How to create a financial forecast for a gym?
Creating a financial forecast for your gym, 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 gym 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 gym?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your gym and ensure that it can be financially viable in the years to come.
A financial plan for a gym 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 gym 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 gym'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 gym financial forecast?
A gym'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 gym, 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 gym 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 gym 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 gym's financial forecast.
The sales forecast for a gym
The sales forecast, also called topline projection, is normally where you will start when building your gym 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 gyms), and consider the elements below:
- Local Competition: The presence of other gyms in the area can affect the average price you can charge for membership. If there are several gyms offering similar services at lower prices, you may need to adjust your prices to remain competitive.
- Economic Conditions: Changes in the economy can impact the number of monthly transactions at your gym. During times of economic downturn, people may be more hesitant to spend money on a gym membership, while during times of economic growth, people may have more disposable income to spend on fitness.
- Seasonal Trends: Depending on your location, there may be seasonal trends that affect the number of monthly transactions at your gym. For example, in colder climates, there may be a decrease in gym attendance during the winter months, while in warmer climates, there may be an increase in gym attendance during the summer months.
- Demographics: The demographics of your target market can also impact the average price and number of monthly transactions at your gym. For example, if your gym caters to a younger demographic, you may need to offer lower prices to attract and retain members, while a gym aimed at an older demographic may be able to charge higher prices.
- Technology Advancements: The advancement of technology can also affect the average price and number of monthly transactions at your gym. For instance, the rise of at-home workout programs and fitness apps may lead to a decrease in gym membership sales, while the integration of new technology into your gym, such as virtual reality workouts, may attract more members and allow you to charge higher prices.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a gym
The next step is to estimate the expenses needed to run your gym 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 gym's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, and benefits for all employees, such as personal trainers, front desk staff, and cleaning staff.
- Accountancy fees: You will need to hire an accountant to manage your financial records and taxes.
- Insurance costs: It is important to have insurance coverage for your gym to protect against any potential accidents or injuries.
- Software licenses: You may need to purchase licenses for software programs used for scheduling, billing, and inventory management.
- Banking fees: There will be fees associated with maintaining a business bank account and processing transactions.
- Rent/lease payments: If you do not own the building where your gym is located, you will have to pay rent or lease payments.
- Utilities: This includes electricity, water, and gas bills for your gym.
- Marketing and advertising: You will need to invest in marketing and advertising to attract new members to your gym.
- Equipment maintenance: Regular maintenance and repairs for gym equipment is necessary to ensure a safe and functional environment.
- Cleaning supplies: You will need to purchase cleaning supplies to keep your gym clean and hygienic.
- Office supplies: This includes items such as paper, pens, and printer ink for your front desk and administrative tasks.
- Professional development: It is important to invest in ongoing training and development for your staff to improve the quality of services provided.
- Membership software fees: If you use a membership management software, there will be fees associated with it.
- Towels/linens: If you provide towels or linens for your members, you will need to budget for their regular replacement.
- Music licensing fees: If you play music in your gym, you may need to pay licensing fees to the appropriate organizations.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small gym might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a gym?
Creating and expanding a gym also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a gym could include elements such as:
- Gym equipment: This includes treadmills, weight machines, exercise bikes, and any other equipment that is used for workouts. These are essential fixed assets for a gym and can be a significant expense.
- Locker room renovations: As a gym owner, you know that keeping your facilities clean and updated is crucial for attracting and retaining members. This may include updating showers, lockers, and other amenities in the locker room.
- Fitness studio upgrades: If your gym offers group fitness classes, you may need to invest in new equipment such as mats, weights, or sound systems. These upgrades can improve the overall experience for your members and potentially attract new ones.
- Building improvements: These expenses may include things like painting, flooring, or lighting upgrades to improve the overall appearance of your gym. This can help create a more inviting and professional atmosphere for your members.
- Maintenance and repairs: Regular maintenance and repairs of equipment and facilities are necessary for the smooth operation of your gym. These expenses can include things like replacing worn-out equipment or fixing a leaky roof.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your gym.
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 gym
The next step in the creation of your financial forecast for your gym 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 gym?
Now let's have a look at the main output tables of your gym's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your gym's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a gym 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 gym'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 gym. 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 gym 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 gym'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 gym 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 gym's financial projections?
Building a gym 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 forecasting software to build your gym'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
Outsourcing the creation of your gym 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 gym's financial forecast?
Creating an accurate and error-free gym 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own gym, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your gym
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 gym 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 gym, 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 create a turnover forecast for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
