How to create a financial forecast for a historic building restoration firm?
Developing and maintaining an up-to-date financial forecast for your historic building restoration firm 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 historic building restoration firm 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 historic building restoration firm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your historic building restoration firm and ensure that it can be financially viable in the years to come.
A financial plan for a historic building restoration firm 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 historic building restoration firm 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 historic building restoration firm'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 historic building restoration firm financial forecast?
A historic building restoration firm'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 historic building restoration firm, 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 historic building restoration firm 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 historic building restoration firm 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 historic building restoration firm's financial forecast.
The sales forecast for a historic building restoration firm
From experience, it usually makes sense to start your historic building restoration firm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your historic building restoration firm (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 historic building restoration firm'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:
- Local Economy: The state of the local economy can have a significant impact on the average price of your historic building restoration services. In a strong economy, customers may be more willing to invest in restoring their historic properties, resulting in higher average prices for your services. On the other hand, during an economic downturn, customers may be more budget-conscious and opt for lower-priced services, resulting in a decrease in average price.
- Demand for Historic Properties: The demand for historic properties in the local market can also affect the average price of your services. If there is a high demand for historic properties, customers may be willing to pay more for restoration services, driving up your average price. Conversely, if there is a low demand for historic properties, customers may be more price-sensitive, leading to a decrease in average price.
- Competition: The level of competition in the historic building restoration industry can impact your average price. If there are many other restoration firms in your area, customers may have more options and therefore be more price-sensitive. This could result in a decrease in your average price as you may need to lower prices to remain competitive. On the other hand, if there is less competition, you may be able to command higher prices for your services.
- Cost of Materials: The cost of materials needed for restoration projects can also affect your average price. If the cost of materials increases, you may need to raise your prices to maintain profitability. However, if the cost of materials decreases, you may be able to offer lower prices to customers, resulting in a decrease in average price.
- Government Regulations: Changes in government regulations related to historic building restoration can also impact your average price. For example, if new regulations require additional permits or inspections, this could increase your costs and result in higher prices for customers. On the other hand, if regulations are relaxed, you may be able to offer lower prices, leading to a decrease in average price.
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 historic building restoration firm
The next step is to estimate the costs you’ll have to incur to operate your historic building restoration firm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your historic building restoration firm's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, benefits, and payroll taxes for your team of restoration specialists, project managers, and administrative staff.
- Accountancy Fees: You may need to hire an accountant or bookkeeper to help you keep track of your financial records and file taxes.
- Insurance Costs: As a historic building restoration firm, you will need to have various insurance policies in place to protect your business and your clients.
- Software Licences: You may need to purchase software licenses for programs such as project management software, accounting software, and design software.
- Banking Fees: You will have various banking fees, such as transaction fees, wire transfer fees, and account maintenance fees.
- Permit Fees: Before beginning any restoration project, you will need to obtain various permits from local authorities, which may come with fees.
- Material Costs: This includes the cost of materials needed for restoration projects, such as lumber, paint, and specialized tools.
- Equipment Rental: You may need to rent equipment, such as scaffolding or cranes, for certain restoration projects.
- Utilities: You will have ongoing utility expenses for your office space, such as electricity, water, and internet.
- Marketing and Advertising: To attract clients and promote your business, you may need to invest in marketing and advertising efforts.
- Training and Professional Development: To stay up-to-date with the latest restoration techniques and industry standards, you may need to invest in training and professional development for yourself and your team.
- Travel Expenses: You may need to travel for client meetings, site visits, and industry events, which will incur expenses for transportation, lodging, and meals.
- Office Supplies: You will need various office supplies, such as paper, printer ink, and pens, to keep your business running smoothly.
- Legal Fees: In case of any legal issues or contracts, you may need to hire a lawyer and incur legal fees.
- Maintenance Costs: As a historic building restoration firm, you will need to maintain your office space, equipment, and vehicles, which will incur ongoing expenses.
This list is not exhaustive by any means, and will need to be tailored to your historic building restoration firm's specific circumstances.
What investments are needed to start or grow a historic building restoration firm?
Once you have an idea of how much sales you could achieve and what it will cost to run your historic building restoration firm, it is time to look into the equipment required to launch or expand the activity.
For a historic building restoration firm, capital expenditures and initial working capital items could include:
- Historic Building Acquisition: This refers to the cost of purchasing a historic building that will be restored by your firm. This can include the purchase price, closing costs, and any necessary renovations or repairs to make the building suitable for restoration.
- Restoration Equipment: This includes the cost of purchasing specialized equipment and tools needed for historic building restoration, such as scaffolding, ladders, power tools, and safety equipment. These items are considered fixed assets as they have a useful life of more than one year.
- Architectural Plans and Blueprints: In order to accurately restore a historic building, you will likely need to hire an architect to create detailed plans and blueprints. These documents will serve as a guide for the restoration process and can be considered a capital expenditure.
- Historic Building Materials: Restoring a historic building often requires using specific materials that may be more expensive or harder to source than modern materials. This can include antique bricks, reclaimed wood, or custom-made architectural details. These materials can be considered a capital expenditure as they are necessary for the restoration process and have a long-term use.
- Restoration Permits and Fees: Depending on the location and regulations, there may be fees associated with obtaining permits for the restoration of a historic building. These costs should be included in your expenditure forecast to ensure they are accounted for in your budget.
Again, this list will need to be adjusted according to the specificities of your historic building restoration firm.
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 historic building restoration firm
The next step in the creation of your financial forecast for your historic building restoration firm 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 historic building restoration firm?
Now let's have a look at the main output tables of your historic building restoration firm'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 historic building restoration firm'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 historic building restoration firm will look different than for a startup.
The projected balance sheet
Your historic building restoration firm'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 projected cash flow statement
A projected cash flow statement for a historic building restoration firm 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 historic building restoration firm'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 historic building restoration firm 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 historic building restoration firm's financial forecast?
Using the right tool or solution will make the creation of your historic building restoration firm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your historic building restoration firm'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 historic building restoration firm 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 historic building restoration firm's financial forecast?
Creating an accurate and error-free historic building restoration firm 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 historic building restoration firm, 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 historic building restoration firm.
- 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 historic building restoration firm. 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
- Sample financial forecast for business idea
- How to create a turnover forecast for a business?
Know someone who runs a historic building restoration firm? Share our business guide with them!
Founder & CEO at The Business Plan Shop Ltd
