How to create a financial forecast for a game and toy shop?
Creating a financial forecast for your game and toy 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 game and toy 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 game and toy shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your game and toy shop and ensure that it can be financially viable in the years to come.
A financial plan for a game and toy 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 game and toy 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 game and toy 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 game and toy shop financial forecast?
A game and toy 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 game and toy shop.
If you are creating (or updating) the forecast of an existing game and toy 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 game and toy 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 game and toy 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 game and toy shop's financial forecast.
The sales forecast for a game and toy shop
From experience, it is usually best to start creating your game and toy shop financial forecast by your sales forecast.
To create an accurate sales forecast for your game and toy shop, you will have to rely on the data collected in your market research, or if you're running an existing game and toy 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:
- Seasonal Trends: As a game and toy shop, the average price and number of monthly transactions may be affected by seasonal trends. For example, during the holiday season, there may be an increase in demand for toys and games, resulting in a higher average price and more monthly transactions for your business. On the other hand, during the summer months, there may be a decrease in demand, leading to a lower average price and fewer monthly transactions.
- Popularity of New Releases: The popularity of new game and toy releases can also impact your average price and number of monthly transactions. If there is a highly anticipated game or toy coming out, customers may be willing to pay a higher price and there may be an increase in monthly transactions. However, if there are no exciting new releases, the average price and number of monthly transactions may decrease.
- Competition: The level of competition in your area can also affect your business's average price and number of monthly transactions. If there are several other game and toy shops in close proximity, you may need to lower your prices in order to stay competitive. On the other hand, if you are the only game and toy shop in the area, you may be able to charge higher prices and have more monthly transactions.
- Trending Toys and Games: The popularity of certain toys and games can also impact your business's average price and number of monthly transactions. If there is a new trend or craze, such as a popular movie or TV show, associated with a particular toy or game, there may be a higher demand for it, leading to a higher average price and more monthly transactions. However, once the trend dies down, the average price and number of monthly transactions may decrease.
- Customer Demographics: The demographics of your customers can also play a role in your business's average price and number of monthly transactions. For example, if you primarily cater to families with young children, you may see a higher average price and more monthly transactions during school breaks and holidays when children have more free time to play with toys and games. On the other hand, if your customers are primarily adults, the average price and number of monthly transactions may remain more consistent throughout the year.
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 game and toy shop
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your game and toy shop 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 game and toy shop will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and payroll taxes for all employees working in the game and toy shop. This may also include bonuses and commissions for sales staff.
- Rent: The cost of renting the physical space for your game and toy shop. This may also include utilities such as electricity, water, and gas.
- Inventory: The cost of purchasing and stocking inventory for your game and toy shop. This may include initial purchases as well as ongoing restocking.
- Marketing and Advertising: The cost of promoting your game and toy shop through various channels such as print, online, and social media. This may also include the cost of creating marketing materials.
- Insurance: The cost of insuring your game and toy shop against potential risks such as theft, property damage, and liability.
- Accountancy Fees: The cost of hiring an accountant to help manage your financial records and tax filings.
- Software Licenses: The cost of purchasing and renewing software licenses for any programs or applications used in the operation of your game and toy shop.
- Shipping and Delivery: The cost of shipping and delivering inventory to your game and toy shop as well as any shipping fees for online orders.
- Banking Fees: The cost of maintaining a business bank account and any fees associated with transactions and transfers.
- Repairs and Maintenance: The cost of repairing and maintaining equipment and fixtures in your game and toy shop, such as cash registers, shelving, and lighting.
- Professional Services: The cost of hiring outside professionals, such as lawyers or consultants, for specific tasks related to your game and toy shop.
- Licenses and Permits: The cost of obtaining and renewing necessary licenses and permits to operate your game and toy shop, such as a business license and sales tax permit.
- Training and Development: The cost of providing training and development opportunities for your employees to improve their skills and knowledge.
- Office Supplies: The cost of purchasing necessary office supplies, such as paper, printer ink, and pens, for your game and toy shop.
- Credit Card Processing Fees: The fees associated with accepting credit and debit card payments from customers in your game and toy shop.
This list will need to be tailored to the specificities of your game and toy shop, but should offer a good starting point for your budget.
What investments are needed to start or grow a game and toy shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your game and toy shop, it is time to look into the equipment required to launch or expand the activity.
For a game and toy shop, capital expenditures and initial working capital items could include:
- Store Renovation: This includes any costs associated with renovating or improving the physical space of your game and toy shop, such as painting, flooring, shelving, lighting, and signage.
- Inventory: This refers to the cost of purchasing the initial stock of games and toys for your shop. This can include wholesale prices, shipping fees, and any other expenses related to acquiring your inventory.
- Point of Sale System: A modern and efficient point of sale (POS) system is crucial for any retail business. This includes the hardware, software, and setup costs for your POS system, which will allow you to track sales, manage inventory, and process payments.
- Furniture and Fixtures: This covers the cost of any furniture and fixtures needed for your shop, such as display cases, tables, chairs, and other store fixtures. These items are necessary for creating an inviting and functional shopping environment.
- Security System: It's important to keep your game and toy shop safe and secure. This can include the cost of installing a security system, such as cameras, alarms, and security tags, as well as ongoing monitoring fees.
Again, this list will need to be adjusted according to the specificities of your game and toy 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 game and toy shop
The next step in the creation of your financial forecast for your game and toy 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 game and toy shop?
Now let's have a look at the main output tables of your game and toy shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your game and toy shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a game and toy shop 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 game and toy shop'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 game and toy shop 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 game and toy shop'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 game and toy shop 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 game and toy shop'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 game and toy shop's financial projections?
Building a game and toy shop financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial projection software to build your game and toy 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional game and toy 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 game and toy shop's financial forecast?
Creating an accurate and error-free game and toy 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 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 game and toy 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 game and toy shop. 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 sales for a business?
- Financial forecast for a business idea
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