How to create a financial forecast for a lobbying firm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your lobbying firm.
Putting together a lobbying firm 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 lobbying firm.
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 lobbying firm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your lobbying firm and ensure that it can be financially viable in the years to come.
A financial plan for a lobbying firm 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 lobbying firm 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 lobbying firm'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 lobbying firm financial forecast?
A lobbying firm'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 lobbying firm.
If you are creating (or updating) the forecast of an existing lobbying firm, 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 lobbying firm 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 lobbying firm 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 lobbying firm's financial forecast.
The sales forecast for a lobbying firm
From experience, it usually makes sense to start your lobbying firm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your lobbying firm (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 lobbying firm'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:
- Legislative changes: Changes in legislation can greatly impact the demand for lobbying services. For example, if there is a shift in political power or a new law is passed that affects the industry, your firm may see an increase or decrease in demand for your services.
- Economic conditions: Economic factors such as recessions or economic booms can also affect the demand for lobbying services. During a recession, companies may be more hesitant to spend money on lobbying, while during a boom, they may have more resources to invest in this type of advocacy.
- Industry-specific issues: Changes or developments in the industry that your clients operate in can also impact the demand for lobbying services. For example, if there is a new regulation being proposed that would greatly benefit or harm your clients, they may seek out your firm's services more frequently.
- Political climate: The overall political climate, both nationally and locally, can also affect the demand for lobbying services. If there is a lot of political activity and contentious issues being debated, your firm may see an increase in demand for your services.
- Client turnover: The turnover of clients can also impact the average price and number of monthly transactions for your firm. If you lose a major client, it may take time to find a replacement and therefore, your average price and number of transactions may decrease temporarily. On the other hand, gaining a new high-profile client can greatly increase your average price and monthly transactions.
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 lobbying firm
The next step is to estimate the expenses needed to run your lobbying firm 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 lobbying firm's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and any other compensation for your employees, including lobbyists, researchers, and administrative staff.
- Accountancy fees: You may need to hire an accountant to help with financial planning, tax preparation, and other financial tasks specific to your lobbying firm.
- Insurance costs: It's important to have proper insurance coverage for your lobbying firm, including liability insurance and professional liability insurance.
- Software licenses: You may need to purchase licenses for software programs that are essential for your lobbying work, such as database management software or communication tools.
- Banking fees: Your lobbying firm will likely have various banking fees, including transaction fees, wire transfer fees, and account maintenance fees.
- Office rent: You will need a physical space to operate your lobbying firm, and rent will likely be one of your biggest expenses.
- Travel expenses: As a lobbying firm, you may need to travel frequently to meet with clients, attend conferences, or participate in advocacy efforts.
- Marketing and advertising: To attract clients and promote your lobbying services, you may need to invest in marketing and advertising efforts, such as creating a website, printing business cards, or running ads.
- Professional fees: You may need to hire legal counsel or consultants for specific projects or issues, and these fees should be included in your operating expenses forecast.
- Printing and postage: As a lobbying firm, you may need to print materials, such as reports or white papers, and send them to clients or government officials via mail.
- Office supplies: Your lobbying firm will need basic office supplies, such as paper, pens, and printer ink, to operate efficiently.
- Phone and internet: Communications are essential for a lobbying firm, so you will need to budget for phone and internet services.
- Utilities: Don't forget to include expenses for utilities, such as electricity, water, and gas, in your operating expenses forecast.
- Training and professional development: It's important to invest in your staff's skills and knowledge, so budget for training and professional development opportunities.
- Office equipment: Your lobbying firm may need equipment such as computers, printers, and furniture, so budget for these expenses as well.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small lobbying firm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a lobbying firm?
Creating and expanding a lobbying firm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a lobbying firm could include elements such as:
- Office Space: This includes the cost of renting or purchasing a physical office space to conduct lobbying activities. This may also include expenses for furnishing and maintaining the office.
- Technology and Equipment: Lobbying firms may need to invest in technology and equipment such as computers, printers, and software to efficiently conduct their work. This also includes costs for maintenance and upgrades.
- Travel and Entertainment: Lobbying firms often have to travel to meet with clients or attend important events. This may include expenses for airfare, hotels, and meals. It is important to accurately forecast these expenses to ensure budget allocation.
- Legal and Compliance: Lobbying firms must comply with various laws and regulations, which may require hiring legal counsel or paying for compliance-related services. This can include the cost of legal fees and training programs to ensure compliance.
- Professional Services: Lobbying firms may need to hire outside consultants or experts to assist with specific projects or tasks. This may include expenses for legal counsel, public relations firms, or other professional services to support lobbying efforts.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your lobbying firm.
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 lobbying firm
The next step in the creation of your financial forecast for your lobbying firm 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 lobbying firm?
Now let's have a look at the main output tables of your lobbying firm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your lobbying firm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a lobbying firm 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 lobbying firm'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 forecast
Your lobbying firm'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 lobbying firm:
- 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 lobbying firm'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 lobbying firm'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 lobbying firm's financial forecast?
Creating your lobbying firm'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 lobbying firm'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional lobbying firm 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 lobbying firm's financial forecast?
Creating an accurate and error-free lobbying firm 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 forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own lobbying firm, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your lobbying firm.
- 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 lobbying firm. 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 project sales for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
