How to create a financial forecast for a jet ski rental company?
Creating a financial forecast for your jet ski rental 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 jet ski rental 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 jet ski rental company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your jet ski rental company and ensure that it can be financially viable in the years to come.
A financial plan for a jet ski rental company 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 jet ski rental company 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 jet ski rental company'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 jet ski rental company financial forecast?
A jet ski rental company'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 jet ski rental company, 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 jet ski rental company 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 jet ski rental company 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 jet ski rental company's financial forecast.
The sales forecast for a jet ski rental company
The sales forecast, also called topline projection, is normally where you will start when building your jet ski rental company 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 jet ski rental companies), and consider the elements below:
- Jet ski demand: The number of customers looking to rent a jet ski can greatly affect your average price and number of monthly transactions. If there is high demand for jet ski rentals, you may be able to charge a premium price and have a higher number of monthly transactions. On the other hand, if demand is low, you may need to lower your prices to attract customers and see a decrease in monthly transactions.
- Weather conditions: The weather can also have a significant impact on your business's average price and number of monthly transactions. During peak summer months with warm and sunny weather, more people may be interested in renting jet skis, allowing you to charge higher prices and have more monthly transactions. However, during colder months or periods of inclement weather, you may see a decrease in demand and need to lower your prices to attract customers.
- Competition: The level of competition in your area can also affect your average price and number of monthly transactions. If there are several other jet ski rental companies in close proximity, you may need to offer competitive prices to attract customers. On the other hand, if you are the only rental company in the area, you may be able to charge higher prices and see a higher number of monthly transactions.
- Cost of maintenance and repairs: The cost of maintaining and repairing your jet skis can also impact your business's average price and number of monthly transactions. If your maintenance and repair costs are high, you may need to increase your prices to cover these expenses, which could result in a decrease in monthly transactions. Alternatively, if your maintenance and repair costs are low, you may be able to offer lower prices and see an increase in monthly transactions.
- Tourism trends: The overall tourism trends in your area can also affect your business's average price and number of monthly transactions. If your area experiences a surge in tourism, you may see an increase in demand for jet ski rentals, allowing you to charge higher prices and have more monthly transactions. However, if there is a decline in tourism, you may need to lower your prices and see a decrease in 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 operating expenses for a jet ski rental company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your jet ski rental company 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 jet ski rental company will include some of the following items:
- Jet Ski Maintenance: This includes regular maintenance and repairs for your jet skis, ensuring they are always in top condition for your customers.
- Fuel Costs: As jet skis require fuel to operate, you will need to factor in the cost of fuel for each rental.
- Dock Fees: If your rental company is located in a marina or on a lake, you may have to pay dock fees for your jet skis.
- Insurance: You will need to have insurance for your jet skis to protect against any potential accidents or damages.
- Staff Costs: This includes wages, benefits, and any training costs for your staff who will be operating and maintaining the jet skis.
- Marketing and Advertising: To attract customers, you may need to invest in marketing and advertising efforts such as flyers, online ads, or social media promotions.
- Accountancy Fees: You may need to hire an accountant to help with bookkeeping, taxes, and other financial aspects of your business.
- Insurance: You will need to have insurance for your jet skis to protect against any potential accidents or damages.
- Software Licenses: You may need to purchase software licenses for reservation and booking systems, as well as accounting and tax software.
- Banking Fees: This includes fees for processing credit card payments, ATM fees, and any other banking fees associated with your business transactions.
- Office Supplies: This includes items such as paper, printer ink, and other supplies needed to keep your office running smoothly.
- Rent/Lease: If you are renting or leasing a space for your rental company, this will be an ongoing expense.
- Utilities: This includes electricity, water, and other utilities needed for your office and/or rental location.
- Permits and Licenses: You may need to obtain permits and licenses to operate your jet ski rental company, which may come with associated fees.
- Cleaning Supplies: To maintain a clean and presentable rental location, you will need to invest in cleaning supplies such as soap, disinfectant, and paper towels.
This list will need to be tailored to the specificities of your jet ski rental company, but should offer a good starting point for your budget.
What investments are needed to start or grow a jet ski rental company?
Creating and expanding a jet ski rental company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a jet ski rental company could include elements such as:
- Jet Skis - As a jet ski rental company, you will need to purchase jet skis to rent out to customers. These are considered fixed assets and will be a significant capital expenditure for your business.
- Trailer(s) - You will also need to invest in trailers to transport your jet skis to and from the rental location. These trailers will be used frequently and will need to be well-maintained to ensure safe transportation of your jet skis.
- Dock/Pier - If your rental location is on the water, you may need to construct a dock or pier to securely store your jet skis when they are not in use. This will also provide a convenient and accessible area for customers to access the jet skis.
- Safety Equipment - It is essential to prioritize the safety of your customers while they are out on the water. This may include investing in life jackets, first aid kits, and other safety equipment. These items are considered fixed assets and will need to be replaced periodically.
- Storage Shed - If your rental location is not on the water, you may need to invest in a storage shed or garage to store your jet skis when they are not in use. This will protect your assets from weather damage and theft.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your jet ski rental 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 jet ski rental company
The next step in the creation of your financial forecast for your jet ski rental 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 jet ski rental company?
Now let's have a look at the main output tables of your jet ski rental company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your jet ski rental company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a jet ski rental 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
The projected balance sheet gives an overview of your jet ski rental company'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 jet ski rental company. 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 forecast
Your jet ski rental company'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 jet ski rental company:
- 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 jet ski rental company'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 jet ski rental company'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 jet ski rental company's financial projections?
Building a jet ski rental 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 jet ski rental 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional jet ski rental company financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your jet ski rental company's financial forecast?
Creating an accurate and error-free jet ski rental 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your jet ski rental 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 jet ski rental 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
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- Example of financial forecast for business idea
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