How to create a financial forecast for a massage parlour?

Developing and maintaining an up-to-date financial forecast for your massage parlour 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 massage parlour 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 massage parlour?

Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your massage parlour and ensure that it can be financially viable in the years to come.

A financial plan for a massage parlour 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 massage parlour 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 massage parlour'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.

What information is needed to build a massage parlour 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 massage parlour, 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 massage parlour 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 massage parlour, 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 massage parlour's financial forecast.

The sales forecast for a massage parlour

From experience, it is usually best to start creating your massage parlour financial forecast by your sales forecast.

To create an accurate sales forecast for your massage parlour, you will have to rely on the data collected in your market research, or if you're running an existing massage parlour, the historical data of the business, to estimate two key variables: 

• The average price 
• The number of monthly transactions

To get there, you will need to consider the following factors:

Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.

The operating expenses for a massage parlour

The next step is to estimate the expenses needed to run your massage parlour 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 massage parlour's operating expenses should include the following items at a minimum:

This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small massage parlour might not have the same level of expenditure as a larger one, for example.

What investments are needed to start or grow a massage parlour?

Creating and expanding a massage parlour also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for a massage parlour could include elements such as:

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your massage parlour.

The financing plan of your massage parlour

The next step in the creation of your financial forecast for your massage parlour 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 massage parlour?

Now let's have a look at the main output tables of your massage parlour's financial forecast.

The profit & loss forecast

The forecasted profit & loss statement will enable you to visualise your massage parlour's expected growth and profitability over the next three to five years.

A financially viable P&L statement for a massage parlour 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

The projected balance sheet gives an overview of your massage parlour'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 massage parlour. 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 massage parlour 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 massage parlour'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 massage parlour is appropriately capitalised.

Which tool should you use to create your massage parlour's financial forecast?

Creating your massage parlour'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 massage parlour'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

Enlisting the help of a consultant or accountant is also a good way to obtain a professional massage parlour 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 massage parlour's financial forecast?

Creating an accurate and error-free massage parlour 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.

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 massage parlour, 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

1. A financial forecast shows expected growth, profitability, and cash generation metrics for your massage parlour.
2. Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
3. 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 massage parlour. Don't hesitate to contact us if you have any questions!

Also on The Business Plan Shop

• Financial forecast example
• How to create a turnover forecast for a business?
• Financial forecast template for a business idea

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