How to create a financial forecast for a motorcycle repair shop?
Creating a financial forecast for your motorcycle repair shop, 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 motorcycle repair shop 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 motorcycle repair shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your motorcycle repair shop and ensure that it can be financially viable in the years to come.
A financial plan for a motorcycle repair shop 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 motorcycle repair shop 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 motorcycle repair shop'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 solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
What information is used as input to build a motorcycle repair shop financial forecast?
A motorcycle repair shop'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 motorcycle repair shop.
If you are creating (or updating) the forecast of an existing motorcycle repair shop, 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 motorcycle repair shop 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 motorcycle repair shop 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 motorcycle repair shop's financial forecast.
The sales forecast for a motorcycle repair shop
From experience, it is usually best to start creating your motorcycle repair shop financial forecast by your sales forecast.
To create an accurate sales forecast for your motorcycle repair shop, you will have to rely on the data collected in your market research, or if you're running an existing motorcycle repair shop, 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 introduction of new motorcycle models and features may affect your average price as customers may be willing to pay more for repairs on newer, more advanced bikes.
- Seasonal fluctuations in weather may impact the number of monthly transactions as customers may be more likely to bring their bikes in for repairs during warmer months.
- The availability of spare parts may affect your average price as rare or hard-to-find parts may be more expensive, resulting in higher repair costs for customers.
- Competitor pricing may affect the number of monthly transactions as customers may choose to go to a competitor with lower prices for their repairs.
- Increased demand for motorcycle repairs due to events such as rallies or races may affect both your average price and number of monthly transactions as customers may be willing to pay more for urgent repairs during busy periods.
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.
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The operating expenses for a motorcycle repair shop
The next step is to estimate the expenses needed to run your motorcycle repair shop 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 motorcycle repair shop's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and any other expenses related to hiring and maintaining employees at your motorcycle repair shop.
- Accountancy fees: You will need to hire an accountant to help you manage your finances, prepare taxes, and provide financial advice for your business.
- Insurance costs: This includes liability insurance, property insurance, and any other insurance policies that are necessary to protect your motorcycle repair shop.
- Software licences: You may need to purchase software licences for programs such as accounting software, inventory management software, or scheduling software.
- Banking fees: Your motorcycle repair shop will have transaction fees, monthly account fees, and other banking fees associated with managing your business's finances.
- Rent: If you are renting a space for your motorcycle repair shop, you will have to pay rent each month to your landlord.
- Utility bills: This includes electricity, water, and other utility expenses for your motorcycle repair shop.
- Supplies: You will need to purchase supplies such as tools, spare parts, and cleaning products to keep your motorcycle repair shop running.
- Marketing and advertising: You may need to allocate funds for marketing and advertising efforts to attract new customers to your motorcycle repair shop.
- Professional development: It's important to keep your skills and knowledge up-to-date, so you may need to budget for professional development courses or workshops.
- Vehicle expenses: This includes fuel, maintenance, and repairs for any vehicles used for business purposes, such as pickup and delivery of motorcycles.
- Taxes: Your motorcycle repair shop will have to pay various taxes, such as income tax, sales tax, and property tax.
- Legal fees: You may need to hire a lawyer to help you with legal matters related to your motorcycle repair shop, such as contracts or disputes.
- Rent or lease of equipment: If you don't own all the necessary equipment for your motorcycle repair shop, you may need to rent or lease some of it.
- Cleaning and maintenance: You will need to keep your motorcycle repair shop clean and well-maintained, so budget for cleaning supplies and maintenance services.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small motorcycle repair shop might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a motorcycle repair shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your motorcycle repair shop, it is time to look into the equipment required to launch or expand the activity.
For a motorcycle repair shop, capital expenditures and initial working capital items could include:
- Motorcycle repair equipment: This includes items such as tire changers, diagnostic tools, and specialized tools for repairing and servicing motorcycles. These are essential for providing quality repairs and maintenance services for your customers.
- Workshop fixtures and furniture: This includes items such as workbenches, shelving units, and storage cabinets. These are necessary for organizing and storing tools and parts in your workshop.
- Computer systems and software: A motorcycle repair shop needs computer systems and software for tasks such as invoicing, inventory management, and customer tracking. These systems can also be used for diagnostic purposes, making them essential for efficient operations.
- Parts inventory: In order to provide timely and efficient repairs, your shop will need to keep a stock of commonly used motorcycle parts. This includes items such as filters, spark plugs, and brake pads.
- Shop signage and branding: To attract customers and promote your business, you will need to invest in signage and branding for your shop. This can include items such as exterior signs, banners, and business cards.
Again, this list will need to be adjusted according to the specificities of your motorcycle repair shop.
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 motorcycle repair shop
The next step in the creation of your financial forecast for your motorcycle repair shop 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 motorcycle repair shop?
Now let's have a look at the main output tables of your motorcycle repair shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your motorcycle repair shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a motorcycle repair shop 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 motorcycle repair shop's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 motorcycle repair shop 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 motorcycle repair shop'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 motorcycle repair shop is appropriately capitalised.
Need a solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
Which tool should you use to create your motorcycle repair shop's financial projections?
Building a motorcycle repair shop 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 motorcycle repair shop'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 motorcycle repair shop 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 motorcycle repair shop's financial forecast?
Creating an accurate and error-free motorcycle repair shop 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 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 motorcycle repair shop, 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
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your motorcycle repair shop.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a motorcycle repair shop. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
Need inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
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