How to create a financial forecast for a music school?

Developing and maintaining an up-to-date financial forecast for your music school 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 music school 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 music school?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your music school and ensure that it can be financially viable in the years to come.
A financial plan for a music school 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 music school 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 music school'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 music school financial forecast?
A music school'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 music school.
If you are creating (or updating) the forecast of an existing music school, 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 music school 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 music school 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 music school's financial forecast.
The sales forecast for a music school
The sales forecast, also called topline projection, is normally where you will start when building your music school 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 music schools), and consider the elements below:
- The introduction of new music classes and workshops, such as group guitar lessons or songwriting workshops, may attract more students and increase the average price per transaction as these classes may be priced higher.
- An increase in demand for music lessons due to a rise in popularity of a particular instrument, such as the ukulele or piano, may result in more monthly transactions and potentially an increase in the average price per transaction if the school offers these lessons.
- The location of your music school can impact the average price per transaction as well as the number of monthly transactions. For example, being located in a high-income area may allow you to charge higher prices and attract more students who can afford them.
- The reputation and experience of your teachers can also play a role in the average price per transaction. More experienced and well-known teachers may command higher prices, resulting in a higher average price per transaction.
- The availability of online lessons may also affect the average price per transaction and number of monthly transactions. Offering online lessons can attract students who may not be able to attend in-person lessons, potentially increasing the number of monthly transactions. However, online lessons may be priced differently than in-person lessons, affecting the average price per transaction.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
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The operating expenses for a music school
The next step is to estimate the expenses needed to run your music school 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 music school's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, and payroll taxes for all staff members, including music instructors, administrative staff, and support staff.
- Rent or Lease: This expense covers the cost of renting or leasing a space for the music school, including utilities and maintenance fees.
- Instrument and Equipment Maintenance: This includes the cost of maintaining and repairing musical instruments, as well as any necessary equipment, such as amplifiers or sound systems.
- Supplies and Materials: This expense covers the cost of purchasing supplies and materials for the music school, such as sheet music, lesson books, and other teaching materials.
- Marketing and Advertising: This includes the cost of promoting the music school through various channels, such as social media, print ads, and flyers.
- Accountancy Fees: This expense covers the cost of hiring an accountant to manage the financial records and taxes for the music school.
- Insurance Costs: This includes the cost of insuring the music school and its assets, such as instruments, equipment, and the property itself.
- Software Licences: This expense covers the cost of purchasing and renewing software licences for programs used in the music school, such as music production software or scheduling software.
- Banking Fees: This includes the cost of bank fees for transactions, such as wire transfers, check processing, and credit card processing fees.
- Professional Development: This expense covers the cost of professional development opportunities for music instructors, such as workshops, conferences, and training courses.
- Repairs and Maintenance: This includes the cost of repairing and maintaining the physical space of the music school, such as fixing plumbing or electrical issues.
- Taxes and Licences: This expense covers the cost of taxes and licences required to operate a music school, such as business licences and property taxes.
- Office Expenses: This includes the cost of office supplies, such as paper, ink, and pens, as well as any necessary office equipment, such as computers or printers.
- Utilities: This expense covers the cost of utilities for the music school, such as electricity, water, and internet services.
- Legal Fees: This includes the cost of hiring a lawyer for any legal matters related to the music school, such as contracts or copyright issues.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small music school might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a music school?
Your music school 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 music school, these could include:
- Musical Instruments: This includes purchasing or leasing instruments such as pianos, guitars, violins, drums, and other instruments that are essential for music education.
- Sound Equipment: This includes purchasing or leasing microphones, amplifiers, speakers, and other sound equipment necessary for live performances and recording sessions.
- Studio Space: This includes renting or buying a space to use as a music studio, which may require renovations or equipment such as soundproofing, flooring, lighting, and furniture.
- Technology: This includes purchasing or leasing computers, software, and other technology for music production, recording, and online learning.
- Furniture and Fixtures: This includes purchasing desks, chairs, music stands, and other furniture and fixtures for classrooms, rehearsal spaces, and offices.
Again, this list will need to be adjusted according to the size and ambitions of your music school.
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 music school
The next step in the creation of your financial forecast for your music school 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 music school?
Now let's have a look at the main output tables of your music school's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your music school's expected growth and profitability over the next three to five years.

A financially viable P&L statement for a music school 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 music school'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 music school 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 music school'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 music school 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 music school's financial forecast?
Creating your music school's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your music school'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 music school 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 music school's financial forecast?
Creating an accurate and error-free music school 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 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 music school, 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 music school

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 music school.
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 music school. 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 music school? Share our financial projection guide with them!