How to create a financial forecast for a Korean restaurant?
Developing and maintaining an up-to-date financial forecast for your Korean restaurant 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 Korean restaurant 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 Korean restaurant?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your Korean restaurant and ensure that it can be financially viable in the years to come.
A financial plan for a Korean restaurant 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 Korean restaurant 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 Korean restaurant'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 Korean restaurant financial forecast?
A Korean restaurant'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 Korean restaurant.
If you are creating (or updating) the forecast of an existing Korean restaurant, 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 Korean restaurant 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 Korean restaurant 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 Korean restaurant's financial forecast.
The sales forecast for a Korean restaurant
The sales forecast, also called topline projection, is normally where you will start when building your Korean restaurant 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 Korean restaurants), and consider the elements below:
- Your location: The location of your Korean restaurant can greatly affect the average price and number of monthly transactions. A restaurant located in a busy city center may be able to charge higher prices and attract more customers compared to one located in a less populated area.
- The quality of ingredients: The quality of ingredients used in your dishes can impact the average price of your menu items. Using high-quality, authentic Korean ingredients can justify higher prices and attract customers looking for an authentic dining experience.
- The popularity of Korean cuisine: The current popularity of Korean cuisine can also affect your business's average price and number of monthly transactions. If Korean food is currently trending, you may be able to charge higher prices and attract more customers.
- Competition: The level of competition in your area can also affect your average price and number of monthly transactions. If there are many other Korean restaurants in your area, you may need to adjust your prices to remain competitive and attract customers.
- Cultural events and holidays: Cultural events and holidays, such as Korean holidays or festivals, can also impact your business's sales. These events may bring in more customers and allow you to charge premium prices for special dishes or menus.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
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The operating expenses for a Korean restaurant
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your Korean restaurant 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 Korean restaurant will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for your kitchen staff, waitstaff, and managers. You will also need to factor in payroll taxes and any employee insurance costs.
- Food and Beverage Costs: This includes the cost of ingredients and supplies needed to create your menu items. As a Korean restaurant, you may need to purchase specialty ingredients such as kimchi, gochujang, and various types of meat and seafood.
- Rent and Utilities: You will need to pay rent for your restaurant space, as well as utilities such as electricity, water, and gas. Depending on your location, rent and utility costs can vary greatly.
- Marketing and Advertising: To attract customers to your restaurant, you will need to invest in marketing and advertising efforts. This can include social media ads, print ads, and promotions.
- Accountancy Fees: It is important to keep your financial records in order, so you may need to hire an accountant to help with bookkeeping, tax preparation, and other financial tasks.
- Insurance Costs: Running a restaurant comes with certain risks, so it is important to have insurance coverage for your property, employees, and liability.
- Software Licenses: To help with tasks such as inventory management and point-of-sale systems, you may need to purchase software licenses.
- Banking Fees: You will need a business bank account for your restaurant, and there may be fees associated with transactions, wire transfers, and other banking services.
- Cleaning and Maintenance: Keeping your restaurant clean and well-maintained is essential for creating a pleasant dining experience for your customers. This can include cleaning supplies, pest control, and equipment repairs.
- Waste Management: Properly disposing of waste and recycling is important for both environmental and health reasons. You may need to pay for waste management services or invest in composting equipment.
- Licenses and Permits: To legally operate your restaurant, you will need to obtain various licenses and permits from your local government. These can include health permits, liquor licenses, and business licenses.
- Credit Card Processing Fees: Many customers prefer to pay with credit or debit cards, so you will need to factor in fees associated with processing these transactions.
- Uniforms and Supplies: Your staff will need uniforms, and you will also need to purchase supplies such as napkins, tablecloths, and cleaning supplies.
- Training and Development: To ensure that your staff is providing high-quality service, you may need to invest in training and development programs.
- Entertainment: As a Korean restaurant, you may want to offer entertainment options such as traditional music or dance performances. This may come with associated costs such as hiring performers or purchasing equipment.
This list will need to be tailored to the specificities of your Korean restaurant, but should offer a good starting point for your budget.
What investments are needed to start or grow a Korean restaurant?
Once you have an idea of how much sales you could achieve and what it will cost to run your Korean restaurant, it is time to look into the equipment required to launch or expand the activity.
For a Korean restaurant, capital expenditures and initial working capital items could include:
- Kitchen Equipment: This includes items such as stoves, grills, fryers, refrigerators, and freezers. These are essential for preparing and storing food in a Korean restaurant.
- Furniture and Fixtures: This category includes tables, chairs, booths, and other seating options, as well as decor and lighting. These items not only provide a comfortable dining experience for your customers, but also contribute to the overall ambience and aesthetic of your restaurant.
- POS System: A Point of Sale (POS) system is necessary for tracking sales, inventory, and managing orders and payments. In a Korean restaurant, this system may also include specialized software for managing orders and payments for traditional Korean dishes such as bulgogi or bibimbap.
- Cookware and Utensils: These items include pots, pans, knives, and other tools necessary for cooking and serving food. In a Korean restaurant, you may also need specialized cookware and utensils for traditional dishes like kimchi or hot pot.
- Ventilation and Hood System: Proper ventilation is crucial in a restaurant to maintain air quality and prevent the buildup of grease and odors. A hood system is necessary for removing smoke and steam from the kitchen, particularly when cooking Korean BBQ or other dishes that require grilling or frying.
Again, this list will need to be adjusted according to the specificities of your Korean restaurant.
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 Korean restaurant
The next step in the creation of your financial forecast for your Korean restaurant 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 Korean restaurant?
Now let's have a look at the main output tables of your Korean restaurant's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your Korean restaurant's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a Korean restaurant 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 Korean restaurant'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 Korean restaurant. 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 projected cash flow statement
A projected cash flow statement for a Korean restaurant 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 Korean restaurant'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 Korean restaurant 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 Korean restaurant's financial projections?
Building a Korean restaurant 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 Korean restaurant'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.
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 Korean restaurant 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 Korean restaurant'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 Korean restaurant 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 Korean restaurant'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 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 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 Korean restaurant.
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 Korean restaurant. 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 template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
