How to create a financial forecast for a martial arts club?
Creating a financial forecast for your martial arts club, 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 martial arts club 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 martial arts club?
The financial projections for your martial arts club 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 martial arts club'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 needed to build a martial arts club 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 martial arts club, 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 martial arts club 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 martial arts club, 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 martial arts club's financial forecast.
The sales forecast for a martial arts club
The sales forecast, also called topline projection, is normally where you will start when building your martial arts club 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 martial arts clubs), and consider the elements below:
- Seasonal Demand: The demand for martial arts classes may fluctuate based on the season. During the winter months, people may be less inclined to participate in physical activities, leading to a decrease in the number of monthly transactions. On the other hand, during the summer months, when children are out of school, there may be an increase in demand for classes.
- Competition: The presence of other martial arts clubs in the same area may affect your average price and number of monthly transactions. If there is a high level of competition, you may need to lower your prices to attract customers. Additionally, if a new, popular club opens nearby, you may see a decrease in demand for your classes.
- Economic Conditions: Economic conditions, such as a recession or a strong economy, can also impact your business. During a recession, people may be less willing to spend money on non-essential activities like martial arts classes, leading to a decrease in monthly transactions. Conversely, during a strong economy, people may have more disposable income and be more likely to invest in activities like martial arts, leading to an increase in demand.
- Demographics: The demographics of your local area can also affect your business. For example, if you are located in an area with a high concentration of families with young children, you may see an increase in demand for children's martial arts classes. On the other hand, if your area has a large population of older adults, you may see a higher demand for classes geared towards seniors.
- Instructor Availability: The availability and qualifications of your instructors can also impact your business. If you have highly skilled and experienced instructors, you may be able to charge a higher average price for classes. Additionally, if you have a limited number of instructors, you may need to limit the number of monthly transactions you can accommodate.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a martial arts club
The next step is to estimate the costs you’ll have to incur to operate your martial arts club.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your martial arts club's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and training expenses for your instructors and administrative staff.
- Rent or lease: The cost of renting or leasing a space for your martial arts club, including utilities and maintenance fees.
- Equipment: The cost of purchasing or leasing equipment such as mats, punching bags, and other training gear.
- Marketing and advertising: This includes the cost of creating and distributing promotional materials, as well as any advertising fees for online or print ads.
- Insurance: It is important to have insurance to protect your club and its members from any potential accidents or injuries.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and other financial matters.
- Software licenses: This includes any software or online tools that you use to manage your club's operations, such as scheduling software or membership management software.
- Training and certification: In order to maintain the quality of your club, you may need to invest in training and certification for your instructors and staff.
- Uniforms and merchandise: The cost of purchasing or creating uniforms for your members, as well as any merchandise you sell, such as t-shirts or water bottles.
- Office supplies: This includes the cost of paper, ink, and other supplies needed to run the administrative side of your club.
- Banking fees: You may be charged fees for transactions, wire transfers, and other banking services related to your club's finances.
- Professional services: This could include hiring a lawyer for legal advice or a consultant for business strategy.
- Facility maintenance: The cost of cleaning, repairs, and other maintenance expenses for your club's space.
- Membership fees: If you belong to a larger martial arts organization or federation, there may be membership fees that you need to pay.
- Continuing education: You may want to invest in your own training and education as a martial arts instructor to further develop your skills and knowledge.
This list is not exhaustive by any means, and will need to be tailored to your martial arts club's specific circumstances.
What investments are needed to start or grow a martial arts club?
Creating and expanding a martial arts club also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a martial arts club could include elements such as:
- Martial arts equipment: This includes items such as punching bags, mats, weapons, and other training equipment used in martial arts classes.
- Fitness equipment: In addition to martial arts equipment, you may also need to purchase fitness equipment for your members to use, such as treadmills, weights, and cardio machines.
- Facility renovations: If you are starting a new martial arts club or expanding an existing one, you may need to make renovations to the facility to accommodate your classes and equipment.
- Computer and software: In today's digital age, having a computer and software is essential for managing memberships, scheduling classes, and handling finances for your martial arts club.
- Security systems: To ensure the safety of your members and your facility, you may need to invest in security systems such as cameras, alarms, and access control systems.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your martial arts club.
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 martial arts club
The next step in the creation of your financial forecast for your martial arts club 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 martial arts club?
Now let's have a look at the main output tables of your martial arts club's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your martial arts club is likely to be in the years to come.
For your martial arts club to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established martial arts clubs, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your martial arts club'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 martial arts club. 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 cash flow forecast
Your martial arts club'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 martial arts club:
- 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 martial arts club'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 martial arts club'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 martial arts club's financial projections?
Building a martial arts club 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 martial arts club'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 martial arts club 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 martial arts club'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 martial arts club 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 martial arts club'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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own martial arts club, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your martial arts club
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your martial arts club.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a martial arts club. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to create a turnover forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a martial arts club? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
