How to create a financial forecast for a grounds maintenance company?
Developing and maintaining an up-to-date financial forecast for your grounds maintenance 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 grounds maintenance 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 grounds maintenance 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 grounds maintenance company becomes handy.
Creating a grounds maintenance 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 grounds maintenance 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 grounds maintenance 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 grounds maintenance 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 grounds maintenance company financial forecast?
A grounds maintenance company'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 grounds maintenance company, 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 grounds maintenance company 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 grounds maintenance company 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 grounds maintenance company's financial forecast.
The sales forecast for a grounds maintenance company
From experience, it is usually best to start creating your grounds maintenance company financial forecast by your sales forecast.
To create an accurate sales forecast for your grounds maintenance company, you will have to rely on the data collected in your market research, or if you're running an existing grounds maintenance company, 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 changes: As a grounds maintenance company, your average price and monthly transactions may be affected by seasonal changes. For example, during the winter months, there may be a decrease in demand for services such as lawn mowing and landscaping, resulting in lower average prices and fewer monthly transactions. However, during the summer months, there may be an increase in demand, leading to higher average prices and more monthly transactions.
- Economic conditions: The state of the economy can also have an impact on your business's average price and monthly transactions. During times of economic downturn, individuals and businesses may cut back on expenses such as grounds maintenance, resulting in lower average prices and fewer monthly transactions. On the other hand, during times of economic prosperity, there may be an increase in demand for your services, leading to higher average prices and more monthly transactions.
- Competition: The level of competition in your area can also affect your average price and monthly transactions. If there are many other grounds maintenance companies in your area, you may need to lower your prices in order to remain competitive, resulting in lower average prices and potentially more monthly transactions. However, if you are the only or one of the few companies in your area, you may be able to charge higher prices, leading to higher average prices and potentially fewer monthly transactions.
- Weather conditions: Extreme weather conditions, such as heavy rain or drought, can also impact your business's average price and monthly transactions. In times of heavy rain, there may be a decrease in demand for services such as lawn mowing, resulting in lower average prices and fewer monthly transactions. On the other hand, during times of drought, there may be an increase in demand for services such as irrigation and watering, leading to higher average prices and more monthly transactions.
- Client demographics: The demographics of your clients can also play a role in your business's average price and monthly transactions. For example, if your clients are primarily residential homeowners, they may be more price-sensitive and willing to negotiate, resulting in lower average prices and potentially more monthly transactions. However, if your clients are primarily commercial businesses, they may be less price-sensitive and willing to pay higher prices, leading to higher average prices and potentially fewer monthly transactions.
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 grounds maintenance company
The next step is to estimate the expenses needed to run your grounds maintenance company 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 grounds maintenance company's operating expenses should include the following items at a minimum:
- Staff Costs: This includes the salaries and benefits for your grounds maintenance team, as well as any training and development costs.
- Accountancy Fees: As a business owner, you will need to hire an accountant to handle your tax filings, payroll, and other financial matters.
- Insurance Costs: To protect your business, you will need to have insurance coverage for your equipment, vehicles, and liability.
- Software Licences: You may need to purchase software licenses for accounting, project management, scheduling, and other business operations.
- Banking Fees: You will need to pay fees for bank accounts, credit card processing, and other financial services.
- Maintenance Supplies: This includes the cost of purchasing and restocking supplies such as fertilizers, pesticides, and other materials needed for grounds maintenance.
- Equipment Maintenance: Regular maintenance and repairs for your equipment, such as lawnmowers and trimmers, are necessary to keep them in good working condition.
- Vehicle Expenses: If your business uses company vehicles for maintenance work, you will need to budget for fuel, maintenance, and insurance costs.
- Marketing and Advertising: To attract new clients, you may need to invest in marketing and advertising efforts, such as creating a website, printing flyers, or attending trade shows.
- Office Rent: If you have a dedicated office space, you will need to pay rent or mortgage payments, as well as utilities and other associated costs.
- Uniforms: Your grounds maintenance team may need to wear uniforms or branded clothing for a professional appearance, which will need to be purchased and replaced as needed.
- Training and Certifications: To stay up to date with industry standards and techniques, you may need to invest in training and certifications for yourself and your team.
- Vehicle Insurance: In addition to insurance for your vehicles, you may also need to purchase insurance for any trailers or equipment attached to them.
- Vehicle Maintenance: In addition to regular maintenance, unexpected repairs and replacements for your vehicles can also be a significant expense.
- Office Supplies: This includes the cost of purchasing and restocking office supplies such as paper, pens, and printer ink.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small grounds maintenance company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a grounds maintenance company?
Once you have an idea of how much sales you could achieve and what it will cost to run your grounds maintenance company, it is time to look into the equipment required to launch or expand the activity.
For a grounds maintenance company, capital expenditures and initial working capital items could include:
Again, this list will need to be adjusted according to the specificities of your grounds maintenance 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 grounds maintenance company
The next step in the creation of your financial forecast for your grounds maintenance 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 grounds maintenance company?
Now let's have a look at the main output tables of your grounds maintenance company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your grounds maintenance company is likely to be in the years to come.
For your grounds maintenance company 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 grounds maintenance companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your grounds maintenance company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 forecast
Your grounds maintenance company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the grounds maintenance company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your grounds maintenance company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your grounds maintenance company's financial plan - so that banks or investors can assess seasonal variation and ensure your 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 grounds maintenance company's financial forecast?
Using the right tool or solution will make the creation of your grounds maintenance company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your grounds maintenance company's projections
The modern and easiest way is to use professional online financial forecasting 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 grounds maintenance company 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 grounds maintenance company's financial forecast?
Creating an accurate and error-free grounds maintenance 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 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 grounds maintenance company, 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 grounds maintenance company.
- 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 grounds maintenance company. 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 sales for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
