How to create a financial forecast for a hydrologic surveying firm?
Developing and maintaining an up-to-date financial forecast for your hydrologic surveying 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 hydrologic surveying 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 hydrologic surveying firm?
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 hydrologic surveying firm becomes handy.
Creating a hydrologic surveying firm 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 hydrologic surveying firm.
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 hydrologic surveying firm 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 hydrologic surveying firm'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 hydrologic surveying firm 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 hydrologic surveying firm, 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 hydrologic surveying firm 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 hydrologic surveying firm, 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 hydrologic surveying firm's financial forecast.
The sales forecast for a hydrologic surveying firm
The sales forecast, also called topline projection, is normally where you will start when building your hydrologic surveying firm financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing hydrologic surveying firms), and consider the elements below:
- Seasonal changes: As a hydrologic surveying firm, you may see fluctuations in your average price or number of monthly transactions based on the time of year. For example, during the rainy season, there may be an increase in demand for your services as clients seek to assess potential flood risks.
- Infrastructure projects: The development of new infrastructure projects, such as dams or bridges, can greatly impact your business's sales. These projects often require extensive hydrologic surveying, resulting in higher average prices and increased monthly transactions for your firm.
- Natural disasters: In the aftermath of a natural disaster, such as a hurricane or earthquake, there may be a surge in demand for your services. Clients may need your expertise to assess potential damage and plan for future prevention, leading to a potential increase in both average price and monthly transactions.
- Regulatory changes: Changes in government regulations related to water management or environmental protection can also affect your business's sales. For instance, stricter regulations may result in an increase in demand for your services, while looser regulations may lead to a decrease in demand.
- Technology advancements: Advancements in technology, such as the use of drones or advanced mapping software, can greatly impact your business's sales. These tools can increase the efficiency and accuracy of your surveying services, potentially leading to higher average prices and increased monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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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 hydrologic surveying firm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your hydrologic surveying firm 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 hydrologic surveying firm will include some of the following items:
- Staff Costs: This includes salaries, benefits, and bonuses for your team of hydrologic surveyors and support staff. You may also need to budget for training and development programs to keep your staff up-to-date with the latest industry practices and technologies.
- Accountancy Fees: As a business owner, you will need to hire an accountant to manage your financial records and ensure compliance with tax laws. This may also include fees for annual audits and preparation of financial statements.
- Insurance Costs: Running a hydrologic surveying firm comes with risks, such as accidents, property damage, and professional liability. You will need to budget for insurance premiums to protect your business and employees.
- Software Licences: To conduct accurate and efficient hydrologic surveys, you will need to invest in specialized software. This may include licenses for GIS mapping, remote sensing, and data analysis tools.
- Banking Fees: Every time you make a transaction, whether it's depositing a check or transferring funds, your bank may charge a fee. These fees can add up, so it's important to budget for them.
- Office Rent: If you have a physical office space, you will need to include rent or lease payments in your operating expenses. This may also include utilities, maintenance, and cleaning services.
- Equipment Maintenance: Your surveying equipment, such as GPS devices and drones, will require regular maintenance to ensure accurate readings. This may include calibration, repairs, and replacement of parts.
- Marketing and Advertising: To attract new clients and promote your services, you will need to invest in marketing and advertising efforts. This may include creating a website, attending industry conferences, and running digital or print ads.
- Travel Expenses: As a hydrologic surveying firm, you may need to travel to different locations for projects. This can include airfare, lodging, car rentals, and meals for you and your team.
- Professional Memberships: To stay updated on industry developments and network with other professionals, you may need to join professional organizations. These memberships often come with annual fees.
- Legal Fees: From drafting contracts to handling disputes, you may need to hire a lawyer for your business. Be sure to budget for legal fees in case any issues arise.
- Office Supplies: This includes everything from pens and paper to printer ink and postage. These small expenses can add up, so it's important to keep track of them.
- Training and Certification: To maintain your credentials and stay up-to-date with industry standards, you and your team may need to attend training programs and obtain certifications. These often come with fees.
- Taxes: As a business owner, you will need to pay taxes on your profits. This may include income tax, property tax, and sales tax.
- Utilities: If you have a physical office, you will need to budget for utilities such as electricity, water, and internet. These expenses may vary depending on the size of your office and number of employees.
This list will need to be tailored to the specificities of your hydrologic surveying firm, but should offer a good starting point for your budget.
What investments are needed to start or grow a hydrologic surveying firm?
Creating and expanding a hydrologic surveying firm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a hydrologic surveying firm could include elements such as:
- Surveying equipment: This includes tools such as total stations, GPS receivers, and laser levels that are essential for conducting accurate hydrologic surveys. These equipment can be expensive, but they are necessary for the success of your firm.
- Computers and software: In today's digital age, having reliable computers and software is crucial for a hydrologic surveying firm. This includes purchasing high-quality computers, as well as specialized software for data analysis and mapping.
- Vehicles: Depending on the scope of your projects, you may need to invest in vehicles such as trucks or boats to transport your equipment to different surveying locations. These vehicles should also be equipped with GPS and other necessary tools.
- Office space and furniture: As your firm grows, you may need to rent or purchase a dedicated office space. This includes expenses for furniture, such as desks, chairs, and filing cabinets, to create a functional work environment for your team.
- Training and certifications: In order to maintain a high level of expertise and credibility, it may be necessary for you and your team to attend training programs and obtain certifications related to hydrologic surveying. These expenses should be included in your expenditure forecast.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your hydrologic surveying 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 hydrologic surveying firm
The next step in the creation of your financial forecast for your hydrologic surveying 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 hydrologic surveying firm?
Now let's have a look at the main output tables of your hydrologic surveying firm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your hydrologic surveying firm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a hydrologic surveying firm 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 hydrologic surveying 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 cash flow forecast
Your hydrologic surveying firm's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the hydrologic surveying firm:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your hydrologic surveying firm's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your hydrologic surveying firm's financial plan - so that banks or investors can assess seasonal variation and ensure your business 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 hydrologic surveying firm's financial projections?
Building a hydrologic surveying firm 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 hydrologic surveying 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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your hydrologic surveying firm 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 hydrologic surveying firm's financial forecast?
Creating an accurate and error-free hydrologic surveying 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 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 hydrologic surveying firm, 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 hydrologic surveying firm
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 hydrologic surveying firm 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 hydrologic surveying firm, 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 template for a business idea
Know someone who owns or is thinking of starting a hydrologic surveying firm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
