How to create a financial forecast for a Pakistani restaurant?
Creating a financial forecast for your Pakistani restaurant, 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 Pakistani restaurant 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 Pakistani restaurant?
The financial projections for your Pakistani restaurant act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your Pakistani restaurant's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 Pakistani restaurant financial forecast?
A Pakistani restaurant'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 Pakistani restaurant, 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 Pakistani restaurant 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 Pakistani restaurant 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 Pakistani restaurant's financial forecast.
The sales forecast for a Pakistani restaurant
From experience, it is usually best to start creating your Pakistani restaurant financial forecast by your sales forecast.
To create an accurate sales forecast for your Pakistani restaurant, you will have to rely on the data collected in your market research, or if you're running an existing Pakistani restaurant, 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:
- Menu changes: As a Pakistani restaurant, you may consider adding or changing dishes on your menu based on customer feedback and market trends. This can affect your average price per transaction as well as the number of monthly transactions, as customers may be willing to pay more for new or popular dishes.
- Inflation: Changes in inflation rates can impact the cost of ingredients and supplies for your restaurant. This can affect your average price per transaction, as you may need to increase prices to cover the higher cost of goods. It can also affect the number of monthly transactions, as customers may be less likely to dine out if prices are too high.
- Seasonal demand: The demand for Pakistani cuisine may vary throughout the year, depending on factors such as weather, holidays, and cultural events. This can affect your number of monthly transactions, as well as your average price per transaction if you offer seasonal specials or promotions.
- Competition: The presence of other Pakistani restaurants in the area can impact your business. If there are many similar restaurants nearby, you may need to adjust your prices or offer unique dishes to differentiate yourself. This can affect your average price per transaction as well as the number of monthly transactions.
- Population demographics: The demographics of the area where your restaurant is located can also affect your business. For example, a higher concentration of South Asian residents may lead to increased demand for Pakistani cuisine, while a mostly non-South Asian population may be less familiar with the cuisine. This can impact your number of monthly transactions, as well as your average price per transaction if you need to educate and attract new customers.
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.
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 Pakistani restaurant
The next step is to estimate the costs you’ll have to incur to operate your Pakistani restaurant.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your Pakistani restaurant's operating expenses should normally include the following items:
- Staff Costs: This includes the salaries and wages of all the employees working at the restaurant, including cooks, servers, and other staff members.
- Accountancy Fees: You will need to hire an accountant to handle your financial records, tax filings, and other financial responsibilities. This will incur accountancy fees.
- Insurance Costs: Running a restaurant comes with various risks, and it is essential to have insurance coverage to protect your business from potential losses due to accidents, theft, or other unforeseen events.
- Software Licences: To efficiently manage your restaurant operations, you may need to invest in software licenses for accounting, inventory management, and other operational needs.
- Banking Fees: Your restaurant will have various financial transactions, such as processing credit card payments, cash deposits, and withdrawals. These transactions will incur banking fees.
- Food and Beverage Costs: This includes the cost of raw materials, ingredients, and beverages used to prepare the dishes on your menu.
- Rent or Lease Payments: If you do not own the building where your restaurant is located, you will need to pay rent or lease payments to the landlord.
- Utilities: This includes the costs of electricity, gas, water, and other utilities needed to operate your restaurant.
- Marketing and Advertising: To attract customers and promote your restaurant, you may need to invest in marketing and advertising efforts, such as social media ads, flyers, or local newspaper ads.
- Cleaning and Maintenance: Keeping your restaurant clean and well-maintained is crucial for customer satisfaction. You will need to budget for cleaning supplies, equipment maintenance, and repairs.
- Licensing and Permits: To legally operate a restaurant, you will need to obtain various licenses and permits, such as a food service license, liquor license, and health department permits.
- Training and Development: It is essential to provide ongoing training and development for your staff to maintain a high level of service and quality in your restaurant.
- Credit Card Processing Fees: If you accept credit card payments, you will need to pay credit card processing fees for each transaction.
- Waste Disposal: Running a restaurant generates a significant amount of waste that needs to be disposed of properly. You will need to budget for waste disposal services.
- Music Licensing: If you play music in your restaurant, you will need to obtain a music license to avoid copyright infringement.
This list is not exhaustive by any means, and will need to be tailored to your Pakistani restaurant's specific circumstances.
What investments are needed to start or grow a Pakistani restaurant?
Creating and expanding a Pakistani restaurant also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a Pakistani restaurant could include elements such as:
- Kitchen Equipment: This includes items such as stoves, ovens, refrigerators, and other necessary equipment for preparing and storing food. These are considered essential fixed assets for a Pakistani restaurant.
- Furniture and Decor: This includes items such as tables, chairs, and other decor elements that contribute to the ambiance and overall aesthetic of the restaurant. These items are important for creating a welcoming and authentic atmosphere for customers.
- POS System: A point-of-sale (POS) system is essential for a Pakistani restaurant to efficiently manage orders, process payments, and track inventory. This includes hardware and software components such as cash registers, printers, and software licenses.
- Utensils and Dinnerware: Utensils and dinnerware are necessary for serving food to customers. This includes plates, bowls, glasses, cutlery, and other serving utensils. It is important to have a sufficient supply of these items to meet the demand of customers.
- Security System: A security system is essential for the safety and security of the restaurant, its employees, and its customers. This may include security cameras, alarms, and other security measures to prevent theft and ensure the safety of the establishment.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your Pakistani restaurant.
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 Pakistani restaurant
The next step in the creation of your financial forecast for your Pakistani restaurant 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 Pakistani restaurant?
Now let's have a look at the main output tables of your Pakistani restaurant's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your Pakistani restaurant is likely to be in the years to come.
For your Pakistani restaurant 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 Pakistani restaurants, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your Pakistani restaurant's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- 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 Pakistani restaurant 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 Pakistani restaurant'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 Pakistani restaurant 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 Pakistani restaurant'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 Pakistani restaurant's financial forecast?
Creating your Pakistani restaurant'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 Pakistani restaurant'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional Pakistani restaurant 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 Pakistani restaurant's financial forecast?
Creating an accurate and error-free Pakistani restaurant 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 Pakistani restaurant, 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 forecast shows expected growth, profitability, and cash generation metrics for your Pakistani restaurant.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a Pakistani restaurant. Don't hesitate to contact us if you 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
- Financial forecast example
- How to create a sales forecast for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
