How to create a financial forecast for a party and fancy dress store?
Creating a financial forecast for your party and fancy dress store, 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 party and fancy dress store 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 party and fancy dress store?
The financial projections for your party and fancy dress store 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 party and fancy dress store'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 party and fancy dress store financial forecast?
A party and fancy dress store'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 party and fancy dress store, 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 party and fancy dress store 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 party and fancy dress store 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 party and fancy dress store's financial forecast.
The sales forecast for a party and fancy dress store
From experience, it is usually best to start creating your party and fancy dress store financial forecast by your sales forecast.
To create an accurate sales forecast for your party and fancy dress store, you will have to rely on the data collected in your market research, or if you're running an existing party and fancy dress store, 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:
- Seasonal Demand: As a party and fancy dress store owner, you already know that demand for your products can vary greatly depending on the time of year. For example, the lead up to Halloween and Christmas is typically the busiest time for your store, resulting in higher average prices due to increased demand and limited supply. On the other hand, the summer months may see a decline in demand, leading to lower average prices and potentially fewer transactions.
- Trends and Fads: The party and fancy dress industry is heavily influenced by trends and fads. Keeping up with the latest popular themes and characters can greatly impact your average price and number of monthly transactions. For example, if a certain movie or TV show becomes popular, costumes and decorations related to that theme may see a surge in demand, resulting in higher average prices and more transactions.
- Competition: As with any business, competition can greatly affect your average price and number of monthly transactions. If there are several other party and fancy dress stores in the area, you may need to adjust your prices to remain competitive and attract customers. On the other hand, if you are the only store of its kind in the area, you may be able to charge higher prices and see an increase in transactions.
- Economic Climate: The state of the economy can also have a significant impact on your business. During times of economic downturn, people may be more hesitant to spend money on non-essential items like party supplies and costumes, resulting in lower average prices and transactions. Conversely, during times of economic growth, people may have more disposable income and be more willing to splurge on parties and events, leading to higher prices and more transactions.
- Customer Demographics: Understanding your target market and their preferences can also affect your average price and number of monthly transactions. For example, if your store is located in a college town, you may see a surge in sales during peak party seasons, resulting in higher average prices and more transactions. Alternatively, if your store caters to families and children, you may see more consistent sales throughout the year, resulting in more stable average prices and 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 party and fancy dress store
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your party and fancy dress store on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a party and fancy dress store will include some of the following items:
- Rent: Your party and fancy dress store will need a physical storefront to operate from, so you will have to factor in the cost of rent or lease payments.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your store running.
- Inventory: As a party and fancy dress store, you will need to constantly update and replenish your inventory to keep up with trends and demand.
- Staff Costs: You will need to pay wages, taxes, and benefits to your employees, including sales staff, stockroom attendants, and possibly a manager.
- Marketing and Advertising: To attract customers, you may need to invest in marketing and advertising efforts, such as print ads, social media campaigns, and event sponsorships.
- Accountancy Fees: It is important to keep track of your finances and taxes, so you may need to hire an accountant or use accounting software to help you manage your books.
- Insurance Costs: To protect your business, you will need to pay for insurance coverage, such as liability insurance, property insurance, and worker's compensation insurance.
- Software Licences: You may need to purchase software licences for point-of-sale systems, inventory management, and accounting software.
- Banking Fees: Your business will have banking needs, such as transaction fees, monthly account fees, and possibly loan fees.
- Packaging and Shipping: If you offer online sales or delivery services, you will need to pay for packaging materials and shipping costs.
- Cleaning and Maintenance: To keep your store clean and presentable, you will need to factor in the cost of cleaning supplies and possibly hire a cleaning service.
- Equipment Rental: You may need to rent equipment for special events or parties, such as tables, chairs, and lighting.
- Professional Fees: Depending on your business needs, you may need to hire professionals such as graphic designers, event planners, or party entertainers.
- Credit Card Processing Fees: If you accept credit card payments, you will need to pay processing fees for each transaction.
- Taxes and Licences: Your business will be subject to various taxes and licensing fees, such as sales tax, business licence fees, and permits for special events.
This list will need to be tailored to the specificities of your party and fancy dress store, but should offer a good starting point for your budget.
What investments are needed to start or grow a party and fancy dress store?
Creating and expanding a party and fancy dress store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a party and fancy dress store could include elements such as:
- Inventory: This includes the purchase of costumes, accessories, and other items to stock your store with. This is a necessary capital expenditure for a party and fancy dress store as it is the main source of revenue.
- Store Fixtures and Displays: In order to create an attractive and organized store, you will need to invest in fixtures and displays such as shelving, racks, mannequins, and hangers. These will not only showcase your products but also contribute to the overall ambiance of your store.
- Point of Sale (POS) System: A POS system is essential for any retail store, including a party and fancy dress store. This system will not only help you process sales transactions efficiently but also provide you with valuable data and reports to track your store's performance.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your party and fancy dress store.
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 party and fancy dress store
The next step in the creation of your financial forecast for your party and fancy dress store 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 party and fancy dress store?
Now let's have a look at the main output tables of your party and fancy dress store's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy party and fancy dress store's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established party and fancy dress store will look different than for a startup.
The projected balance sheet
Your party and fancy dress store'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 party and fancy dress store 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 party and fancy dress store'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 party and fancy dress store 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 party and fancy dress store'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 party and fancy dress store's financial forecast?
Creating your party and fancy dress store'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 party and fancy dress store'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 party and fancy dress store 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 party and fancy dress store's financial forecast?
Creating an accurate and error-free party and fancy dress store 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 party and fancy dress store, 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 party and fancy dress store.
- 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 party and fancy dress store. 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?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
