How to create a financial forecast for a metal brokerage firm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your metal brokerage firm.
Putting together a metal brokerage firm financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your metal brokerage firm.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a metal brokerage firm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your metal brokerage firm and ensure that it can be financially viable in the years to come.
A financial plan for a metal brokerage firm 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 metal brokerage firm 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 metal brokerage firm'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 used as input to build a metal brokerage firm financial forecast?
A metal brokerage firm's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing metal brokerage firm, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a metal brokerage firm startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the metal brokerage firm running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your metal brokerage firm's financial forecast.
The sales forecast for a metal brokerage firm
From experience, it is usually best to start creating your metal brokerage firm financial forecast by your sales forecast.
To create an accurate sales forecast for your metal brokerage firm, you will have to rely on the data collected in your market research, or if you're running an existing metal brokerage firm, 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:
- Fluctuations in global metal prices: As a metal brokerage firm, you are heavily reliant on the prices of various metals in the global market. Factors such as supply and demand, economic conditions, and geopolitical events can greatly impact the average price of metals, which in turn will affect your business's profitability.
- Changes in trade policies and regulations: With the constantly evolving trade policies and regulations around the world, your metal brokerage firm may face challenges in terms of importing and exporting metals. This could lead to delays in transactions, changes in prices, and ultimately affect your business's monthly transactions.
- Technological advancements in the metal industry: As technology continues to advance in the metal industry, it may lead to changes in production methods, quality standards, and even the types of metals being used. This could impact the average price of metals and the demand for certain types of metals, which will affect your business's sales forecast.
- Changes in consumer preferences and trends: The metal industry is not immune to changing consumer preferences and trends. For example, a shift towards more environmentally friendly materials may lead to a decrease in demand for certain metals, while an increase in demand for electric vehicles could lead to a surge in demand for specific metals. These changes in demand will directly impact your business's average price and monthly transactions.
- Natural disasters and supply chain disruptions: Natural disasters, such as hurricanes or earthquakes, can greatly impact the supply chain for metals. This could result in shortages or delays in shipments, leading to changes in prices and availability of certain metals. As a metal brokerage firm, it is important to closely monitor any potential natural disasters and have contingency plans in place to mitigate their impact on your business.
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.
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 metal brokerage firm
The next step is to estimate the expenses needed to run your metal brokerage firm 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 metal brokerage firm's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and bonuses for your employees, such as brokers, analysts, and administrative staff.
- Accountancy fees: As a metal brokerage firm, you will need to hire an accountant to help you with tax preparation, financial statements, and other financial tasks.
- Insurance costs: You will need to purchase insurance to protect your firm from potential risks and liabilities, such as professional liability insurance and property insurance.
- Software licenses: In order to run your business efficiently, you will need to invest in software licenses for trading platforms, market analysis tools, and other essential software.
- Banking fees: As a brokerage firm, you will have various banking needs, such as wire transfers, foreign currency exchange, and account maintenance fees.
- Rent and utilities: You will need to lease office space and pay for utilities, such as electricity, internet, and phone services.
- Market data subscriptions: In order to stay informed about market trends and prices, you will need to subscribe to market data services.
- Marketing and advertising: To attract clients and promote your services, you will need to invest in marketing and advertising efforts.
- Legal fees: You may need to hire a lawyer for contract review, legal advice, and other legal matters related to your business.
- Travel expenses: As a brokerage firm, you may need to travel for client meetings, conferences, and other business-related purposes.
- Office supplies: You will need to purchase office supplies, such as stationery, printing materials, and office equipment, to run your business.
- Professional development: To stay competitive in the market, you may need to invest in professional development for yourself and your employees.
- Telephone and internet expenses: As a brokerage firm, you will need to have reliable phone and internet services for communication with clients and market updates.
- Taxes and licenses: You will need to pay taxes and obtain necessary licenses to operate your brokerage firm.
- Office maintenance: You will need to cover the costs of office maintenance, such as cleaning services, repairs, and maintenance contracts.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small metal brokerage firm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a metal brokerage firm?
Once you have an idea of how much sales you could achieve and what it will cost to run your metal brokerage firm, it is time to look into the equipment required to launch or expand the activity.
For a metal brokerage firm, capital expenditures and initial working capital items could include:
- Computer Equipment: As a metal brokerage firm, you will need reliable and up-to-date computer equipment to manage your transactions, store client information, and communicate with suppliers and other partners in the industry. This may include desktop computers, laptops, servers, and other necessary hardware and software.
- Office Furniture and Fixtures: Your office space is an important aspect of your business and should be equipped with comfortable and functional furniture and fixtures. This may include desks, chairs, filing cabinets, shelving units, and other necessary equipment to create a productive work environment for you and your employees.
- Security Systems: As a metal brokerage firm, you will be handling valuable assets and sensitive client information. Therefore, investing in a reliable security system is crucial to protect your business from potential threats. This may include CCTV cameras, alarm systems, access control systems, and other necessary security measures.
- Transportation Vehicles: In order to transport and deliver metal products to your clients, you may need to invest in transportation vehicles such as trucks, vans, or trailers. These vehicles should be reliable and well-maintained to ensure timely and safe delivery of your products.
- Metal Testing Equipment: As a metal brokerage firm, it is important to have accurate and reliable testing equipment to assess the quality and purity of the metal products you are dealing with. This may include spectrometers, hardness testers, and other necessary equipment to ensure the quality of your products.
Again, this list will need to be adjusted according to the specificities of your metal brokerage firm.
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 metal brokerage firm
The next step in the creation of your financial forecast for your metal brokerage firm 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 metal brokerage firm?
Now let's have a look at the main output tables of your metal brokerage firm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your metal brokerage firm is likely to be in the years to come.
For your metal brokerage firm 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 metal brokerage firms, 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 metal brokerage firm'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 metal brokerage firm. 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 metal brokerage firm'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 metal brokerage firm:
- 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 metal brokerage firm'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 metal brokerage firm'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 metal brokerage firm's financial projections?
Building a metal brokerage firm 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 metal brokerage firm'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 metal brokerage firm 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 metal brokerage firm's financial forecast?
Creating an accurate and error-free metal brokerage firm 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 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 metal brokerage firm 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 metal brokerage firm, 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?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
