How to create a financial forecast for a market research and survey company?
Developing and maintaining an up-to-date financial forecast for your market research and survey company 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 market research and survey company 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 market research and survey company?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your market research and survey company becomes handy.
Creating a market research and survey company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your market research and survey company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a market research and survey company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your market research and survey company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is needed to build a market research and survey company 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 market research and survey company, 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 market research and survey company 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 market research and survey company, 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 market research and survey company's financial forecast.
The sales forecast for a market research and survey company
The sales forecast, also called topline projection, is normally where you will start when building your market research and survey company 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 market research and survey companies), and consider the elements below:
- Economic conditions: The state of the economy can have a significant impact on the number of businesses seeking market research and survey services. During times of economic growth, businesses are more likely to invest in market research to better understand consumer behavior and improve their products or services. On the other hand, during a recession, businesses may cut back on expenses, including market research, to save costs.
- Technological advancements: The continuous development of new technologies can greatly impact the market research industry. As new tools and platforms emerge, businesses may shift their focus to more innovative methods of collecting and analyzing data. This could result in changes in the average price of services offered by your company or a change in the number of monthly transactions as clients adapt to new research methods.
- Competition: The competitiveness of the market research industry can also affect your company's average price and monthly transactions. If there is a high level of competition in your area, you may need to lower your prices or offer additional services to attract and retain clients. On the other hand, if your company has a unique selling point or specialized services, you may be able to charge higher prices and attract a smaller but more dedicated client base.
- Regulatory changes: Changes in regulations related to data privacy and protection can also impact the market research industry. If new laws or regulations are introduced, your company may need to invest in additional resources to ensure compliance, which could affect your average price. Additionally, changes in regulations could also impact the types of data that can be collected and analyzed, potentially affecting the demand for your services.
- Industry trends: Keeping up with industry trends and staying ahead of the curve can greatly impact your company's success in the market research industry. For example, if there is a growing demand for market research in a specific niche or industry, your company may need to adapt its services to meet this demand, potentially resulting in changes in your average price and number of monthly transactions.
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 market research and survey company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your market research and survey company 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 market research and survey company will include some of the following items:
- Staff Costs: Salaries, wages, and benefits for employees, including market researchers, survey administrators, and support staff.
- Accountancy Fees: Fees paid to an external accountant or accounting firm for financial services, such as bookkeeping, tax preparation, and financial reporting.
- Insurance Costs: Premiums for various types of insurance, such as liability insurance, professional indemnity insurance, and property insurance.
- Software Licenses: Fees for software used to conduct market research and surveys, such as survey platforms, data analysis tools, and project management software.
- Banking Fees: Fees for banking services, such as account maintenance fees, wire transfer fees, and credit card processing fees.
- Rent and Utilities: Monthly rent for office space, as well as utilities such as electricity, water, and internet.
- Marketing and Advertising: Costs for promoting the company's services, such as website development, social media advertising, and print materials.
- Travel and Accommodation: Expenses related to business travel, including airfare, hotel stays, and transportation.
- Professional Memberships: Fees for memberships to professional associations and organizations related to market research and surveys.
- Office Supplies: Expenses for purchasing office supplies and equipment, such as paper, printer ink, and computers.
- Training and Development: Costs for employee training and development programs, including workshops, conferences, and online courses.
- Legal Fees: Fees for legal services, such as contract reviews, trademark registrations, and intellectual property protection.
- Data Collection Expenses: Costs for collecting data for market research and surveys, such as participant incentives, postage, and telephone charges.
- Office Maintenance: Expenses for maintaining and repairing office space, such as cleaning services, office equipment repairs, and pest control.
- Consulting Services: Fees for hiring external consultants for specialized services, such as data analysis, research design, and survey development.
This list will need to be tailored to the specificities of your market research and survey company, but should offer a good starting point for your budget.
What investments are needed to start or grow a market research and survey company?
Once you have an idea of how much sales you could achieve and what it will cost to run your market research and survey company, it is time to look into the equipment required to launch or expand the activity.
For a market research and survey company, capital expenditures and initial working capital items could include:
- Survey Software and Hardware: As a market research and survey company, you will need to invest in high-quality survey software and hardware to conduct accurate and efficient surveys. This can include online survey platforms, data collection tools, and specialized survey equipment.
- Office Equipment: In order to run your business smoothly, you will need to invest in essential office equipment such as computers, printers, scanners, and furniture. These fixed assets will be necessary for conducting research, analyzing data, and managing client relationships.
- Data Storage and Security: As a company that deals with sensitive client data, it is crucial to invest in secure data storage solutions. This can include cloud storage, servers, and cybersecurity measures to protect your clients' information.
- Marketing and Branding: While marketing and branding expenses are typically considered operating expenses, as a market research and survey company, you may need to invest in fixed assets such as a website, branding materials, and marketing software to establish your brand and attract clients.
- Research and Development: In order to stay competitive in the market research industry, you will need to continuously invest in research and development. This can include new technology, software upgrades, and training for your team to stay up-to-date with industry trends and best practices.
Again, this list will need to be adjusted according to the specificities of your market research and survey company.
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 market research and survey company
The next step in the creation of your financial forecast for your market research and survey company 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 market research and survey company?
Now let's have a look at the main output tables of your market research and survey company'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 market research and survey company'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 market research and survey company will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your market research and survey company'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 market research and survey company. 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 market research and survey company 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 market research and survey company'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 market research and survey company 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 market research and survey company's financial projections?
Building a market research and survey company 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 market research and survey company'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.
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 market research and survey company 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 market research and survey company's financial forecast?
Creating an accurate and error-free market research and survey company 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 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 market research and survey company, 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
- 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 market research and survey company 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 market research and survey company, 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 sales for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
