How to create a financial forecast for a martial arts school?
Creating a financial forecast for your martial arts school, 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 school 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 school?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your martial arts school and ensure that it can be financially viable in the years to come.
A financial plan for a martial arts school 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 martial arts school 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 martial arts school'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 martial arts school 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 school, 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 school 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 school, 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 school's financial forecast.
The sales forecast for a martial arts school
From experience, it usually makes sense to start your martial arts school's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your martial arts school (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 martial arts school'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:
- The popularity of martial arts in your local community - If there is a high demand for martial arts classes in your area, you may be able to charge a higher average price for your classes and see an increase in the number of monthly transactions as more people are interested in enrolling.
- The quality of your instructors - If you have highly skilled and experienced instructors at your school, you may be able to charge a premium for your classes, which can lead to a higher average price and increased monthly transactions as students are willing to pay more for top-notch instruction.
- The current economy - In times of economic downturn, people may be looking for more affordable forms of exercise and stress relief. This could lead to a decrease in your average price as customers are more price-sensitive, but an increase in monthly transactions as more people are looking for ways to stay active and de-stress on a budget.
- The availability of other martial arts schools in the area - If there are a lot of other martial arts schools in your local area, you may face more competition for students. This could result in a decrease in your average price as you may need to offer lower prices to attract customers, but it could also lead to an increase in monthly transactions as students have more options to choose from.
- The age demographics of your target market - The age of your target market can also impact your average price and number of monthly transactions. For example, if you primarily cater to children, you may see a higher number of monthly transactions as parents are willing to enroll their children in classes, but a lower average price as parents may be more price-sensitive. On the other hand, if your target market is primarily adults, you may be able to charge a higher average price as they may have more disposable income, but may see a lower number of monthly transactions as adults may have busier schedules and may not be able to commit to regular classes.
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 martial arts school
The next step is to estimate the costs you’ll have to incur to operate your martial arts school.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your martial arts school's operating expenses should normally include the following items:
- Rent/Mortgage: As a martial arts school, you will need a dedicated space to conduct your classes. This expense includes the monthly rent or mortgage payment for your school.
- Utilities: You will need to keep the lights on and the space heated or cooled for your students. This expense covers electricity, water, and gas bills.
- Equipment: Martial arts schools require specific equipment such as punching bags, mats, and weapons. This expense includes the purchase, maintenance, and replacement of these items.
- Uniforms: Your students will need to wear a uniform for class, and you may also want to provide branded merchandise. This expense covers the cost of purchasing and maintaining uniforms and merchandise.
- Marketing/Advertising: To attract new students, you will need to invest in marketing and advertising. This expense includes printed materials, online ads, and any other promotional efforts.
- Staff Salaries: If you have employees, you will need to pay their salaries. This expense includes instructors, administrative staff, and any other employees.
- Instructor Training/Certifications: As a martial arts school, you want to ensure your instructors are well-trained and certified. This expense covers the cost of their training and certifications.
- Insurance: It's important to have insurance to protect your school and its students. This expense includes liability insurance and any other necessary coverage.
- Accounting Fees: You will need to keep track of your finances and file taxes. This expense covers the cost of hiring an accountant to help you manage your finances.
- Software Licenses: You may need to invest in software to manage your scheduling, billing, and other administrative tasks. This expense includes the cost of purchasing and renewing software licenses.
- Banking Fees: You will likely have a business bank account to manage your finances. This expense covers monthly account fees, transaction fees, and any other banking fees.
- Cleaning/Maintenance: Your school will need to be kept clean and well-maintained for your students. This expense includes the cost of hiring a cleaning service and any necessary repairs or upkeep.
- Professional Memberships: As a martial arts school, you may want to join professional organizations or associations. This expense covers the cost of membership fees.
- Office Supplies: You will need basic office supplies such as paper, pens, and printer ink. This expense includes the cost of purchasing these supplies.
- Continuing Education: To stay current in your field and provide the best instruction to your students, you may want to attend workshops or conferences. This expense covers the cost of these educational opportunities.
This list is not exhaustive by any means, and will need to be tailored to your martial arts school's specific circumstances.
What investments are needed to start or grow a martial arts school?
Once you have an idea of how much sales you could achieve and what it will cost to run your martial arts school, it is time to look into the equipment required to launch or expand the activity.
For a martial arts school, capital expenditures and initial working capital items could include:
- Martial arts equipment: This includes items such as punching bags, mats, weapons, and training gear. These are essential for your students to practice and learn martial arts techniques and forms. It is important to budget for the initial purchase of these items as well as potential replacement or upgrades in the future.
- Facility renovations: If you are starting your martial arts school in a new location, you may need to make renovations to the space to accommodate your needs. This could include installing mirrors, changing flooring, or creating a designated waiting area for parents and students.
- Furniture and fixtures: This includes items such as desks, chairs, and storage units. These are necessary for your reception area, office, and any other spaces within your school that require furniture. It is important to invest in high-quality and durable furniture that can withstand the wear and tear of daily use.
- Technology and software: In today's digital age, it is important for martial arts schools to have technology and software to assist with tasks such as scheduling, attendance tracking, and billing. This may include purchasing computers, printers, and software programs specifically designed for martial arts schools.
- Security system: As a martial arts school owner, it is your responsibility to ensure the safety and security of your students. Installing a security system, including surveillance cameras, alarms, and locks, can help protect your school and give parents peace of mind.
Again, this list will need to be adjusted according to the specificities of your martial arts school.
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 school
The next step in the creation of your financial forecast for your martial arts school 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 school?
Now let's have a look at the main output tables of your martial arts school's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your martial arts school is likely to be in the years to come.
For your martial arts school 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 schools, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your martial arts school'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 martial arts school'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 school:
- 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 school'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 school'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 school's financial forecast?
Using the right tool or solution will make the creation of your martial arts school's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your martial arts school's projections
The modern and easiest way is to use professional online financial forecasting 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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your martial arts school financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your martial arts school's financial forecast?
Creating an accurate and error-free martial arts school 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 martial arts school 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 martial arts school, 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?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a martial arts school? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
