How to create a financial forecast for a painting studio?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your painting studio.
Putting together a painting studio 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 painting studio.
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 painting studio?
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 painting studio becomes handy.
Creating a painting studio 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 painting studio.
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 painting studio 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 painting studio'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 painting studio financial forecast?
A painting studio'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 painting studio, 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 painting studio 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 painting studio 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 painting studio's financial forecast.
The sales forecast for a painting studio
The sales forecast, also called topline projection, is normally where you will start when building your painting studio 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 painting studios), and consider the elements below:
- Seasonal Demand: As a painting studio owner, you may experience fluctuations in your average price and number of monthly transactions depending on the time of year. For example, there may be a higher demand for landscape paintings during the summer months, leading to an increase in average price and number of transactions.
- Economic Conditions: The overall state of the economy can also impact your painting studio's sales forecast. During times of economic downturn, people may have less disposable income to spend on luxury items like artwork, resulting in a decrease in average price and number of transactions.
- Trends in Art Market: As with any industry, the art market experiences trends that can affect the average price and number of transactions for your painting studio. For example, if there is a growing interest in abstract art, you may see an increase in the average price of your paintings and a higher number of transactions for those pieces.
- Competition: The presence of other painting studios in your area can also impact your sales forecast. If you have a lot of competition, you may need to adjust your average price to stay competitive and attract customers. Additionally, your number of monthly transactions may be affected if customers choose to purchase from a competitor instead.
- Customer Preferences: The preferences of your target audience can also play a role in your sales forecast. For example, if your customers tend to prefer smaller, more affordable pieces, your average price and number of transactions may be lower compared to a studio that caters to customers looking for larger, more expensive pieces.
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 painting studio
The next step is to estimate the costs you’ll have to incur to operate your painting studio.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your painting studio's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other costs associated with hiring and retaining employees, such as training and development.
- Accountancy Fees: You may need to hire an accountant or bookkeeper to help with managing your financial records, filing taxes, and providing financial advice.
- Insurance Costs: As a painting studio, you may need to have insurance to protect your business from any potential risks, such as liability insurance for accidents or property insurance for your studio space and equipment.
- Software Licences: You may need to purchase software to help with managing your finances, scheduling appointments, or creating digital designs for your painting projects.
- Banking Fees: This includes any fees associated with maintaining a business bank account, such as monthly maintenance fees or transaction fees.
- Rent/Mortgage: If you have a physical studio space, you will need to pay rent or a mortgage for the space.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your studio running.
- Supplies: As a painting studio, you will need to purchase various supplies, such as paint, canvases, brushes, and other materials.
- Marketing and Advertising: To attract customers, you may need to invest in marketing and advertising efforts, such as creating a website, printing business cards, or running social media ads.
- Website Maintenance: If you have a website for your studio, you may need to pay for web hosting, domain registration, and other maintenance costs.
- Professional Memberships: You may want to join professional organizations or associations related to painting, which may require membership fees.
- Professional Development: To improve your skills as a painter, you may need to attend workshops, classes, or conferences, which may have associated costs.
- Cleaning/Maintenance: You will need to keep your studio space clean and well-maintained, which may require hiring a cleaning service or purchasing cleaning supplies.
- Legal Fees: You may need to seek legal advice or assistance for various reasons, such as creating contracts, protecting your intellectual property, or resolving disputes.
- Office Supplies: You will need basic office supplies, such as paper, pens, and printer ink, to help with running your business.
This list is not exhaustive by any means, and will need to be tailored to your painting studio's specific circumstances.
What investments are needed to start or grow a painting studio?
Creating and expanding a painting studio also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a painting studio could include elements such as:
- Paints and Brushes: As a painting studio owner, you will need to invest in a variety of paints and brushes to create your artwork. This can include acrylic, oil, watercolor, and other types of paints, as well as different sizes and types of brushes. These items are essential for creating your paintings and will need to be replaced periodically.
- Easels and Canvas: Easels and canvas are fixed assets that are necessary for creating your paintings. Easels provide a stable surface for painting, while canvas is the material on which you paint. Depending on the size and quality of the canvas, it can be a significant expense for your studio.
- Framing Materials: Framing is an important aspect of presenting and selling your artwork. Therefore, you will need to invest in framing materials such as frames, mat board, glass, and backing boards. These items can be costly, especially if you offer custom framing services.
- Lighting and Studio Equipment: Proper lighting is crucial for creating and showcasing your paintings. You may need to invest in studio lighting, as well as other equipment such as tables, chairs, and storage units. These items will help you create a functional and comfortable workspace for yourself and your clients.
- Inventory Management Software: As your painting studio grows, you may need to invest in inventory management software to keep track of your supplies and sales. This type of software can help you monitor your inventory levels, track sales, and generate reports to help you make informed business decisions.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your painting studio.
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 painting studio
The next step in the creation of your financial forecast for your painting studio 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 painting studio?
Now let's have a look at the main output tables of your painting studio's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your painting studio's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a painting studio 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 painting studio'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 cash flow projection
The cash flow forecast of your painting studio will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the painting studio's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your painting studio is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your painting studio's financial plan.
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 painting studio's financial projections?
Building a painting studio 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 painting studio's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection software for free by signing up here.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your painting studio 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 painting studio's financial forecast?
Creating an accurate and error-free painting studio 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 painting studio, 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 painting studio.
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 painting studio. 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
- Financial forecast template for a business idea
- How to create a turnover forecast for a business?
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Founder & CEO at The Business Plan Shop Ltd
