How to create a financial forecast for a hammam?
Developing and maintaining an up-to-date financial forecast for your hammam 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 hammam 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 hammam?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your hammam and ensure that it can be financially viable in the years to come.
A financial plan for a hammam 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 hammam 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 hammam'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 hammam financial forecast?
A hammam'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 hammam, 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 hammam 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 hammam 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 hammam's financial forecast.
The sales forecast for a hammam
From experience, it usually makes sense to start your hammam's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your hammam (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your hammam's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Weather conditions: You should consider how weather conditions can affect the number of customers visiting your hammam. In colder months, people may be more inclined to visit a hammam to warm up and relax, leading to higher demand and potentially higher prices. However, in warmer months, people may prefer to spend time outdoors and may be less likely to visit a hammam.
- Tourism trends: If your hammam is located in a popular tourist destination, tourism trends can greatly impact your business. For example, if there is an increase in tourist arrivals, you may see a spike in demand for your services and potentially increase your prices. On the other hand, a decrease in tourism may lead to lower demand and lower prices.
- Competition: The presence of other hammams in your area can also affect your average price and number of monthly transactions. If there are many competitors offering similar services, you may need to adjust your prices to remain competitive. Alternatively, if you are the only hammam in the area, you may be able to charge higher prices and attract more customers.
- Local events and festivals: Local events and festivals can also impact your business. If your hammam is located near a popular event or festival, you may see an increase in demand and potentially raise your prices during that time. On the other hand, if there are no events or festivals happening, you may experience a decrease in demand and need to lower your prices to attract customers.
- Customer preferences: It's important to consider the preferences of your target customers when creating a sales forecast. For example, if your hammam caters to a more luxury market, you may be able to charge higher prices and still have a steady demand. However, if your target customers are more price-sensitive, you may need to lower your prices to attract and retain customers.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 hammam
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your hammam 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 hammam will include some of the following items:
- Staff Costs: This includes salaries, benefits, and training for all employees working in the hammam, such as masseuses, attendants, and receptionists.
- Accountancy Fees: You will need to hire an accountant or use accounting software to manage the financial records and taxes for your hammam.
- Insurance Costs: It is important to have insurance coverage for your hammam to protect against potential accidents or liability claims.
- Software Licences: You may need to purchase software licenses for scheduling appointments, managing inventory, or tracking customer data.
- Banking Fees: You will incur fees for processing credit card payments, making bank transfers, and other banking services related to your hammam.
- Rent: If you do not own the building where your hammam is located, you will need to pay rent to the landlord.
- Utilities: This includes electricity, water, and gas bills for running the hammam facilities.
- Cleaning and Maintenance: To ensure a clean and hygienic environment, you will need to budget for cleaning supplies and maintenance services.
- Marketing and Advertising: You will need to promote your hammam to attract customers, which may involve expenses such as printing flyers, advertising online, or hiring a marketing agency.
- Supplies and Inventory: This includes purchasing towels, oils, and other supplies for the hammam treatments, as well as maintaining an inventory of products for sale.
- Training and Development: To provide high-quality services, you may need to invest in training for your staff and attend industry conferences or workshops.
- Professional Services: You may need to hire consultants or advisors for legal, HR, or other professional services related to your hammam.
- Taxes and Licenses: You will need to pay taxes on your hammam's earnings, as well as obtain any necessary licenses or permits to operate.
- Waste Disposal: Proper disposal of waste from the hammam, such as used towels and oils, will incur costs for garbage collection or recycling services.
- Security: To ensure the safety of your customers and employees, you may need to invest in security measures such as CCTV cameras or security personnel.
This list will need to be tailored to the specificities of your hammam, but should offer a good starting point for your budget.
What investments are needed to start or grow a hammam?
Your hammam 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 hammam, these could include:
- Hammam equipment: This includes items such as steam generators, heated massage tables, and traditional hammam bowls. These are essential fixed assets that are necessary for the operation of a hammam.
- Renovation and construction costs: If you are starting a new hammam or expanding an existing one, you may need to invest in renovation and construction costs. This can include building or renovating the hammam space, installing plumbing and heating systems, and creating separate areas for different treatments.
- Furniture and decor: In order to create a relaxing and luxurious atmosphere in your hammam, you may need to invest in high-quality furniture and decor. This can include items such as massage chairs, decorative lighting, and artwork.
- Spa products: As a hammam offers a variety of spa treatments, you will need to purchase a range of products such as oils, scrubs, and masks. These products are essential for providing high-quality services to your customers.
- Technology and software: In today's digital age, it is important to have the necessary technology and software to run a successful business. This can include a point-of-sale system, online booking software, and customer relationship management software.
Again, this list will need to be adjusted according to the size and ambitions of your hammam.
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 hammam
The next step in the creation of your financial forecast for your hammam 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 hammam?
Now let's have a look at the main output tables of your hammam's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your hammam is likely to be in the years to come.
For your hammam 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 hammams, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your hammam'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 projection
The cash flow forecast of your hammam 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 hammam'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 hammam 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 hammam'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 hammam's financial projections?
Building a hammam 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 hammam'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 hammam 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 hammam's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free hammam financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your hammam's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 hammam, 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 hammam
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 hammam.
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 hammam. 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 revenues for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a hammam? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
