How to create a financial forecast for a pedal boat rental company?
Developing and maintaining an up-to-date financial forecast for your pedal boat rental company 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 pedal boat rental company 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 pedal boat rental company?
The financial projections for your pedal boat rental company 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 pedal boat rental company'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 pedal boat rental company financial forecast?
A pedal boat rental company'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 pedal boat rental company.
If you are creating (or updating) the forecast of an existing pedal boat rental company, 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 pedal boat rental company 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 pedal boat rental company 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 pedal boat rental company's financial forecast.
The sales forecast for a pedal boat rental company
From experience, it is usually best to start creating your pedal boat rental company financial forecast by your sales forecast.
To create an accurate sales forecast for your pedal boat rental company, you will have to rely on the data collected in your market research, or if you're running an existing pedal boat rental company, 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 pedal boat rental company, your sales forecast will be heavily influenced by the seasonality of your business. During peak summer months, you can expect higher demand and therefore, a higher average price and number of monthly transactions. On the other hand, during the colder months, demand may decrease, leading to a decrease in both average price and number of transactions.
- Competition: The level of competition in your area can also affect your sales forecast. If there are several other pedal boat rental companies in close proximity, you may need to adjust your prices and promotions in order to stay competitive. This can have an impact on your average price and number of monthly transactions.
- Weather Conditions: Inclement weather, such as storms or high winds, can significantly impact your business's sales forecast. If the weather is not suitable for boating, customers may be less likely to rent a pedal boat, resulting in a decrease in average price and number of transactions for the month.
- Tourism Trends: Your business may also be affected by the overall tourism trends in your area. If your location is a popular tourist destination, you can expect higher demand and potentially, higher average prices. On the other hand, if tourism is down, this can have a negative impact on your sales forecast.
- Customer Demographics: Understanding your target market and their preferences can also play a role in your sales forecast. For example, if your pedal boats are popular among families, you may see an increase in sales during summer months when families are more likely to take vacations. However, if your target market is primarily older individuals, you may see a decrease in sales during colder months when they may be less inclined to participate in outdoor activities.
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 pedal boat rental company
The next step is to estimate the expenses needed to run your pedal boat rental company 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 pedal boat rental company's operating expenses should include the following items at a minimum:
- Staff wages and salaries: As a pedal boat rental company, your biggest operating expense will likely be the wages and salaries of your staff who will be responsible for managing and maintaining the boats, as well as providing customer service.
- Accountancy fees: You may need to hire an accountant to help you manage your finances, track your income and expenses, and file your taxes correctly.
- Insurance costs: It is important to have insurance coverage for your rental business to protect yourself from any accidents or damages that may occur to the boats or customers.
- Software licenses: You may need to invest in software to manage your reservations, bookings, and other administrative tasks, which will require paying for licenses.
- Banking fees: As a business, you will have to manage your finances through a bank account, which may come with monthly fees for services and transactions.
- Marketing and advertising expenses: To attract customers to your pedal boat rental company, you may need to invest in marketing and advertising efforts, such as online ads, flyers, and promotions.
- Rent or lease payments: If you do not own the property where your rental business is located, you will need to pay rent or lease payments to your landlord.
- Utilities: Your rental business will have ongoing expenses for utilities such as electricity, water, and internet.
- Boat maintenance and repairs: As a pedal boat rental company, it is important to regularly maintain and repair your boats to ensure they are safe and functional for customers to use.
- Office supplies: You will need to purchase office supplies such as paper, ink, and pens to run your business efficiently.
- Customer service expenses: To provide excellent customer service, you may need to invest in training programs, bonuses, or rewards for your staff.
- Legal fees: You may need to hire a lawyer to help you with legal matters, contracts, or any disputes that may arise.
- Credit card processing fees: If you accept credit card payments from customers, you will need to pay a fee for each transaction processed.
- Cleaning and sanitation supplies: As a rental business, you will need to regularly clean and sanitize your boats and equipment to ensure a safe and enjoyable experience for customers.
- Office rent or lease payments: If you have a separate office space for administrative tasks, you will need to pay rent or lease payments for that space.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small pedal boat rental company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a pedal boat rental company?
Creating and expanding a pedal boat rental company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a pedal boat rental company could include elements such as:
- Pedal Boats: As a pedal boat rental company, you will need to purchase a fleet of pedal boats to rent out to customers. These boats are a major capital expenditure and will be the primary source of revenue for your business.
- Docking Equipment: In order to safely dock your pedal boats and make them easily accessible to customers, you will need to invest in docking equipment such as ramps, buoys, and ropes. This equipment will ensure the efficient operation of your rental business.
- Safety Gear: The safety of your customers is of utmost importance, and as such, you will need to purchase safety gear for your pedal boats. This can include life jackets, first aid kits, and emergency communication devices.
- Boat Maintenance: To keep your pedal boats in top condition, you will need to allocate funds for regular maintenance and repairs. This can include expenses such as cleaning supplies, replacement parts, and labor costs.
- Storage Facilities: When the rental season is over, you will need a safe and secure place to store your pedal boats. This may require renting storage space or investing in storage units on your own property.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your pedal boat rental company.
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 pedal boat rental company
The next step in the creation of your financial forecast for your pedal boat rental company 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 pedal boat rental company?
Now let's have a look at the main output tables of your pedal boat rental company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your pedal boat rental company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a pedal boat rental company 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
The projected balance sheet gives an overview of your pedal boat rental company'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 pedal boat rental company. 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 pedal boat rental company'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 pedal boat rental company:
- 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 pedal boat rental company'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 pedal boat rental company'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 pedal boat rental company's financial projections?
Building a pedal boat rental company 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 pedal boat rental company'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 pedal boat rental company 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 pedal boat rental company's financial forecast?
Creating an accurate and error-free pedal boat rental company 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 pedal boat rental company 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 pedal boat rental company, 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?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a pedal boat rental company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
