How to create a financial forecast for a kitchen store?
Developing and maintaining an up-to-date financial forecast for your kitchen store 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 kitchen store 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 kitchen store?
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 kitchen store becomes handy.
Creating a kitchen store 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 kitchen store.
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 kitchen store 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 kitchen store'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 used as input to build a kitchen store financial forecast?
A kitchen store's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing kitchen store.
If you are creating (or updating) the forecast of an existing kitchen store, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new kitchen store startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the kitchen store to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your kitchen store's financial forecast.
The sales forecast for a kitchen store
From experience, it usually makes sense to start your kitchen store's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your kitchen store (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your kitchen store's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Your store's location: The location of your kitchen store can greatly impact the average price and number of monthly transactions. For example, if your store is located in a high-end neighborhood, customers may expect higher prices and your average price per transaction may be higher. On the other hand, if your store is located in a more budget-friendly area, your average price may be lower and you may have a higher volume of transactions.
- The economy: The state of the economy can also affect your average price and number of transactions. In a strong economy, customers may be more willing to spend more on kitchen products, resulting in a higher average price. However, during an economic downturn, customers may be more cautious with their spending and your average price may decrease as a result.
- Trends and demand: Keeping up with current trends and meeting customer demand can also impact your sales forecast. For example, if there is a trend towards eco-friendly kitchen products, you may see an increase in sales and average price for those types of products. Similarly, if there is a high demand for a specific type of kitchen appliance, you may see an increase in sales and average price for that product.
- Competition: The level of competition in your area can also affect your sales forecast. If there are many other kitchen stores in close proximity, you may need to adjust your prices and promotions in order to stay competitive and attract customers. This can impact your average price and number of monthly transactions.
- Seasonal trends: Seasonal trends can also play a role in your sales forecast. For example, during the holiday season, customers may be more likely to purchase kitchen products as gifts, resulting in a higher average price and number of transactions. However, during slower seasons, you may need to adjust your pricing and promotions to maintain sales and average price.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 kitchen store
The next step is to estimate the expenses needed to run your kitchen store on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your kitchen store's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, and training costs for your employees. Depending on the size of your kitchen store, you may have a store manager, sales associates, and kitchen experts to help customers with their purchases.
- Rent and Utilities: Your store's location will likely be one of your biggest expenses. This includes rent, utilities such as electricity and water, and any maintenance costs for your store space.
- Inventory: As a kitchen store, you will need to invest in a wide range of products to sell to your customers. This includes cookware, appliances, and kitchen gadgets. Keep in mind that your inventory will need to be restocked regularly to meet customer demand.
- Marketing and Advertising: You will need to promote your kitchen store to attract customers. This may include creating advertisements, participating in local events, and utilizing social media to reach potential customers.
- Accountancy Fees: It's important to keep track of your store's financials, and you may need to hire an accountant to help you with bookkeeping, tax preparation, and other financial tasks.
- Insurance Costs: As a business owner, it's important to protect your store from potential risks. You may need to invest in insurance for your store's property, inventory, and liability coverage.
- Software Licenses: In order to run your store efficiently, you may need to invest in software for tasks such as inventory management, accounting, and customer relationship management.
- Banking Fees: Your store will likely have a business bank account, and you may incur fees for services such as wire transfers, overdrafts, and monthly account maintenance.
- Legal Fees: You may need to consult with a lawyer for legal advice and assistance with contracts, leases, and other business-related matters.
- Equipment Maintenance: If you have any kitchen equipment in your store, such as refrigerators or ovens, you will need to budget for regular maintenance and repairs.
- Delivery and Shipping Costs: If you offer delivery or shipping services for your products, you will need to factor in the cost of transportation and packaging materials.
- Training and Development: It's important to invest in the development of your staff to ensure they have the knowledge and skills to provide excellent customer service and promote your products effectively.
- Office Supplies: You will need basic office supplies such as paper, pens, and printer ink for your store's administrative tasks.
- Credit Card Processing Fees: If you accept credit cards as a form of payment, you will need to pay fees for each transaction to the credit card processor.
- Waste Disposal: Your store will likely generate some waste, and you may need to pay for garbage collection services or invest in a waste disposal system.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small kitchen store might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a kitchen store?
Your kitchen store 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 kitchen store, these could include:
- Kitchen Equipment: This includes items such as ovens, refrigerators, mixers, and other appliances that are necessary for operating a kitchen store.
- Furniture and Fixtures: This category includes items such as display shelves, tables, chairs, and other furniture that are needed to set up the store and attract customers.
- Point-of-Sale System: A modern and efficient point-of-sale system is essential for any retail business, including a kitchen store. This includes hardware such as cash registers, barcode scanners, and card readers, as well as software for tracking sales and inventory.
- Store Renovation: If you are starting your kitchen store from scratch, you may need to invest in renovating the space to make it suitable for your business. This could include painting, flooring, lighting, and other improvements.
- Delivery Vehicles: If your kitchen store offers delivery services, you may need to invest in a vehicle specifically for this purpose. This could include a van or truck to transport large and heavy items to customers.
Again, this list will need to be adjusted according to the size and ambitions of your kitchen 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 kitchen store
The next step in the creation of your financial forecast for your kitchen 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 kitchen store?
Now let's have a look at the main output tables of your kitchen store's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your kitchen store's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a kitchen store 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 kitchen store'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 projected cash flow statement
A projected cash flow statement for a kitchen store is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your kitchen store's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the kitchen store 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 kitchen store's financial forecast?
Creating your kitchen 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 forecasting software to build your kitchen store'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional kitchen store 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 kitchen store's financial forecast?
Creating an accurate and error-free kitchen store 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 kitchen 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 kitchen store
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your kitchen store.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a kitchen store. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to project revenues for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a kitchen store? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
