How to create a financial forecast for a photography 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 photography studio.
Putting together a photography 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 photography 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 photography studio?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your photography studio and ensure that it can be financially viable in the years to come.
A financial plan for a photography studio 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 photography studio 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 photography studio'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.
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 needed to build a photography studio financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a photography studio, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the photography studio on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing photography studio, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your photography studio's financial forecast.
The sales forecast for a photography studio
The sales forecast, also called topline projection, is normally where you will start when building your photography 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 photography studios), and consider the elements below:
- Seasonal Demand: As a photography studio, your business may experience fluctuations in demand based on the time of year. For example, during wedding season in the spring and summer months, you may see an increase in the number of transactions as couples book engagement and wedding photoshoots. This could also affect your average price, as weddings tend to be higher-priced packages compared to other types of photoshoots.
- Economic Conditions: Economic factors such as inflation, unemployment rates, and consumer confidence can impact the average price of your photography services. During times of economic downturn, individuals and businesses may be more cautious with their spending, resulting in a lower average price for your services. On the other hand, during times of economic growth, you may be able to charge higher prices for your services as consumers have more disposable income.
- Competition: The level of competition in your area can greatly affect your average price and number of monthly transactions. If you are the only photography studio in a small town, you may be able to charge higher prices and have a steady stream of clients. However, if you are located in a large city with many other photographers, you may need to adjust your prices to remain competitive and attract customers.
- Technological Advancements: As technology continues to advance, it can affect the average price of your services. For example, the rise of smartphone cameras and photo editing apps may lead to a decrease in demand for traditional photography services. To combat this, you may need to invest in new equipment or offer specialized services that cannot be replicated with technology.
- Client Referrals: Word-of-mouth referrals from satisfied clients can greatly impact your business's average price and number of transactions. If you consistently provide high-quality services, your satisfied clients may refer their friends and family to your studio, resulting in a higher average price and more transactions. On the other hand, if you receive negative reviews or feedback, it could negatively impact your business's sales forecast.
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 photography studio
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your photography studio 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 photography studio will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for all employees working in your photography studio. This may also include freelance or contract workers.
- Accountancy fees: You may need to hire an accountant to help you with financial management, tax preparation, and other financial tasks for your business.
- Insurance costs: It's important to have insurance coverage for your photography studio to protect against potential risks such as liability, equipment damage, and theft.
- Software licenses: You may need to purchase software licenses for editing, organizing, and managing your photographs. This could include programs such as Adobe Photoshop or Lightroom.
- Banking fees: This includes fees for maintaining a business bank account, processing credit card payments, and making wire transfers.
- Rent: If you are renting a space for your studio, this will be a recurring expense. Make sure to include rent, utilities, and any other related costs.
- Equipment maintenance: Your photography equipment will need regular maintenance and repairs to ensure it is functioning properly and producing high-quality images.
- Marketing and advertising: To attract clients and promote your business, you may need to invest in marketing and advertising strategies such as creating a website, printing business cards, or running social media ads.
- Professional development: As a photographer, it's important to continually improve your skills and stay updated on industry trends. This may include attending workshops, conferences, or investing in online courses.
- Office supplies: This includes items such as paper, ink, pens, and other supplies needed for day-to-day operations in your studio.
- Travel expenses: If you do on-location shoots or travel for business purposes, you will need to budget for expenses such as gas, lodging, and meals.
- Professional association fees: Joining professional photography associations can help you network, stay updated on industry news, and access resources to improve your business.
- Website hosting and domain fees: If you have a website for your photography studio, you will need to pay for web hosting and domain registration fees.
- Taxes: As a business owner, you will need to set aside funds for income taxes, sales taxes, and other business-related taxes.
- Legal fees: If you need legal advice or assistance with contracts, copyright issues, or other legal matters, you may need to budget for legal fees.
This list will need to be tailored to the specificities of your photography studio, but should offer a good starting point for your budget.
What investments are needed to start or grow a photography studio?
Once you have an idea of how much sales you could achieve and what it will cost to run your photography studio, it is time to look into the equipment required to launch or expand the activity.
For a photography studio, capital expenditures and initial working capital items could include:
- Cameras and Lenses: These are essential tools for any photography studio, and investing in high-quality cameras and lenses is crucial for producing professional and high-quality images. You may need to purchase multiple cameras and lenses to cater to different types of photography, such as portrait, product, or event photography.
- Lighting Equipment: Proper lighting is essential in photography, and a studio will require various lighting equipment, such as studio strobes, continuous lights, and modifiers. These can be expensive, but investing in quality lighting equipment will greatly improve the quality of your images and attract more clients.
- Studio Space and Equipment: Renting or purchasing a studio space is a significant capital expenditure for a photography studio. In addition to the space itself, you will also need to invest in studio equipment, such as backdrops, props, and furniture, to create a professional and functional studio environment.
- Computer and Editing Software: In today's digital age, post-processing is an essential part of photography, and you will need a reliable computer and editing software to edit and deliver your images to clients. This can be a significant expense, but investing in high-quality equipment will save you time and produce better results.
- Printers and Packaging Materials: If you offer printing services to your clients, you will need to invest in a high-quality printer and various packaging materials, such as photo paper, frames, and albums. These can be costly, but they will add value to your services and generate additional revenue.
Again, this list will need to be adjusted according to the specificities of your photography 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 photography studio
The next step in the creation of your financial forecast for your photography 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 photography studio?
Now let's have a look at the main output tables of your photography studio's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your photography studio's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a photography 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 photography 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 forecast
Your photography studio'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 photography studio:
- 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 photography studio'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 photography studio'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 photography studio's financial forecast?
Using the right tool or solution will make the creation of your photography studio's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your photography 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 photography 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 photography studio's financial forecast?
Creating an accurate and error-free photography studio 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
- 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 photography 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 photography 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
- Example of financial forecast for business idea
- How to create a sales forecast for a business?
Know someone who runs or wants to start a photography studio? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
