How to create a financial forecast for a mountain refuge?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your mountain refuge.
Putting together a mountain refuge 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 mountain refuge.
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 mountain refuge?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your mountain refuge becomes handy.
Creating a mountain refuge financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your mountain refuge.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a mountain refuge is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your mountain refuge's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is used as input to build a mountain refuge financial forecast?
A mountain refuge'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 mountain refuge, 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 mountain refuge 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 mountain refuge 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 mountain refuge's financial forecast.
The sales forecast for a mountain refuge
The sales forecast, also called topline projection, is normally where you will start when building your mountain refuge financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing mountain refuges), and consider the elements below:
- Weather Conditions: The average price and number of monthly transactions for your mountain refuge may be affected by the weather conditions in the surrounding area. Harsh weather, such as heavy snowfall or extreme temperatures, may deter potential customers from visiting, resulting in a decrease in both price and transactions. On the other hand, pleasant weather may attract more visitors, leading to an increase in both price and transactions.
- Economy: The state of the economy can also impact the average price and number of monthly transactions for your mountain refuge. During times of economic prosperity, people may be more likely to spend money on leisure activities like mountain retreats, resulting in an increase in both price and transactions. However, during economic downturns, people may be more hesitant to spend money, leading to a decrease in both price and transactions.
- Natural Disasters: Natural disasters, such as wildfires or landslides, can have a significant impact on your mountain refuge's business. If your refuge is located in an area prone to these types of events, it may result in a decrease in both price and transactions as potential customers may be deterred from visiting. On the other hand, if your refuge is located in an area unaffected by natural disasters, it may attract more visitors looking for a safe and secure retreat, resulting in an increase in both price and transactions.
- Competitors: The presence of competitors in the area can also affect your refuge's average price and number of monthly transactions. If there are other mountain refuges in the vicinity, it may lead to a decrease in price as customers have more options to choose from. However, if your refuge offers unique experiences or amenities that set it apart from competitors, it may result in an increase in both price and transactions as customers are willing to pay more for a unique experience.
- Seasonal Changes: The time of year can also play a significant role in your refuge's sales forecast. During peak seasons, such as summer or winter, you may experience an increase in both price and transactions as more people are looking for outdoor activities during these times. However, during off-peak seasons, such as spring or fall, you may see a decrease in both price and transactions as there may be fewer visitors looking for mountain retreats during these times.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 mountain refuge
The next step is to estimate the expenses needed to run your mountain refuge 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 mountain refuge's operating expenses should include the following items at a minimum:
- Staff Costs: This includes wages, salaries, bonuses, and benefits for your employees. As a mountain refuge, you will need staff to help with daily operations, such as cooking, cleaning, and maintenance.
- Accountancy Fees: You will need to hire an accountant to help with bookkeeping, tax preparation, and financial analysis. This is important to ensure the financial health of your mountain refuge.
- Insurance Costs: As a mountain refuge, you will need insurance to protect your business from potential risks, such as natural disasters, accidents, and liability claims.
- Software Licenses: In order to manage reservations, track inventory, and maintain customer records, you will need to invest in software licenses for your business operations.
- Banking Fees: You will need to open a business bank account and pay fees for services such as deposits, withdrawals, and wire transfers. It is important to keep track of these fees to manage your budget effectively.
- Utilities: This includes electricity, heating, and water. As a mountain refuge, you may need to rely on alternative sources of energy, such as solar power, to reduce your utility costs.
- Supplies: This includes food, toiletries, cleaning products, and other necessary items to operate your mountain refuge. You will need to keep track of inventory and restock regularly.
- Marketing and Advertising: You will need to invest in marketing and advertising to promote your mountain refuge and attract customers. This can include online ads, print materials, and collaborations with local businesses.
- Maintenance and Repairs: As a mountain refuge, you will need to regularly maintain and repair your property, including the building, equipment, and outdoor amenities.
- Taxes: You will need to pay taxes on your business income, property, and employees. It is important to budget for these expenses accordingly.
- Professional Services: You may need to hire professionals such as lawyers, consultants, or architects for various aspects of your mountain refuge, such as legal advice, business planning, or property renovations.
- Training and Development: It is important to invest in the training and development of your staff to ensure quality service and to keep up with industry trends and standards.
- Cleaning and Laundry Services: Depending on the size of your mountain refuge, you may need to hire cleaning and laundry services to keep your property and linens clean and presentable for guests.
- Office Supplies: You will need basic office supplies such as paper, pens, and printer ink to run your business. It is important to keep track of these expenses to manage your budget effectively.
- Employee Benefits: In addition to salaries and wages, you may also need to provide benefits for your employees, such as health insurance, retirement plans, and paid time off.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small mountain refuge might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a mountain refuge?
Creating and expanding a mountain refuge also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a mountain refuge could include elements such as:
- Building renovations: This includes any major repairs or updates to the physical structure of the mountain refuge, such as roofing, flooring, or plumbing.
- Equipment purchases: This could include items such as kitchen appliances, furniture, or outdoor gear necessary for running the refuge.
- Utility installations: Depending on the location of the refuge, you may need to invest in installing utilities such as electricity, water, or sewage systems.
- Vehicle purchases: If your mountain refuge is accessible by vehicle, you may need to purchase a reliable 4-wheel drive vehicle for transportation of supplies and guests.
- Safety and security upgrades: Investing in security systems, emergency equipment, and first aid supplies is crucial for the safety and well-being of your guests and staff.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your mountain refuge.
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 mountain refuge
The next step in the creation of your financial forecast for your mountain refuge 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 mountain refuge?
Now let's have a look at the main output tables of your mountain refuge's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your mountain refuge is likely to be in the years to come.
For your mountain refuge 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 mountain refuges, 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 mountain refuge'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 mountain refuge. 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 mountain refuge'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 mountain refuge:
- 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 mountain refuge'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 mountain refuge'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 mountain refuge's financial projections?
Building a mountain refuge 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 mountain refuge'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 mountain refuge 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 mountain refuge's financial forecast?
Creating an accurate and error-free mountain refuge 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 mountain refuge, 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 mountain refuge.
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 mountain refuge. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to create a turnover forecast for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a mountain refuge? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
