How to create a financial forecast for a horse equipment shop?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your horse equipment shop.
Putting together a horse equipment shop financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your horse equipment shop.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a horse equipment shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your horse equipment shop and ensure that it can be financially viable in the years to come.
A financial plan for a horse equipment shop 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 horse equipment shop 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 horse equipment shop'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 horse equipment shop financial forecast?
A horse equipment shop'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 horse equipment shop, 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 horse equipment shop 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 horse equipment shop 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 horse equipment shop's financial forecast.
The sales forecast for a horse equipment shop
From experience, it is usually best to start creating your horse equipment shop financial forecast by your sales forecast.
To create an accurate sales forecast for your horse equipment shop, you will have to rely on the data collected in your market research, or if you're running an existing horse equipment shop, 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:
- Demand for specialized equipment: The average price and number of transactions in your horse equipment shop may be affected by the demand for specialized equipment such as custom-made saddles, show attire, and high-tech training tools. Keep an eye on trends and customer requests to anticipate changes in demand.
- Competition: The presence of other horse equipment shops in the area can impact your average price and number of transactions. If there are multiple shops offering similar products, you may need to adjust your prices and marketing strategies to stay competitive.
- Horse industry trends: Changes in the horse industry can also affect your business. For example, if there is a shift towards natural horsemanship or a new trend in equestrian sports, you may see changes in the types of equipment customers are looking for and the price they are willing to pay.
- Weather conditions: The weather can have a significant impact on the horse industry and, in turn, your business. Severe weather conditions such as harsh winters or droughts can affect the demand for certain products and services, leading to fluctuations in your average price and number of transactions.
- Economic conditions: The overall state of the economy can also influence your business's sales forecast. In times of economic downturn, customers may be more budget-conscious and less likely to make large purchases, while a strong economy may lead to increased spending on luxury items such as horse equipment.
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 horse equipment shop
The next step is to estimate the costs you’ll have to incur to operate your horse equipment shop.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your horse equipment shop's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees, such as sales associates, customer service representatives, and warehouse staff.
- Rent: The cost of leasing or renting a physical store location for your horse equipment shop.
- Utilities: Expenses for electricity, water, gas, and other necessary utilities to keep your store running.
- Inventory: The cost of purchasing and restocking inventory, including horse saddles, bridles, grooming supplies, and riding apparel.
- Marketing and Advertising: Costs for promoting your horse equipment shop through various channels, such as social media, print ads, and events.
- Accountancy Fees: The cost of hiring an accountant to manage your financial records and tax filings.
- Insurance Costs: Expenses for liability insurance, property insurance, and other necessary insurance policies to protect your business.
- Software Licenses: Costs for purchasing and renewing software licenses for your point-of-sale system, inventory management software, and other necessary tools.
- Banking Fees: Charges for maintaining a business bank account, processing credit card payments, and other banking services.
- Equipment Maintenance: The cost of maintaining and repairing equipment used in your horse equipment shop, such as cash registers and shelving units.
- Professional Services: Expenses for hiring outside professionals, such as lawyers or consultants, for specific business needs.
- Office Supplies: The cost of purchasing necessary office supplies, such as paper, pens, and printer ink.
- Shipping and Delivery: Expenses for shipping and delivering products to customers, as well as receiving shipments from suppliers.
- Credit Card Processing Fees: Charges for processing credit card payments from customers.
- Training and Development: The cost of providing training and development opportunities for your employees to improve their skills and knowledge.
This list is not exhaustive by any means, and will need to be tailored to your horse equipment shop's specific circumstances.
What investments are needed to start or grow a horse equipment shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your horse equipment shop, it is time to look into the equipment required to launch or expand the activity.
For a horse equipment shop, capital expenditures and initial working capital items could include:
- Horse Tack and Equipment: This includes items such as saddles, bridles, halters, reins, and other equipment used for riding and handling horses. These items are essential for a horse equipment shop and must be of high quality to ensure the safety and comfort of both the horse and rider.
- Stable and Barn Construction: As a horse equipment shop, you may also offer services such as horse boarding or training. This may require you to have a stable or barn on your property. The construction of these facilities is a major capital expenditure, but it is necessary to provide a safe and comfortable environment for the horses.
- Trailer or Truck: If you plan on offering delivery services for your horse equipment, you will need a reliable mode of transportation. A truck or trailer can be a significant capital expenditure, but it will allow you to expand your services and reach a larger customer base.
- Fencing and Pasture Maintenance: If you have a stable or offer horse boarding services, you will need to have proper fencing and maintain the pasture areas for the horses to graze. These expenses may include materials for fencing, labor costs, and maintenance equipment.
- Storage and Inventory Management: As a horse equipment shop, you will need to have a secure and organized storage area for your inventory. This may include shelves, bins, or other storage solutions to keep your products in good condition and easily accessible for customers.
Again, this list will need to be adjusted according to the specificities of your horse equipment shop.
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 horse equipment shop
The next step in the creation of your financial forecast for your horse equipment shop 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 horse equipment shop?
Now let's have a look at the main output tables of your horse equipment shop'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 horse equipment shop'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 horse equipment shop will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your horse equipment shop'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 horse equipment shop. 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 cash flow projection
The cash flow forecast of your horse equipment shop 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 horse equipment shop'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 horse equipment shop 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 horse equipment shop'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 horse equipment shop's financial projections?
Building a horse equipment shop 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 horse equipment shop'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional horse equipment shop 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 horse equipment shop'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 horse equipment shop 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 horse equipment shop'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 horse equipment shop, 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 horse equipment shop
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 horse equipment shop 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 horse equipment shop, 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 project revenues for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
