How to create a financial forecast for a pilates 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 pilates studio.
Putting together a pilates 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 pilates 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 pilates studio?
The financial projections for your pilates studio 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 pilates studio'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 pilates studio financial forecast?
A pilates studio'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 pilates studio.
If you are creating (or updating) the forecast of an existing pilates studio, 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 pilates studio 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 pilates studio 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 pilates studio's financial forecast.
The sales forecast for a pilates studio
The sales forecast, also called topline projection, is normally where you will start when building your pilates 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 pilates studios), and consider the elements below:
- Seasonal trends: As a pilates studio, your business may experience an increase in demand during certain seasons, such as the beginning of the year when people are focused on fitness and wellness resolutions. This could result in higher prices and more monthly transactions during these peak seasons.
- Competition: The presence of other pilates studios in your area could impact your average price and number of monthly transactions. If there are fewer competitors, you may be able to charge higher prices and attract more clients, whereas a saturated market may lead to lower prices and fewer transactions.
- Economic climate: Economic factors such as a recession or a booming economy can affect your business's average price and number of monthly transactions. During a recession, people may be less willing to spend money on luxury services like pilates, leading to lower prices and fewer transactions. On the other hand, a strong economy may lead to higher prices and more transactions as people have more disposable income.
- Demographics: The demographics of your target market can also impact your business's average price and number of monthly transactions. For example, if your studio is located in an affluent area with a high demand for luxury fitness services, you may be able to charge higher prices and attract more clients. However, if your target market consists of budget-conscious individuals, you may need to offer lower prices to stay competitive.
- Special events and promotions: Offering special events and promotions, such as a free trial class or discounted packages, can attract new clients and increase the number of monthly transactions. However, these promotions may also lead to lower average prices as clients take advantage of discounted rates.
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 pilates studio
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your pilates 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 pilates studio will include some of the following items:
- Rent: This expense covers the cost of renting your studio space. It can vary depending on the location and size of your studio.
- Utilities: This includes electricity, water, gas, and internet costs for your studio. You'll need to keep the lights on and the internet running for your business to operate smoothly.
- Equipment maintenance: As a pilates studio, you'll have various equipment such as reformers, mats, and props that will require regular maintenance and repairs.
- Cleaning services: Keeping your studio clean and sanitized is essential for the health and safety of your clients. You may need to hire professional cleaning services to maintain a clean environment.
- Staff costs: This includes salaries, wages, and benefits for your instructors, receptionists, and any other staff members you may have.
- Accountancy fees: As a business owner, you'll need to keep your finances in order. Hiring an accountant or bookkeeper can help you stay on top of your financial records and tax obligations.
- Insurance costs: It's important to have insurance to protect your business and employees in case of any accidents or injuries that may occur in your studio.
- Software licenses: You may need to invest in software for booking and scheduling appointments, managing client information, and processing payments.
- Marketing and advertising: Getting the word out about your pilates studio is crucial for attracting new clients. This expense may include social media ads, flyers, and other marketing materials.
- Professional development: As a pilates studio owner, it's important to continue learning and improving your skills. This may involve attending workshops, seminars, or online courses.
- Office supplies: This includes items like paper, printer ink, pens, and other supplies needed to run your studio's administrative tasks.
- Banking fees: There may be fees associated with processing payments, transferring funds, and maintaining a business bank account.
- Music licensing: If you play music in your studio, you may need to obtain a license to avoid copyright infringement.
- Legal fees: It's important to have legal counsel for your business to ensure compliance with laws and regulations.
- Taxes: As a business owner, you'll need to pay taxes on your profits. It's important to budget for this expense throughout the year.
This list will need to be tailored to the specificities of your pilates studio, but should offer a good starting point for your budget.
What investments are needed to start or grow a pilates studio?
Once you have an idea of how much sales you could achieve and what it will cost to run your pilates studio, it is time to look into the equipment required to launch or expand the activity.
For a pilates studio, capital expenditures and initial working capital items could include:
- Pilates Equipment: This includes items such as reformers, Cadillac machines, and chairs. These are essential for conducting pilates classes and will be a significant capital expense for your studio.
- Studio Renovations: In order to create the ideal space for your pilates studio, you may need to invest in renovations such as new flooring, mirrors, and lighting. These upgrades will not only enhance the atmosphere of your studio but also create a safe and functional space for your clients.
- Furniture and Fixtures: This category includes items such as reception desk, seating, storage cabinets, and decor. These items are necessary for creating a welcoming and professional environment for your clients.
- Computer Software and Technology: In today's digital age, it's important to have the right software and technology to manage your studio's operations. This may include software for scheduling, billing, and client management, as well as computers, printers, and other office equipment.
- Security System: As a business owner, it's important to protect your assets and ensure the safety of your clients. A security system, including cameras and alarm systems, is a crucial investment for your pilates studio.
Again, this list will need to be adjusted according to the specificities of your pilates 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 pilates studio
The next step in the creation of your financial forecast for your pilates 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 pilates studio?
Now let's have a look at the main output tables of your pilates studio's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your pilates studio is likely to be in the years to come.
For your pilates studio 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 pilates studios, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your pilates studio'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 pilates studio. 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 projection
The cash flow forecast of your pilates 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 pilates 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 pilates 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 pilates 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 pilates studio's financial forecast?
Creating your pilates studio'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 pilates 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 pilates 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 pilates studio's financial forecast?
Creating an accurate and error-free pilates 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own pilates studio, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your pilates studio
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your pilates studio.
- 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 pilates studio. 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
- Financial forecast template for a business idea
- How to create a sales forecast for a business?
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Founder & CEO at The Business Plan Shop Ltd
