How to create a financial forecast for a metallic doors and windows maker?
Developing and maintaining an up-to-date financial forecast for your metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your metallic doors and windows manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business'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 metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business, 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 metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business, 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 metallic doors and windows manufacturing business's financial forecast.
The sales forecast for a metallic doors and windows manufacturing business
From experience, it is usually best to start creating your metallic doors and windows manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your metallic doors and windows manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing metallic doors and windows manufacturing business, 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:
- The demand for eco-friendly and energy-efficient metallic doors and windows is expected to increase due to a rise in environmental awareness and government regulations. This could positively impact your average price as customers are willing to pay a premium for sustainable products.
- The construction industry is a major consumer of metallic doors and windows, and any fluctuations in the industry can directly affect your business. Economic downturns or shifts in consumer preferences towards alternative building materials could lead to a decrease in demand and potentially lower your average price.
- Technological advancements in the metallic doors and windows manufacturing process, such as automation and 3D printing, could lead to a decrease in production costs. This could allow you to offer competitive prices and potentially increase your monthly transactions as customers are attracted to cost-effective solutions.
- The price of raw materials, such as steel and aluminum, can have a significant impact on your average price. Fluctuations in the prices of these materials can affect your production costs and, in turn, your pricing strategy. Keeping an eye on the market trends and securing favorable contracts with suppliers could help you maintain a stable average price.
- Changes in building codes and regulations can also affect the demand for metallic doors and windows. For instance, stricter fire safety regulations could lead to an increase in demand for fire-rated doors and windows, which could positively impact your business. Being aware of any upcoming regulatory changes and adapting your product offerings accordingly could help you stay ahead of the competition.
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 metallic doors and windows manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other expenses related to hiring and retaining employees such as training costs and payroll taxes.
- Accountancy Fees: As a business owner, you will need to hire an accountant to handle your financial records, tax filings, and other related tasks. These services will come at a cost.
- Insurance Costs: As a manufacturer, you will need to have various insurance policies in place to protect your business from risks such as property damage, liability, and worker's compensation.
- Software Licences: To run your business efficiently, you will need to invest in software licenses for programs such as inventory management, accounting, and design software specific to the manufacturing industry.
- Banking Fees: You will need to have a business bank account to manage your finances, and this will come with various fees such as transaction fees, monthly maintenance fees, and overdraft fees.
- Raw Materials: The primary expense in a metallic doors and windows manufacturing business will be the cost of raw materials such as steel, aluminum, and glass.
- Utilities: Running a manufacturing business will require a significant amount of energy, leading to high utility bills for electricity, gas, and water.
- Rent/Lease: If you do not own the building where your business is located, you will need to pay rent or lease payments for your manufacturing facility.
- Marketing and Advertising: To attract customers and promote your business, you will need to invest in marketing and advertising efforts such as creating a website, printing brochures, and attending trade shows.
- Maintenance and Repairs: Manufacturing equipment can be costly, and you will need to budget for regular maintenance and repairs to keep them in good working condition.
- Shipping and Freight: If you sell your products to customers outside of your local area, you will need to factor in shipping and freight costs to deliver your goods.
- Travel Expenses: If you need to travel for business purposes, you will need to budget for expenses such as airfare, accommodation, and meals.
- Taxes and Licenses: As a business owner, you will need to pay various taxes, such as income tax and sales tax, and obtain licenses and permits to operate your business legally.
- Office Supplies: To keep your business running smoothly, you will need to purchase office supplies such as paper, ink, and other stationery items.
- Legal Fees: In case of any legal issues or contracts, you may need to hire a lawyer, which can be an expensive cost for your business.
This list will need to be tailored to the specificities of your metallic doors and windows manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a metallic doors and windows manufacturing business?
Creating and expanding a metallic doors and windows manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a metallic doors and windows manufacturing business could include elements such as:
- Machinery and Equipment: This includes the cost of purchasing and maintaining machinery and equipment used in the manufacturing process, such as saws, drills, and welding machines.
- Factory Building: If you plan on having a dedicated manufacturing facility, the cost of purchasing or leasing the building and any necessary renovations or upgrades should be included in your expenditure forecast.
- Raw Materials: The cost of purchasing raw materials, such as steel, aluminum, and glass, should be factored into your forecast. This includes both the initial purchase and any ongoing costs for replenishing your inventory.
- Transportation Vehicles: If you will be delivering your products to customers, the cost of purchasing and maintaining transportation vehicles, such as trucks or vans, should be included in your forecast.
- Computer Systems: In today's digital age, having a reliable computer system is crucial for managing inventory, tracking orders, and other important business operations. Make sure to budget for the cost of purchasing and maintaining computer systems and software for your business.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your metallic doors and windows manufacturing business.
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 metallic doors and windows manufacturing business
The next step in the creation of your financial forecast for your metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business?
Now let's have a look at the main output tables of your metallic doors and windows manufacturing business's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your metallic doors and windows manufacturing business is likely to be in the years to come.
For your metallic doors and windows manufacturing business 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 metallic doors and windows makers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your metallic doors and windows manufacturing business'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 projected cash flow statement
A projected cash flow statement for a metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business'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 metallic doors and windows manufacturing 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 metallic doors and windows manufacturing business's financial projections?
Building a metallic doors and windows manufacturing business 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 projection software to build your metallic doors and windows manufacturing business's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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 metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business's financial forecast?
Creating an accurate and error-free metallic doors and windows manufacturing business 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 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 metallic doors and windows manufacturing business, 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
- 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 metallic doors and windows manufacturing business 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 metallic doors and windows manufacturing business, 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 turnover forecast for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a metallic doors and windows manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
