How to create a financial forecast for a handyman company?
Creating a financial forecast for your handyman company, 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 handyman company 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 handyman 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 handyman company becomes handy.
Creating a handyman 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 handyman 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 handyman 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 handyman 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 needed to build a handyman company financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a handyman company, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the handyman company on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing handyman company, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your handyman company's financial forecast.
The sales forecast for a handyman company
From experience, it is usually best to start creating your handyman company financial forecast by your sales forecast.
To create an accurate sales forecast for your handyman company, you will have to rely on the data collected in your market research, or if you're running an existing handyman 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 demand: As the weather changes, certain types of handyman services may be more in demand than others. For example, during the winter months, services related to snow removal or winterizing homes may see an increase in demand, while in the summer, services such as deck repair or landscaping may be more sought after.
- Competition: The number of other handyman companies in your area and their pricing may affect your average price and number of transactions. If there are many competitors offering similar services at lower prices, you may need to adjust your prices or offer additional discounts or promotions to remain competitive.
- Economic conditions: Economic downturns or recessions may lead to a decrease in consumer spending, which could impact the number of monthly transactions for your business. On the other hand, during times of economic growth, people may be more willing to invest in home repairs and renovations, leading to an increase in demand for your services.
- Local events: Events happening in your local area, such as festivals or concerts, may affect the number of transactions your business receives. For example, if a large event is taking place, you may see an increase in demand for services such as event setup or cleanup.
- Customer demographics: The demographics of your target market may also play a role in your average price and number of transactions. For instance, if your target market consists mainly of elderly homeowners, you may need to adjust your prices to be more affordable for those on a fixed income, or offer specialized services for seniors.
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 handyman company
The next step is to estimate the expenses needed to run your handyman 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 handyman company's operating expenses should include the following items at a minimum:
- Staff Costs: This includes wages, benefits, and any other expenses related to your employees. As a handyman company, you may have a small team of technicians and administrative staff.
- Accountancy Fees: You will need to hire an accountant to help with your taxes, bookkeeping, and financial statements. They can also provide valuable advice on managing your finances.
- Insurance Costs: As a handyman company, you will need various types of insurance, including liability insurance, workers' compensation insurance, and commercial vehicle insurance.
- Software Licences: You may use software to manage your appointments, invoices, and other business operations. These software licenses will incur monthly or annual fees.
- Banking Fees: You will need a business bank account to manage your finances. This may include monthly maintenance fees, transaction fees, and ATM fees.
- Marketing Expenses: You may need to invest in marketing to promote your handyman services. This can include online advertising, flyers, and business cards.
- Vehicle Expenses: If you have a company vehicle, you will need to budget for fuel, maintenance, and repairs.
- Office Supplies: You will need basic office supplies such as paper, pens, and printer ink to run your business.
- Telephone and Internet: As a handyman company, you will need a reliable phone and internet connection to communicate with clients and manage your operations.
- Rent or Mortgage: If you have a physical office or workshop, you will need to budget for rent or mortgage payments.
- Utilities: This includes electricity, water, and gas for your office or workshop.
- Training and Development: It's important to invest in the training and development of your employees to improve their skills and knowledge.
- Professional Memberships: You may need to join professional organizations or associations to network and stay updated on industry trends.
- Maintenance and Repair: You will need to budget for the maintenance and repair of your tools and equipment.
- Travel Expenses: If you provide on-site services, you will need to budget for travel expenses such as gas, tolls, and parking fees.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small handyman company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a handyman company?
Once you have an idea of how much sales you could achieve and what it will cost to run your handyman company, it is time to look into the equipment required to launch or expand the activity.
For a handyman company, capital expenditures and initial working capital items could include:
- Tools and Equipment: As a handyman company, it is essential to have the necessary tools and equipment to complete various tasks. This can include power tools, hand tools, ladders, and other specialized equipment.
- Vehicle: A reliable vehicle is crucial for a handyman company as it allows you to transport tools and equipment to job sites efficiently. This can be a van, truck, or even a trailer, depending on the size and needs of your company.
- Office Equipment: While a handyman company is primarily focused on hands-on work, having essential office equipment is still necessary. This can include a computer, printer, phone system, and other office supplies.
- Safety Gear: It is essential to prioritize safety in any business, and as a handyman company, you may need to invest in safety gear for you and your employees. This can include hard hats, safety glasses, gloves, and other protective equipment.
- Inventory: Depending on the services your handyman company offers, you may need to purchase inventory such as building materials, paint, or other supplies. These items can be considered a capital expenditure as they are essential for the operation of your business.
Again, this list will need to be adjusted according to the specificities of your handyman 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 handyman company
The next step in the creation of your financial forecast for your handyman 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 handyman company?
Now let's have a look at the main output tables of your handyman company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your handyman company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a handyman company 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 handyman company'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 handyman company 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 handyman company'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 handyman company 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 handyman company'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 handyman company's financial projections?
Building a handyman company 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 handyman company'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
Outsourcing the creation of your handyman company 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 handyman company's financial forecast?
Creating an accurate and error-free handyman 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 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 handyman company, 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 handyman company
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your handyman 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 handyman 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
- Financial forecast template for a business idea
- How to project revenues for a business?
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Founder & CEO at The Business Plan Shop Ltd
