How to create a financial forecast for a newspaper?
Creating a financial forecast for your newspaper, 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 newspaper 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 newspaper?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your newspaper and ensure that it can be financially viable in the years to come.
A financial plan for a newspaper 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 newspaper 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 newspaper'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.
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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 newspaper financial forecast?
A newspaper'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 newspaper.
If you are creating (or updating) the forecast of an existing newspaper, 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 newspaper 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 newspaper 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 newspaper's financial forecast.
The sales forecast for a newspaper
From experience, it is usually best to start creating your newspaper financial forecast by your sales forecast.
To create an accurate sales forecast for your newspaper, you will have to rely on the data collected in your market research, or if you're running an existing newspaper, 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:
- Your newspaper's reputation and credibility in the community can impact the average price of your newspaper. If your newspaper is known for its high-quality content and unbiased reporting, readers may be willing to pay a higher price for it, resulting in a higher average price for your newspaper.
- The economic climate of your community can affect the number of monthly transactions for your newspaper. In times of economic downturn, people may be less likely to purchase non-essential items such as newspapers, leading to a decrease in transactions.
- The popularity and relevance of your newspaper's content can also impact the number of monthly transactions. If your newspaper covers timely and important topics that readers are interested in, they may be more likely to purchase it, resulting in an increase in transactions.
- The distribution channels for your newspaper can also affect the average price and number of monthly transactions. If your newspaper is only available in physical stores, readers may be less likely to purchase it due to the inconvenience of going to a store. However, if your newspaper is also available online, it may attract a wider audience and lead to an increase in both average price and transactions.
- The demographic of your target audience can also play a role in determining the average price and number of transactions for your newspaper. For example, if your newspaper caters to a younger audience, they may be more interested in digital versions and less likely to purchase physical copies, impacting both the average price and number of transactions.
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 newspaper
The next step is to estimate the costs you’ll have to incur to operate your newspaper.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your newspaper's operating expenses should normally include the following items:
- Staff Costs: This includes the salaries and benefits for all employees including reporters, editors, photographers, and administrative staff.
- Accountancy Fees: You will need to hire an accountant to handle the financial aspect of your newspaper, including taxes and other financial reporting.
- Insurance Costs: To protect your newspaper from potential liabilities, you will need to purchase insurance coverage for your employees, equipment, and the physical building.
- Software Licenses: In order to design and publish your newspaper, you will need to invest in software licenses for programs such as Adobe InDesign and Photoshop.
- Banking Fees: Every time you deposit or withdraw money from your newspaper's bank account, you will incur fees that should be included in your operating expenses.
- Printing Costs: This includes the cost of paper, ink, and other supplies needed to physically print your newspaper.
- Distribution Expenses: You will need to budget for the cost of delivering your newspaper to subscribers and newsstands.
- Marketing and Advertising: To attract readers and advertisers, you may need to invest in marketing and advertising efforts, such as printing flyers or purchasing ad space.
- Office Supplies: This includes the cost of everyday supplies such as pens, paper, and printer ink for your office.
- Telephone and Internet: In order to communicate with staff and sources, you will need to have a reliable telephone and internet service, which should be included in your operating expenses.
- Travel Expenses: If your newspaper covers events or stories outside of your local area, you will need to budget for travel expenses, including transportation, lodging, and meals.
- Subscription Fees: If your newspaper offers digital subscriptions, you will need to include the cost of subscription management services in your operating expenses.
- Legal Fees: It is important to consult with a lawyer to ensure your newspaper is operating within the law, and this may result in legal fees that should be included in your operating expenses.
- Training and Development: To ensure your staff is up-to-date on industry standards and techniques, you may need to invest in training and development programs for your employees.
- Office Rent: If you do not own the building your newspaper operates in, you will need to budget for the cost of rent or lease payments.
This list is not exhaustive by any means, and will need to be tailored to your newspaper's specific circumstances.
What investments are needed to start or grow a newspaper?
Once you have an idea of how much sales you could achieve and what it will cost to run your newspaper, it is time to look into the equipment required to launch or expand the activity.
For a newspaper, capital expenditures and initial working capital items could include:
- Printing Press: This is one of the most important assets for a newspaper. It is used to print the daily issues and needs to be regularly maintained and upgraded to ensure quality output.
- Computers and Software: In today's digital age, newspapers rely heavily on computers and software for content creation, layout, and production. These assets need to be constantly updated and replaced to keep up with technological advancements.
- Delivery Vehicles: A newspaper's distribution network is crucial for reaching its target audience. Delivery vehicles such as trucks and vans need to be maintained and replaced periodically to ensure timely and efficient delivery.
- Office Equipment: This includes items such as desks, chairs, printers, and copiers, which are necessary for the day-to-day operations of a newspaper. These assets need to be regularly upgraded and replaced to provide a comfortable and efficient working environment for employees.
- Printing Plates: These are used to print images and graphics in newspapers. They have a limited lifespan and need to be replaced regularly to maintain the quality of printed images.
Again, this list will need to be adjusted according to the specificities of your newspaper.
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 newspaper
The next step in the creation of your financial forecast for your newspaper 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 newspaper?
Now let's have a look at the main output tables of your newspaper's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your newspaper is likely to be in the years to come.
For your newspaper 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 newspapers, 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 newspaper'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 newspaper. 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 newspaper'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 newspaper:
- 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 newspaper'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 newspaper'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 newspaper's financial forecast?
Creating your newspaper'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 newspaper'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 newspaper 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 newspaper's financial forecast?
Creating an accurate and error-free newspaper 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
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 newspaper 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 newspaper, 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 sales forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
