How to create a financial forecast for a kebab shop?
Creating a financial forecast for your kebab shop, 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 kebab shop 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 kebab shop?
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 kebab shop becomes handy.
Creating a kebab shop 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 kebab shop.
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 kebab shop 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 kebab shop'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 solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
What information is needed to build a kebab shop 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 kebab shop, 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 kebab shop 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 kebab shop, 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 kebab shop's financial forecast.
The sales forecast for a kebab shop
From experience, it is usually best to start creating your kebab shop financial forecast by your sales forecast.
To create an accurate sales forecast for your kebab shop, you will have to rely on the data collected in your market research, or if you're running an existing kebab 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:
- Competition: Keep an eye on your competitors' prices and offerings. If a new kebab shop opens up nearby, it may affect your average price and number of transactions. Consider offering unique or seasonal items to differentiate yourself and attract customers.
- Economic conditions: Changes in the economy, such as a recession or inflation, can impact consumer spending. Keep track of economic news and adjust your prices accordingly to stay competitive and maintain your average number of transactions.
- Food trends: Stay up to date on food trends and incorporate them into your menu to attract customers. For example, if veganism is on the rise, consider adding a vegan kebab option to your menu to appeal to a wider audience and potentially increase your average price and number of transactions.
- Tourism: If your kebab shop is located in a tourist-heavy area, be aware of peak tourist seasons and adjust your prices accordingly. During peak season, you may be able to charge a higher average price and see an increase in transactions from tourists.
- Seasonal changes: The time of year can also affect your average price and number of transactions. For example, during the summer months, customers may be more likely to purchase cold drinks with their kebab, leading to a higher average price and more transactions. In the colder months, consider offering warm drinks or seasonal menu items to attract customers and maintain your average price and transactions.
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 inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
The operating expenses for a kebab shop
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your kebab shop 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 kebab shop will include some of the following items:
- Staff Costs: This includes wages, salaries, benefits, and training for your employees. As a kebab shop owner, you will need to budget for the salaries of your cooks, servers, and cashiers.
- Ingredients: The cost of ingredients is a major expense for a kebab shop. You will need to purchase high-quality meats, vegetables, and spices to make your delicious kebabs.
- Rent: You will need to find a suitable location for your kebab shop and pay monthly rent. The cost of rent will depend on the size and location of your shop.
- Utilities: Electricity, gas, water, and other utilities are necessary for running your kebab shop. You will need to budget for these expenses on a monthly basis.
- Marketing and Advertising: To attract customers, you will need to advertise your kebab shop through various channels such as social media, flyers, and local promotions. This will incur costs for printing, design, and advertising fees.
- Accountancy Fees: As a business owner, you will need to hire an accountant to help you with tax filings, financial statements, and other related tasks. Their services will come at a cost.
- Insurance Costs: To protect your business from potential risks, you will need to purchase insurance. This includes general liability insurance, workers' compensation insurance, and property insurance.
- Equipment and Supplies: In addition to ingredients, you will need to purchase equipment and supplies for your kebab shop such as grills, knives, utensils, and packaging materials. These items will need to be replaced or repaired regularly.
- Software Licenses: You may need to purchase software licenses for your point-of-sale system, accounting software, and other programs to help you run your kebab shop efficiently.
- Banking Fees: Every time you process a transaction, whether it's a credit card or a check, you will incur banking fees. These fees can add up over time and should be factored into your budget.
- Cleaning and Maintenance: To keep your kebab shop clean and well-maintained, you will need to hire cleaning services and budget for regular maintenance of your equipment.
- Licenses and Permits: Depending on your location, you may need to obtain various licenses and permits to operate your kebab shop legally. These may include food service permits, health permits, and business licenses.
- Training and Development: To ensure the quality of your kebabs, you may need to invest in training and development for your staff. This can include workshops, seminars, and online courses.
- Taxes: As a business owner, you will need to pay various taxes such as income tax, sales tax, and payroll tax. These should be factored into your operating expenses.
- Contingency Fund: It's always a good idea to have a contingency fund to cover unexpected expenses such as equipment breakdowns or supply shortages. This will help you avoid any financial strain on your business.
This list will need to be tailored to the specificities of your kebab shop, but should offer a good starting point for your budget.
What investments are needed to start or grow a kebab shop?
Your kebab shop financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a kebab shop, these could include:
- Equipment: This includes items such as grills, fryers, refrigerators, and other kitchen equipment necessary for preparing and storing food. You will need to budget for the initial purchase of this equipment and also consider the cost of any repairs or replacements in the future.
- Furniture and fixtures: This covers items such as tables, chairs, lighting, and decorations for your kebab shop. These items are important for creating a welcoming and comfortable atmosphere for your customers.
- Renovations and improvements: If you are starting your kebab shop from scratch, you may need to make renovations to the space in order to meet health and safety codes and create a functional kitchen and dining area. Even if you are leasing a space, you may need to make improvements to meet your specific needs.
- Point-of-sale system: A modern point-of-sale system is crucial for accurately tracking sales, managing inventory, and processing payments. This includes hardware such as a cash register or tablet, as well as software for managing transactions and generating reports.
- Delivery vehicle: If you plan on offering delivery services, you may need to purchase a vehicle specifically for this purpose. This could be a car, scooter, or bike depending on the size of your operation and the distance you are willing to deliver.
Again, this list will need to be adjusted according to the size and ambitions of your kebab 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 kebab shop
The next step in the creation of your financial forecast for your kebab 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 kebab shop?
Now let's have a look at the main output tables of your kebab shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your kebab shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a kebab shop 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 kebab shop's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 kebab 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 kebab 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 kebab 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 kebab shop's financial plan.
Need a solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
Which tool should you use to create your kebab shop's financial forecast?
Using the right tool or solution will make the creation of your kebab shop's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your kebab 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 kebab 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 kebab 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 kebab 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 kebab 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 kebab 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 kebab shop
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your kebab shop.
- 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 kebab shop. Don't hesitate to contact us if you have any questions!
Need inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
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