How to create a financial forecast for a liquor store?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your liquor store.
Putting together a liquor store 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 liquor store.
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 liquor store?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your liquor store and ensure that it can be financially viable in the years to come.
A financial plan for a liquor store 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 liquor store 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 liquor store'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 liquor store financial forecast?
A liquor 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 liquor store.
If you are creating (or updating) the forecast of an existing liquor 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 liquor 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 liquor 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 liquor store's financial forecast.
The sales forecast for a liquor store
From experience, it usually makes sense to start your liquor store's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your liquor 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 liquor 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:
- Location: The location of your liquor store can greatly impact the average price and number of monthly transactions. A store located in a high-end, affluent neighborhood may be able to charge higher prices for premium products, while a store in a lower-income area may need to adjust their prices to cater to their customers' budget.
- Seasonal Events: Certain seasonal events such as holidays, sporting events, and festivals can affect the demand for alcohol and therefore, the number of monthly transactions. For example, the demand for alcohol may increase during the holiday season, leading to higher sales and potentially higher prices for certain products.
- Competition: The presence of other liquor stores in your area can also impact your average price and number of monthly transactions. If there are several competitors offering similar products at lower prices, you may need to adjust your prices to remain competitive and attract customers.
- Trends: Changes in consumer preferences and trends can also influence your sales. For example, if there is a growing trend towards craft beers or organic wines, you may need to stock these products and potentially charge higher prices to meet the demand.
- Economic Conditions: Economic factors such as inflation, unemployment, and consumer confidence can also affect the average price and number of monthly transactions at your liquor store. In times of economic downturn, consumers may be more price-sensitive and opt for cheaper products, while in times of economic growth, they may be more willing to spend on premium items.
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 liquor store
The next step is to estimate the costs you’ll have to incur to operate your liquor store.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your liquor store's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, and benefits for your employees. As a liquor store, you will likely need to hire staff to operate the cash register, stock shelves, and assist customers.
- Accountancy Fees: It is important to keep accurate financial records and file taxes correctly. You may need to hire an accountant to help you with this, which will incur fees.
- Insurance Costs: You will need to protect your business and assets with various types of insurance, such as general liability insurance, liquor liability insurance, and workers' compensation insurance.
- Software Licenses: In today's digital age, many liquor stores use point-of-sale systems, inventory management software, and other programs to help run their business. These typically require annual licenses.
- Banking Fees: You will likely have a business bank account to manage your finances. This may incur fees such as monthly maintenance fees, transaction fees, and ATM fees.
- Rent: If you do not own the property where your liquor store is located, you will need to pay rent to your landlord.
- Utilities: This includes electricity, water, and gas bills for your store. As a liquor store, you may also have additional costs for refrigeration and cooling systems.
- Inventory: As a liquor store, your main source of revenue will be from selling alcohol. You will need to purchase inventory regularly to maintain stock levels.
- Marketing and Advertising: To attract customers and promote your store, you may need to invest in marketing and advertising efforts, such as flyers, social media ads, and promotions.
- Licenses and Permits: As a liquor store, you will need to obtain various licenses and permits to legally sell alcohol. These may include a liquor license, business license, and health permits.
- Maintenance and Repairs: Over time, your store may require maintenance and repairs, such as fixing broken equipment or replacing worn-out fixtures. These costs should be factored into your operating expenses.
- Credit Card Processing Fees: If you accept credit and debit card payments, you will need to pay processing fees to your payment processor.
- Security: To protect your store from theft and vandalism, you may need to invest in security measures, such as security cameras, alarm systems, and security guards.
- Taxes: As a business owner, you are responsible for paying various taxes, such as sales tax, payroll tax, and income tax.
- Professional Services: You may need to hire lawyers, consultants, or other professionals to assist with legal, financial, or operational matters for your liquor store.
This list is not exhaustive by any means, and will need to be tailored to your liquor store's specific circumstances.
What investments are needed to start or grow a liquor store?
Creating and expanding a liquor store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a liquor store could include elements such as:
- Store Fixtures and Equipment: This includes items such as shelves, refrigerators, and point-of-sale systems. These are essential for displaying and storing liquor products and conducting sales transactions.
- Liquor Inventory: As a liquor store, your main source of revenue will come from selling liquor products. Therefore, you will need to budget for the initial purchase of inventory and ongoing restocking costs.
- Renovations and Improvements: If you are starting a new liquor store or looking to update an existing one, you may need to budget for renovations and improvements, such as painting, flooring, or lighting upgrades.
- Security Systems: As a business that deals with valuable and potentially attractive products, it is important to invest in security systems to protect your liquor store from theft or vandalism. This may include cameras, alarms, and locks.
- Delivery Vehicles: If you plan on offering delivery services to your customers, you may need to budget for the purchase of a delivery vehicle. This will allow you to efficiently and safely transport large orders of liquor to your customers.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your liquor 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 liquor store
The next step in the creation of your financial forecast for your liquor 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 liquor store?
Now let's have a look at the main output tables of your liquor store's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your liquor store's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a liquor 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 liquor 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 cash flow projection
The cash flow forecast of your liquor store 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 liquor store'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 liquor store 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 liquor store's financial plan.
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 liquor store's financial projections?
Building a liquor store 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 projection software to build your liquor store'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 liquor store 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 liquor store'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 liquor store 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 liquor store'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 forecast shows expected growth, profitability, and cash generation metrics for your liquor store.
- 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 liquor store. 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 write a business plan for a liquor store
- 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
