How to create a financial forecast for a mining equipment wholesaler?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your mining equipment wholesaler.
Putting together a mining equipment wholesaler 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 mining equipment wholesaler.
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 mining equipment wholesaler?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your mining equipment wholesaler and ensure that it can be financially viable in the years to come.
A financial plan for a mining equipment wholesaler 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 mining equipment wholesaler 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 mining equipment wholesaler'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 mining equipment wholesaler financial forecast?
A mining equipment wholesaler's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing mining equipment wholesaler.
If you are creating (or updating) the forecast of an existing mining equipment wholesaler, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new mining equipment wholesaler startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the mining equipment wholesaler to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your mining equipment wholesaler's financial forecast.
The sales forecast for a mining equipment wholesaler
From experience, it usually makes sense to start your mining equipment wholesaler's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your mining equipment wholesaler (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 mining equipment wholesaler'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:
- Mining Industry Trends: As a mining equipment wholesaler, you are directly impacted by the overall trends in the mining industry. Changes in demand for specific minerals or metals, shifts in global mining regulations, and advancements in technology can all affect the average price of your products and the number of monthly transactions.
- Economic Conditions: The state of the economy can also play a significant role in your sales forecast. A strong economy typically leads to increased mining activity and higher demand for your products, resulting in higher average prices and more monthly transactions. Conversely, a weak economy may lead to decreased mining activity and lower demand for your products.
- Competition: The level of competition in the mining equipment wholesale market can also impact your sales forecast. If new competitors enter the market or existing competitors lower their prices, you may need to adjust your average price to remain competitive. This could lead to a decrease in your monthly transactions if customers opt for the lower-priced options.
- Technological Advancements: As technology continues to advance, it can affect the types of mining equipment that are in demand. If new, more efficient equipment is introduced to the market, it may lead to a decrease in your average price as customers opt for the newer technology. However, it could also result in an increase in monthly transactions as customers look to upgrade their equipment.
- Customer Relationships: Building and maintaining strong relationships with your customers can also impact your sales forecast. A satisfied customer is more likely to continue purchasing from you, leading to a higher number of monthly transactions. Additionally, by understanding your customers' needs and preferences, you may be able to offer personalized solutions at a higher average price, resulting in increased profitability.
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 mining equipment wholesaler
The next step is to estimate the expenses needed to run your mining equipment wholesaler 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 mining equipment wholesaler's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and training costs for your employees. As a mining equipment wholesaler, you will likely have a team of salespeople, warehouse workers, and administrative staff.
- Accountancy fees: You will need to hire an accountant to handle your financial records and tax filings. This will ensure that your business remains compliant with all relevant laws and regulations.
- Insurance costs: As a wholesaler, you will need to protect your business and assets with insurance. This may include general liability insurance, product liability insurance, and property insurance.
- Software licenses: You will need to invest in software to manage your inventory, sales, and finances. This may include a point-of-sale system, accounting software, and customer relationship management software.
- Banking fees: You will need to pay fees for maintaining a business bank account and processing transactions. This may also include fees for wire transfers and foreign currency exchanges.
- Marketing and advertising: To attract new customers and promote your business, you will need to invest in marketing and advertising efforts. This may include print ads, online ads, and attending industry trade shows.
- Rent and utilities: You will need a physical location to store your inventory and run your operations. This will come with the cost of rent and utilities such as electricity, water, and internet.
- Transportation and shipping: As a wholesaler, you will need to transport your products from manufacturers to your warehouse and then to your customers. This will include costs for fuel, vehicle maintenance, and shipping fees.
- Office supplies: You will need basic office supplies such as paper, pens, and printer ink to run your business. These costs may seem small, but they can add up over time.
- Repairs and maintenance: Your equipment and warehouse may require occasional repairs and maintenance to keep them in good working condition. This may include costs for hiring contractors and purchasing replacement parts.
- Professional fees: You may need to hire lawyers, consultants, or other professionals to help with legal or strategic matters. These fees can vary greatly depending on the scope of the project.
- Travel expenses: You may need to travel for business purposes, such as meeting with manufacturers or attending trade shows. These expenses may include airfare, lodging, and meals.
- Taxes and licenses: As a business owner, you will need to pay taxes and obtain necessary licenses and permits to operate your business legally. These costs will vary depending on your location and business structure.
- Employee benefits: In addition to salaries, you may offer your employees benefits such as health insurance, retirement plans, and paid time off. These costs can be significant, but they can also help attract and retain top talent.
- Training and development: Keeping your employees trained and up-to-date on industry trends and best practices can help your business stay competitive. This may include costs for workshops, conferences, and online courses.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small mining equipment wholesaler might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a mining equipment wholesaler?
Your mining equipment wholesaler financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a mining equipment wholesaler, these could include:
- Mining Equipment: This includes the purchase or lease of heavy machinery such as excavators, bulldozers, and trucks used for mining operations.
- Safety Equipment: As a mining equipment wholesaler, you will need to invest in safety equipment such as helmets, gloves, and safety harnesses for your employees.
- Transportation Vehicles: In order to transport your mining equipment and materials, you may need to purchase or lease trucks, trailers, or other transportation vehicles.
- Storage Facilities: As a wholesaler, you may need to invest in storage facilities to store your mining equipment and materials before distribution to customers.
- Maintenance Tools and Equipment: In order to keep your mining equipment in good working condition, you may need to purchase tools and equipment for regular maintenance and repairs.
Again, this list will need to be adjusted according to the size and ambitions of your mining equipment wholesaler.
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 mining equipment wholesaler
The next step in the creation of your financial forecast for your mining equipment wholesaler 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 mining equipment wholesaler?
Now let's have a look at the main output tables of your mining equipment wholesaler's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your mining equipment wholesaler's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a mining equipment wholesaler 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 mining equipment wholesaler'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 mining equipment wholesaler'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 mining equipment wholesaler:
- 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 mining equipment wholesaler'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 mining equipment wholesaler'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 mining equipment wholesaler's financial forecast?
Creating your mining equipment wholesaler'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 mining equipment wholesaler'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional mining equipment wholesaler financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your mining equipment wholesaler's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free mining equipment wholesaler financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your mining equipment wholesaler's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own mining equipment wholesaler, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your mining equipment wholesaler
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 mining equipment wholesaler 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 mining equipment wholesaler, 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 template for a business idea
Know someone who owns or is thinking of starting a mining equipment wholesaler? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
