How to create a financial forecast for a jewellery store?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your jewellery store.
Putting together a jewellery store 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 jewellery store.
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 jewellery store?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your jewellery store and ensure that it can be financially viable in the years to come.
A financial plan for a jewellery store 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 jewellery store 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 jewellery store'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 needed to build a jewellery store 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 jewellery store, 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 jewellery store 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 jewellery store, 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 jewellery store's financial forecast.
The sales forecast for a jewellery store
The sales forecast, also called topline projection, is normally where you will start when building your jewellery store 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 jewellery stores), and consider the elements below:
- The economy: As the economy fluctuates, so does the average price of jewellery. During an economic downturn, consumers may be more price-conscious and therefore, sales may decline as the average price decreases. On the other hand, during a booming economy, consumers may be more willing to splurge on luxury items, resulting in an increase in both average price and number of transactions.
- Trends and fashion: The constantly changing trends and fashion in the jewellery industry can have a significant impact on the average price of jewellery. For example, if a certain type of gemstone or style becomes popular, the demand for it may increase, driving up the average price of jewellery featuring that particular trend.
- Seasonal demand: The demand for jewellery may vary throughout the year, with certain seasons having higher demand than others. For example, the holiday season and special occasions like Valentine's Day may see a spike in sales and average price, while the summer months may experience a decline in sales and average price.
- Competition: The level of competition in the local market can also have an impact on the average price and number of transactions for a jewellery store. If there are several other jewellery stores in the area, you may need to adjust your prices to remain competitive, potentially affecting the average price and number of transactions.
- Quality and uniqueness of products: The quality and uniqueness of your jewellery can also play a role in your sales forecast. If you offer high-quality and unique pieces, you may be able to charge a higher average price and attract more customers, resulting in a higher number of transactions. On the other hand, if your products are not perceived as unique or of high quality, it may be difficult to maintain a high average price and attract customers, leading to a decline in sales.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 jewellery store
The next step is to estimate the costs you’ll have to incur to operate your jewellery store.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your jewellery store's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, bonuses, and benefits for your employees. In a jewellery store, you may have sales associates, jewellery designers, and administrative staff.
- Rent: You will need to pay rent for your store space, whether it is a standalone store or a space within a mall or shopping center.
- Utilities: This includes electricity, water, and gas. These are necessary for powering your store and keeping it at a comfortable temperature for your customers.
- Inventory: As a jewellery store, you will need to constantly replenish your inventory of jewellery pieces, gemstones, and other materials.
- Advertising and Marketing: You will need to promote your business through various channels, such as print and digital advertising, social media, and events.
- Accountancy Fees: You may need to hire an accountant or bookkeeper to help you manage your finances and file taxes.
- Insurance Costs: It is important to have insurance coverage for your store, inventory, and employees.
- Software Licences: You may need to purchase licenses for software programs that help you manage your inventory, sales, and customer data.
- Banking Fees: There may be fees associated with your business bank account, such as monthly maintenance fees and transaction fees.
- Maintenance and Repairs: You may need to budget for repairs and maintenance of your store, equipment, and fixtures.
- Professional Fees: If you hire outside professionals, such as lawyers or consultants, you will need to pay for their services.
- Taxes and Licences: You will need to pay taxes on your business income and may also need to obtain certain licences to operate your store.
- Credit Card Processing Fees: If you accept credit card payments, you will need to pay processing fees for each transaction.
- Supplies: You will need to purchase various supplies for your store, such as packaging materials, cleaning products, and office supplies.
- Training and Development: It is important to invest in the training and development of your employees to ensure they have the necessary skills to provide excellent customer service and sell your products effectively.
This list is not exhaustive by any means, and will need to be tailored to your jewellery store's specific circumstances.
What investments are needed to start or grow a jewellery store?
Once you have an idea of how much sales you could achieve and what it will cost to run your jewellery store, it is time to look into the equipment required to launch or expand the activity.
For a jewellery store, capital expenditures and initial working capital items could include:
- Jewellery Display Cases: These are essential for showcasing your products in an attractive and organized manner. Depending on the size and style, display cases can range from a few hundred to several thousand dollars.
- Security Systems: As a jewellery store owner, it is important to invest in a reliable security system to protect your valuable inventory. This can include security cameras, alarms, and other measures to deter theft.
- Lighting Fixtures: Lighting plays a crucial role in showcasing the beauty and details of your jewellery pieces. Investing in high-quality lighting fixtures, such as spotlights and track lights, can enhance the overall aesthetic of your store and attract customers.
Again, this list will need to be adjusted according to the specificities of your jewellery store.
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 jewellery store
The next step in the creation of your financial forecast for your jewellery store 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 jewellery store?
Now let's have a look at the main output tables of your jewellery store'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 jewellery store'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 jewellery store will look different than for a startup.
The projected balance sheet
Your jewellery store'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 projection
The cash flow forecast of your jewellery store 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 jewellery store'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 jewellery store 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 jewellery store'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 jewellery store's financial forecast?
Creating your jewellery store's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your jewellery store'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
Outsourcing the creation of your jewellery store 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 jewellery store'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 jewellery store 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 jewellery store'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 jewellery store, 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 jewellery store
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 jewellery store 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 jewellery store, 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 sales forecast for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a jewellery store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
