How to create a financial forecast for a lime and plaster manufacturer?
Creating a financial forecast for your lime and plaster manufacturing business, 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 lime and plaster manufacturing business 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 lime and plaster manufacturing business?
The financial projections for your lime and plaster manufacturing business act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your lime and plaster manufacturing business's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 lime and plaster manufacturing business financial forecast?
A lime and plaster manufacturing business'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 lime and plaster manufacturing business, 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 lime and plaster manufacturing business 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 lime and plaster manufacturing business 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 lime and plaster manufacturing business's financial forecast.
The sales forecast for a lime and plaster manufacturing business
From experience, it is usually best to start creating your lime and plaster manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your lime and plaster manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing lime and plaster manufacturing business, 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:
- Price of raw materials: The cost of materials such as limestone, gypsum, and sand can impact the average price of your lime and plaster products. If the price of these materials increases, your average price may also need to increase to maintain profitability.
- Demand for eco-friendly building materials: As more consumers become environmentally conscious, demand for eco-friendly building materials like lime and plaster may increase. This could potentially lead to an increase in your average price as customers are willing to pay more for sustainable products.
- Competition from alternative building materials: Your average price may be affected by competition from alternative building materials such as drywall or cement. If these materials become more popular or cost-effective, you may need to adjust your prices to remain competitive.
- Construction industry trends: The overall state of the construction industry can impact the demand for lime and plaster products. If there is a slowdown in construction activity, your monthly transactions may decrease, as well as your average price as you compete for a smaller pool of customers.
- Seasonal fluctuations: Depending on your location, the demand for lime and plaster products may vary throughout the year. For example, in colder climates, construction activity may slow down during the winter months, leading to a decrease in monthly transactions and potentially a decrease in average price as well.
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.
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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 lime and plaster manufacturing business
The next step is to estimate the costs you’ll have to incur to operate your lime and plaster manufacturing business.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your lime and plaster manufacturing business's operating expenses should normally include the following items:
- Raw materials: This includes the cost of limestone, gypsum, and other materials used in the production of lime and plaster.
- Staff costs: You will need to pay salaries, benefits, and other related expenses for your employees, including production workers, administrative staff, and sales and marketing personnel.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and financial analysis for your lime and plaster manufacturing business.
- Insurance costs: You will need to obtain insurance coverage to protect your business from potential risks and liabilities, such as property damage, product liability, and worker's compensation.
- Utility expenses: This includes the cost of electricity, water, and other utilities needed to operate your manufacturing facility.
- Rent or lease payments: If you do not own the building where your business is located, you will need to pay rent or lease payments.
- Maintenance and repair costs: Your manufacturing equipment and machinery will require regular maintenance and occasional repairs, which can be a significant expense.
- Marketing and advertising expenses: You will need to promote your lime and plaster products to potential customers through various channels, such as print ads, online marketing, and trade shows.
- Software licenses: You may need to purchase software licenses for programs that help with production, inventory management, and other business operations.
- Transportation costs: Depending on the size of your business, you may need to pay for transportation expenses to deliver your products to customers.
- Banking fees: Your business will have various banking needs, such as processing payments, managing cash flow, and obtaining loans, which may come with fees.
- Taxes: Your business will be subject to various taxes, including income tax, sales tax, and property tax.
- Office supplies: You will need to purchase office supplies, such as paper, printer ink, and stationery, to keep your business running smoothly.
- Professional fees: You may need to hire consultants or other professionals to assist with specific tasks, such as legal advice or environmental assessments.
- Training and development: It is essential to invest in the training and development of your employees to ensure they have the necessary skills and knowledge to perform their jobs effectively.
This list is not exhaustive by any means, and will need to be tailored to your lime and plaster manufacturing business's specific circumstances.
What investments are needed to start or grow a lime and plaster manufacturing business?
Creating and expanding a lime and plaster manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a lime and plaster manufacturing business could include elements such as:
- Machinery and Equipment: This includes the purchase of any machinery and equipment needed for the manufacturing process such as mixers, kilns, and grinding machines.
- Building and Infrastructure: This includes any expenses related to the construction, renovation, or maintenance of the manufacturing facility, such as building materials, plumbing, and electrical work.
- Raw Materials Inventory: This includes the cost of purchasing and storing raw materials such as limestone, sand, and water, which are essential for the production of lime and plaster.
- Transportation and Logistics: This includes the cost of transportation for raw materials and finished products, as well as any equipment needed for the transportation process, such as trucks or forklifts.
- Packaging and Labeling: This includes the cost of packaging materials and labeling for the finished products, such as bags, boxes, and labels, which are necessary for storage and distribution.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your lime and plaster manufacturing 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.
The financing plan of your lime and plaster manufacturing business
The next step in the creation of your financial forecast for your lime and plaster manufacturing business 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 lime and plaster manufacturing business?
Now let's have a look at the main output tables of your lime and plaster manufacturing business'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 lime and plaster manufacturing business'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 lime and plaster manufacturing business will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your lime and plaster manufacturing business'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 lime and plaster manufacturing business. 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 lime and plaster manufacturing business 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 lime and plaster manufacturing business'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 lime and plaster manufacturing 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 lime and plaster manufacturing business's financial forecast?
Creating your lime and plaster manufacturing business'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 lime and plaster manufacturing business'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 lime and plaster manufacturing business 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 lime and plaster manufacturing business's financial forecast?
Creating an accurate and error-free lime and plaster manufacturing business 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 lime and plaster manufacturing business.
- 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 lime and plaster manufacturing business. 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
- Financial forecast example
- How to create a turnover forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
