, including sales associates, delivery personnel, and administrative staff.
- Rent and utilities: You will need to cover the cost of renting a physical space for your furniture store, as well as monthly utilities such as electricity, water, and internet.
- Inventory: As a furniture store, you will need to purchase and maintain a large inventory of products. This includes the cost of purchasing furniture from suppliers, as well as any storage or warehousing fees.
- Marketing and advertising: In order to attract customers to your furniture store, you will need to invest in marketing and advertising efforts. This can include print ads, online ads, and other promotional materials.
- Accountancy fees: You may choose to hire an accountant to help with bookkeeping, taxes, and other financial tasks for your furniture store.
- Insurance costs: It is important to have insurance coverage for your furniture store, including property insurance, liability insurance, and worker's compensation insurance.
- Software licenses: You may need to purchase software licenses for programs such as point-of-sale systems, inventory management software, and accounting software.
- Banking fees: You will need to pay fees for services such as credit card processing, check deposits, and online banking for your furniture store.
- Maintenance and repairs: Your furniture store will require regular maintenance and repairs for your physical space, as well as any equipment or vehicles used for delivery.
- Professional services: You may need to hire professionals such as lawyers, consultants, or designers for your furniture store.
- Delivery and transportation: If your furniture store offers delivery services, you will need to cover the cost of vehicles, fuel, and other transportation expenses.
- Supplies and equipment: This includes the cost of office supplies, cleaning supplies, and any equipment needed for your furniture store, such as computers or furniture assembly tools.
- Credit card fees: If you accept credit card payments, you will need to pay processing fees for each transaction.
- Taxes and licenses: You will need to pay taxes on your furniture store's income, as well as any necessary business licenses or permits.
- Training and development: To ensure the success of your furniture store, you may choose to invest in training and development for your employees.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small furniture store might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a furniture store?
Once you have an idea of how much sales you could achieve and what it will cost to run your furniture store, it is time to look into the equipment required to launch or expand the activity.
For a furniture store, capital expenditures and initial working capital items could include:
- Store Renovations and Improvements: These can include expenses such as new flooring, lighting, display fixtures, and paint for your furniture store. These improvements not only make your store more visually appealing to customers, but also provide a better shopping experience.
- Inventory and Product Purchases: As a furniture store, your main source of revenue will come from the sales of your products. Therefore, it is important to budget for the purchase of new inventory and products to keep your store well-stocked and up-to-date with the latest trends.
- Equipment and Machinery: Furniture stores require various equipment and machinery to operate, such as delivery trucks, forklifts, and assembly tools. These are considered fixed assets and should be included in your expenditure forecast.
- Store Expansion or Relocation: If you are planning to expand your furniture store or relocate to a larger space, this will require a significant capital investment. This could include expenses such as lease deposits, construction costs, and new furniture displays.
- Technology and Software: With the rise of e-commerce and online shopping, investing in technology and software is essential for furniture stores. This can include point-of-sale systems, inventory management software, and online ordering platforms.
Again, this list will need to be adjusted according to the specificities of your furniture store.
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 store
The next step in the creation of your financial forecast for your furniture store 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 store?
Now let's have a look at the main output tables of your furniture store's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your furniture store's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a furniture store 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
The projected balance sheet gives an overview of your furniture store'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 store. 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 cash flow projection
The cash flow forecast of your furniture store 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 furniture store'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 furniture store 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 furniture store'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 furniture store's financial forecast?
Creating your furniture store'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 store'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 furniture store 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 furniture store's financial forecast?
Creating an accurate and error-free furniture store 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 store, 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 store 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 store, 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 write a furniture store business plan
- How to create a sales forecast for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting a furniture store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
