How to create a financial forecast for a go-kart manufacturer?
Creating a financial forecast for your go-kart manufacturing business, 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 go-kart manufacturing business 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 go-kart manufacturing business?
The financial projections for your go-kart manufacturing business 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 go-kart manufacturing business'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 go-kart manufacturing business financial forecast?
A go-kart manufacturing business's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing go-kart manufacturing business, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a go-kart manufacturing business startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the go-kart manufacturing business running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your go-kart manufacturing business's financial forecast.
The sales forecast for a go-kart manufacturing business
From experience, it is usually best to start creating your go-kart manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your go-kart manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing go-kart manufacturing business, 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:
- Economic conditions: The overall state of the economy can greatly impact the demand for go-karts. In times of economic downturn, people may be less likely to spend money on leisure activities like go-karting, causing a decrease in sales and potentially leading to a decrease in average price.
- Competitor activity: If a new competitor enters the market with a similar product at a lower price, it could drive down the average price of go-karts and potentially lead to a decrease in monthly transactions for your business.
- Technology advancements: As technology continues to advance, new and improved go-kart models may enter the market, making your current models seem outdated. This could lead to a decrease in average price as customers may opt for the newer, more advanced models from your competitors.
- Weather conditions: Go-karting is primarily an outdoor activity, so weather conditions can greatly affect the number of monthly transactions for your business. Inclement weather, such as rain or extreme heat, may deter customers from participating in go-karting, resulting in a decrease in sales.
- Regulations and safety standards: Changes in regulations and safety standards for go-karts can have a significant impact on your business. If new safety standards require expensive modifications to your go-karts, it could lead to an increase in average price and potentially decrease the number of monthly transactions as customers may opt for cheaper alternatives.
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.
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The operating expenses for a go-kart manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your go-kart manufacturing business 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 go-kart manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other expenses related to your employees. As a go-kart manufacturing business, you will need a team of skilled workers to design, assemble, and test the go-karts.
- Accountancy Fees: You will need to hire an accountant or outsource your accounting services to ensure accurate financial records and tax compliance for your business.
- Insurance Costs: As with any business, you will need to invest in insurance to protect your go-kart manufacturing business from potential risks and liabilities.
- Software Licences: To streamline your production process, you will need to invest in software licences for design, inventory management, and other essential operations.
- Banking Fees: Your business will need a bank account for managing finances, and this will come with various fees such as transaction fees, overdraft fees, and monthly maintenance fees.
- Raw Materials: As a go-kart manufacturer, you will need to purchase raw materials such as metal, plastic, and tires to build your go-karts.
- Equipment Maintenance: Your production equipment, such as welding machines and assembly lines, will require regular maintenance to ensure smooth operations.
- Utilities: Your manufacturing facility will consume a significant amount of electricity, water, and other utilities, resulting in monthly expenses.
- Marketing and Advertising: To attract customers and promote your go-kart manufacturing business, you will need to invest in marketing and advertising strategies.
- Rent or Mortgage: If you do not own your manufacturing facility, you will need to pay rent or mortgage for the space you operate in.
- Packaging and Shipping: You will need to package and ship your go-karts to customers, which will incur costs for packaging materials and shipping services.
- Travel Expenses: As a go-kart manufacturer, you may need to travel for business purposes such as attending trade shows and meeting with suppliers or clients.
- Legal Fees: You may need to consult with a lawyer for legal advice or to handle any legal issues that may arise in your go-kart manufacturing business.
- Training and Development: To ensure the quality of your go-karts, you may need to invest in training and development programs for your employees.
- Office Supplies: Your business will require office supplies such as stationery, printer ink, and other essentials for day-to-day operations.
This list will need to be tailored to the specificities of your go-kart manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a go-kart manufacturing business?
Your go-kart manufacturing business 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 go-kart manufacturing business, these could include:
- Factory Equipment: This includes machinery, tools, and other equipment necessary for the production of go-karts such as welding machines, cutting tools, and assembly line equipment.
- Building Renovations: If you are starting your go-kart manufacturing business in an existing building, you may need to make renovations to accommodate your production needs. This can include installing new plumbing, electrical wiring, and building partitions to create separate work areas.
- Raw Materials: As a go-kart manufacturer, you will need to purchase raw materials such as metal, plastic, and rubber to use in the production of your go-karts. These materials will be a significant capital expenditure, especially when starting the business.
- Delivery Vehicles: Depending on the size of your business and the scope of your operations, you may need to invest in delivery vehicles to transport finished go-karts to your customers. This could include vans, trucks, or larger vehicles to accommodate multiple go-karts at once.
- Computer Systems: In today's digital age, it is essential to have a reliable computer system to manage your go-kart manufacturing business. This includes purchasing computers, software, and other necessary equipment to keep track of inventory, finances, and other important aspects of your operations.
Again, this list will need to be adjusted according to the size and ambitions of your go-kart manufacturing 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.
The financing plan of your go-kart manufacturing business
The next step in the creation of your financial forecast for your go-kart manufacturing business 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 go-kart manufacturing business?
Now let's have a look at the main output tables of your go-kart manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your go-kart manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a go-kart manufacturing business 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 go-kart manufacturing business'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 go-kart manufacturing business 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 go-kart manufacturing business'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 go-kart manufacturing business 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 go-kart manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your go-kart manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your go-kart manufacturing business'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional go-kart manufacturing business financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your go-kart manufacturing business's financial forecast?
Creating an accurate and error-free go-kart manufacturing business 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 go-kart manufacturing business, 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 forecast shows expected growth, profitability, and cash generation metrics for your go-kart manufacturing business.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a go-kart manufacturing business. Don't hesitate to contact us if you 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
- Financial forecast example
- How to project revenues for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
