How to create a financial forecast for a headhunting agency?
Developing and maintaining an up-to-date financial forecast for your headhunting agency 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 headhunting agency 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 headhunting agency?
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 headhunting agency becomes handy.
Creating a headhunting agency 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 headhunting agency.
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 headhunting agency 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 headhunting agency'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 headhunting agency financial forecast?
A headhunting agency'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 headhunting agency, 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 headhunting agency 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 headhunting agency 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 headhunting agency's financial forecast.
The sales forecast for a headhunting agency
From experience, it is usually best to start creating your headhunting agency financial forecast by your sales forecast.
To create an accurate sales forecast for your headhunting agency, you will have to rely on the data collected in your market research, or if you're running an existing headhunting agency, 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:
- You can expect the average price of your headhunting services to increase if there is a high demand for skilled workers in specific industries, such as technology or healthcare. This could be due to factors such as a shortage of qualified candidates or a growing economy.
- If your agency specializes in executive-level positions, your average price may also be affected by changes in the job market for top-level professionals. For example, economic downturns may result in a decrease in executive hiring and a decrease in your average price.
- The number of monthly transactions for your agency may be impacted by the overall job market. In times of high unemployment, there may be fewer job openings and therefore, fewer companies seeking your services. This could result in a decrease in your monthly transactions.
- If your agency has a strong reputation for successfully placing candidates in top companies, you may see an increase in your average price as companies are willing to pay a premium for your services. This can be a result of your agency's expertise, network, and track record.
- Changes in immigration policies and work visa regulations may also affect the number of international candidates seeking jobs through your agency. Restrictions or increased difficulty in obtaining work visas could lead to a decrease in your 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 headhunting agency
The next step is to estimate the costs you’ll have to incur to operate your headhunting agency.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your headhunting agency's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and other compensation for your team of headhunters, as well as any administrative or support staff you may have.
- Accountancy fees: As a headhunting agency, you may need to hire an accountant to help with taxes, payroll, and other financial matters.
- Insurance costs: To protect your agency and your clients, you may need to purchase liability insurance, professional indemnity insurance, and other types of coverage.
- Software licences: As a headhunting agency, you may need to use various software programs to manage your client database, track job openings, and communicate with candidates.
- Banking fees: Your headhunting agency will likely have multiple bank accounts for managing client funds, paying employees, and other financial transactions, which may incur monthly fees.
- Advertising and marketing: To attract clients and candidates, you may need to invest in advertising and marketing efforts, such as job postings, social media campaigns, and networking events.
- Office rent: You may need to rent office space to meet with clients and conduct interviews, which can be a significant expense depending on the location.
- Travel expenses: If your agency operates in multiple locations or serves clients outside of your local area, you may need to budget for travel expenses, including airfare, accommodations, and meals.
- Professional development: To stay current in the ever-changing job market, you may need to invest in professional development opportunities for your team, such as attending conferences and workshops.
- Telephone and internet: As a headhunting agency, you will likely need reliable phone and internet services to communicate with clients and candidates.
- Office supplies: From paper and printer ink to postage and envelopes, your agency will need various office supplies to operate efficiently.
- Legal fees: As with any business, you may need to seek legal advice from time to time, which can result in legal fees.
- Professional memberships: To establish credibility and gain access to industry resources, you may need to join professional organizations and pay membership fees.
- Utilities: Your office space will likely require utilities such as electricity, water, and heating/cooling, which will need to be factored into your operating expenses.
- Training and onboarding: As your agency grows, you may need to invest in training and onboarding programs for new employees, which can be a significant expense.
This list is not exhaustive by any means, and will need to be tailored to your headhunting agency's specific circumstances.
What investments are needed to start or grow a headhunting agency?
Creating and expanding a headhunting agency also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a headhunting agency could include elements such as:
- Office space: This includes the cost of renting or purchasing a physical location for your headhunting agency. This can also include any renovations or improvements needed to make the space suitable for your business needs.
- Technology and equipment: This includes the cost of purchasing computers, software, printers, and other necessary equipment for your agency. It can also include any maintenance or upgrades needed to keep your technology functioning properly.
- Furniture and fixtures: This includes the cost of purchasing office furniture such as desks, chairs, and filing cabinets. It can also include any fixtures or decorations needed to create a professional and welcoming office environment for your clients and employees.
- Recruiting and hiring expenses: This includes the cost of background checks, drug tests, and other expenses related to the hiring process for your headhunting agency. It can also include any fees associated with recruiting software or job board subscriptions.
- Training and development materials: This includes the cost of developing or purchasing training materials for your employees, such as training manuals, videos, or online courses. It can also include any expenses related to attending conferences or workshops for professional development.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your headhunting agency.
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 headhunting agency
The next step in the creation of your financial forecast for your headhunting agency 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 headhunting agency?
Now let's have a look at the main output tables of your headhunting agency's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy headhunting agency's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established headhunting agency will look different than for a startup.
The projected balance sheet
Your headhunting agency'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 projected cash flow statement
A projected cash flow statement for a headhunting agency 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 headhunting agency'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 headhunting agency 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 headhunting agency's financial forecast?
Creating your headhunting agency's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your headhunting agency's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional headhunting agency financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your headhunting agency's financial forecast?
Creating an accurate and error-free headhunting agency financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 headhunting agency, 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
- 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 headhunting agency 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 headhunting agency, 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?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a headhunting agency? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
