How to create a financial forecast for a masonry company?
Creating a financial forecast for your masonry company, 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 masonry company 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 masonry company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your masonry company and ensure that it can be financially viable in the years to come.
A financial plan for a masonry company 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 masonry company 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 masonry company'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 masonry 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 masonry 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 masonry 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 masonry 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 masonry company's financial forecast.
The sales forecast for a masonry company
From experience, it usually makes sense to start your masonry company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your masonry company (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 masonry company'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:
- Seasonal Demand: As the owner of a masonry company, you are aware that there are certain times of the year when demand for your services may increase or decrease. For example, during the summer months, there may be a higher demand for outdoor masonry projects such as patios and outdoor fireplaces, which can drive up the average price of your services.
- Economic Conditions: Economic conditions can also have an impact on your business's average price and number of monthly transactions. During a recession, homeowners may be less likely to invest in expensive masonry projects, resulting in a decrease in both price and transactions. On the other hand, during a booming economy, there may be an increase in demand for luxury masonry projects, leading to higher prices and more transactions.
- Competition: The level of competition in your area can also affect your business's average price and monthly transactions. If there are many other masonry companies in your area offering similar services, you may need to lower your prices to remain competitive. This can result in a decrease in your average price and potentially an increase in the number of transactions.
- Materials and Labor Costs: As a masonry company, your prices are likely affected by the cost of materials and labor. If there is a shortage of certain materials or an increase in labor costs, this can drive up your average price as you need to cover these expenses. On the other hand, if there is a decrease in materials or labor costs, you may be able to offer lower prices, resulting in more transactions.
- Weather Conditions: Weather conditions can also have an impact on your business's average price and number of transactions. Extreme weather, such as heavy rain or snow, can delay projects and lead to higher prices as you may need to allocate more time and resources to complete them. On the other hand, mild and pleasant weather can lead to more projects being completed, resulting in more transactions and potentially lower prices due to increased efficiency.
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 masonry company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your masonry 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 masonry company will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for your masonry crew, as well as any administrative staff you may have.
- Accountancy Fees: As a business owner, you will need to hire an accountant to help you manage your finances and keep track of your expenses.
- Insurance Costs: This includes liability insurance to protect your business in case of any accidents or damages on a job site.
- Software Licenses: You may need to purchase software programs for estimating, project management, or accounting purposes.
- Banking Fees: As a business owner, you will have to pay fees for business bank accounts, credit card processing, and other banking services.
- Materials and Supplies: This includes the cost of purchasing bricks, cement, tools, and other materials needed for each project.
- Vehicle Expenses: If you have company vehicles, you will need to budget for fuel, maintenance, and insurance costs.
- Advertising and Marketing: To attract new clients, you may need to invest in advertising and marketing efforts, such as online ads, print materials, and trade show attendance.
- Rent or Mortgage: If you have a physical location for your business, you will need to budget for rent or mortgage payments.
- Utilities: This includes electricity, water, and other utility bills for your business premises.
- Training and Education: As a masonry company, it is important to invest in ongoing training and education for yourself and your employees to stay updated on industry standards and techniques.
- Permits and Licenses: Depending on your location, you may need to obtain permits and licenses to operate your masonry business.
- Taxes: As a business owner, you will need to pay income taxes, property taxes, and other taxes related to your business.
- Repairs and Maintenance: You will need to budget for any repairs or maintenance needed for your equipment, tools, and vehicles.
- Professional Memberships: Consider joining professional organizations related to the masonry industry to network and stay updated on industry trends.
This list will need to be tailored to the specificities of your masonry company, but should offer a good starting point for your budget.
What investments are needed to start or grow a masonry company?
Once you have an idea of how much sales you could achieve and what it will cost to run your masonry company, it is time to look into the equipment required to launch or expand the activity.
For a masonry company, capital expenditures and initial working capital items could include:
- Equipment: This includes items such as mixers, saws, and scaffolding that are necessary for masonry work. These are typically large, fixed assets that have a long lifespan and require significant investment.
- Vehicles: Masonry companies often need trucks and other vehicles to transport materials and equipment to job sites. These vehicles are considered capital expenditures because they are essential for the operation of the business and have a useful life of more than one year.
- Tools: Masonry work requires a variety of tools, including trowels, levels, and chisels. These tools need to be replaced periodically due to wear and tear, making them a recurring capital expenditure for a masonry company.
- Land and Buildings: If you are starting a masonry company, you may need to purchase or lease land and buildings for your operations. These are significant capital expenditures that will impact your financial forecast in terms of rent or mortgage payments.
- Technology: In today's digital age, masonry companies may need to invest in technology such as computers, software, and specialized design programs. These are essential tools for creating accurate estimates and project plans, making them necessary capital expenditures for a masonry company.
Again, this list will need to be adjusted according to the specificities of your masonry 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 masonry company
The next step in the creation of your financial forecast for your masonry 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 masonry company?
Now let's have a look at the main output tables of your masonry company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your masonry company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a masonry company 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 masonry company's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- 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 masonry company'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 masonry company:
- 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 masonry company'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 masonry company'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 masonry company's financial forecast?
Using the right tool or solution will make the creation of your masonry company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your masonry 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 masonry 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 masonry company's financial forecast?
Creating an accurate and error-free masonry company 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 masonry 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 masonry 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 create a sales forecast for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a masonry company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
