How to create a financial forecast for a lingerie shop?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your lingerie shop.
Putting together a lingerie shop 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 lingerie shop.
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 lingerie shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your lingerie shop and ensure that it can be financially viable in the years to come.
A financial plan for a lingerie shop 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 lingerie shop 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 lingerie shop'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 lingerie 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 lingerie 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 lingerie 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 lingerie 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 lingerie shop's financial forecast.
The sales forecast for a lingerie shop
The sales forecast, also called topline projection, is normally where you will start when building your lingerie shop 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 lingerie shops), and consider the elements below:
- Seasonal trends: As a lingerie shop owner, you know that seasonal trends can heavily impact your average price and number of monthly transactions. For example, during the summer months, customers may be more interested in purchasing swimwear and lighter lingerie, while during the winter months, they may be looking for cozy and warm pieces. Keeping track of these seasonal trends can help you adjust your inventory and pricing accordingly.
- Economic climate: The state of the economy can also affect your business's average price and number of monthly transactions. During a recession, customers may be more price-sensitive and opt for lower-priced items, while during a booming economy, they may be more willing to splurge on luxury lingerie. Stay updated on the current economic climate and adjust your pricing and marketing strategies accordingly.
- Fashion trends: Lingerie is a fashion-driven industry, and keeping up with the latest trends can greatly impact your sales. For example, if a certain style or color becomes popular, customers may be more willing to pay a higher price for it. Stay updated on fashion shows and industry publications to stay ahead of the trends and attract more customers.
- Competition: Competition from other lingerie shops can also affect your average price and number of monthly transactions. If there are many similar shops in your area, you may need to offer competitive prices or unique products to stand out and attract customers. Keep an eye on your competitors and adjust your pricing and inventory accordingly.
- Online presence: In today's digital age, having a strong online presence can greatly impact your business's success. Having an e-commerce website or a strong social media presence can attract more customers and increase your average price and number of monthly transactions. Keep your website and social media platforms updated with new products and promotions to attract more customers and increase 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 lingerie shop
The next step is to estimate the expenses needed to run your lingerie shop 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 lingerie shop's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, bonuses, and benefits for employees such as sales associates, cashiers, and store managers.
- Rent: You will need to pay rent for your lingerie shop's physical location, whether it's a standalone store or a space in a shopping mall or plaza.
- Utilities: These are the monthly costs for electricity, water, and other utilities needed to keep your shop running.
- Inventory: As a lingerie shop, you will need to constantly restock your inventory with new products, which will incur costs.
- Marketing and Advertising: You will need to promote your lingerie shop to attract customers, which may involve expenses for advertising, social media marketing, and collaborations with influencers.
- Accountancy Fees: You may need to hire an accountant or outsource accounting services to help you manage your finances, file taxes, and track your shop's performance.
- Insurance Costs: It's important to have insurance coverage for your lingerie shop to protect against potential risks such as theft, fire, or customer injuries.
- Software Licenses: You may need to invest in software licenses for point-of-sale systems, inventory management, and other business operations.
- Banking Fees: You will likely have to pay fees for business banking services, such as transaction fees, wire transfers, and credit card processing fees.
- Supplies: This includes the cost of office supplies, packaging materials, and other consumables needed to run your lingerie shop.
- Professional Services: You may need to hire professionals such as lawyers, consultants, or designers to support your business operations.
- Maintenance and Repairs: You will need to budget for regular maintenance and repairs of your shop's equipment, furniture, and fixtures.
- Training and Development: It's important to invest in your employees' skills and knowledge through training and development programs to improve their performance and customer service.
- Taxes and Licenses: You will need to pay taxes and obtain necessary licenses and permits to legally operate your lingerie shop.
- Credit Card Fees: If you accept credit card payments, you will need to factor in the fees charged by credit card companies for each transaction.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small lingerie shop might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a lingerie shop?
Your lingerie 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 lingerie shop, these could include:
- Store Renovation: This includes any renovations or improvements made to your physical store location, such as updating the flooring, painting, or adding new fixtures and displays. These renovations can help create a more inviting and visually appealing atmosphere for your customers.
- Point of Sale System: A reliable and efficient point of sale (POS) system is essential for any retail business, including a lingerie shop. This system can help you track sales, manage inventory, and process transactions, making it a crucial capital expenditure for your business.
- Lingerie Inventory: As a lingerie shop, your inventory will be a significant capital expenditure. This includes purchasing a variety of lingerie styles, sizes, and colors to meet the demands of your customers. It is essential to regularly update your inventory to keep up with trends and customer preferences.
- Technology and Equipment: In addition to a POS system, there may be other technology and equipment that you need to invest in for your lingerie shop, such as a computer, printer, and security system. These items are necessary for day-to-day operations and should be factored into your capital expenditures.
- Store Furniture and Decor: The furniture and decor in your store can greatly impact the overall shopping experience for your customers. This may include purchasing display cases, mannequins, and other decorative items to showcase your lingerie products. These items may be considered fixed assets and should be included in your expenditure forecast.
Again, this list will need to be adjusted according to the size and ambitions of your lingerie 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 lingerie shop
The next step in the creation of your financial forecast for your lingerie 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 lingerie shop?
Now let's have a look at the main output tables of your lingerie shop'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 lingerie shop'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 lingerie shop will look different than for a startup.
The projected balance sheet
Your lingerie shop'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 forecast
Your lingerie shop's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the lingerie shop:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your lingerie shop's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your lingerie shop's financial plan - so that banks or investors can assess seasonal variation and ensure your 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 lingerie shop's financial forecast?
Using the right tool or solution will make the creation of your lingerie shop's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your lingerie shop'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional lingerie 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 lingerie shop's financial forecast?
Creating an accurate and error-free lingerie shop 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 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
- 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 lingerie shop 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 lingerie shop, 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 project revenues for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a lingerie shop? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
