How to create a financial forecast for a plastering company?
Developing and maintaining an up-to-date financial forecast for your plastering 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 plastering 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 plastering company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your plastering company and ensure that it can be financially viable in the years to come.
A financial plan for a plastering company 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 plastering company 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 plastering company'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 used as input to build a plastering company financial forecast?
A plastering company'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 plastering company, 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 plastering company 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 plastering company 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 plastering company's financial forecast.
The sales forecast for a plastering company
From experience, it usually makes sense to start your plastering company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your plastering company (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your plastering company's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Changes in Material Costs - As the owner of a plastering company, you know that the cost of materials can greatly affect your average price. Fluctuations in the price of materials such as plaster, joint compound, and sand can impact the cost of your services and ultimately influence your average price.
- Competition - The level of competition in your local market can also play a significant role in determining your average price. If there are many other plastering companies in your area, you may need to adjust your prices to remain competitive and attract customers.
- Seasonal Demands - Plastering is a seasonal business, with peak demand typically occurring during the warmer months. This can affect the number of monthly transactions for your company. During the slower winter months, you may need to adjust your prices to attract more customers and maintain a steady stream of income.
- Housing Market Trends - The state of the housing market can also impact your average price and monthly transactions. During a housing boom, you may see an increase in demand for your services, allowing you to charge higher prices. Conversely, during a housing slump, you may need to lower your prices to stay competitive.
- Labor Costs - As a plastering company, your labor costs are a significant factor in determining your average price. Changes in labor laws, minimum wage requirements, and the availability of skilled workers can all affect your labor costs and, in turn, your average price.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 plastering company
The next step is to estimate the expenses needed to run your plastering 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 plastering company's operating expenses should include the following items at a minimum:
- Staff costs: This includes the salaries, wages, and benefits of your plasterers, as well as any administrative staff you may have.
- Materials and supplies: Plastering requires a variety of materials and supplies, such as plaster, sand, and tools. Keep track of how much you spend on these items.
- Equipment rental: If you don't own all the necessary equipment, you may need to rent it. This can include scaffolding, ladders, and other specialized tools.
- Transportation costs: You'll need to factor in the cost of gas, maintenance, and insurance for any company vehicles you use to transport your crew and materials to job sites.
- Accountancy fees: It's important to have a professional handle your company's finances. Consider hiring an accountant to help you keep track of your expenses and file taxes.
- Insurance costs: As with any business, it's important to have insurance to protect your company, employees, and clients. This can include liability insurance, worker's compensation, and property insurance.
- Marketing and advertising: In order to attract new clients, you may need to invest in marketing and advertising efforts such as creating a website, printing business cards, or placing ads.
- Software licenses: Depending on the size of your company, you may need to purchase software licenses for programs such as accounting or project management software.
- Rent or mortgage: If you have a physical location for your business, you'll need to factor in the cost of rent or mortgage payments.
- Utilities: Don't forget about the cost of utilities such as electricity, water, and internet for your office space.
- Training and development: In order to stay competitive, it's important to invest in ongoing training and development for your employees.
- Banking fees: Keep track of any fees associated with your business bank account, such as monthly maintenance fees or transaction fees.
- Professional memberships: Consider joining professional organizations related to the plastering industry. Membership fees may provide access to valuable resources and networking opportunities.
- Legal fees: As a business owner, you may need to seek legal advice from time to time. Factor in the cost of lawyer fees when necessary.
- Office supplies: Don't forget about the cost of everyday office supplies such as paper, pens, and printer ink.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small plastering company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a plastering company?
Once you have an idea of how much sales you could achieve and what it will cost to run your plastering company, it is time to look into the equipment required to launch or expand the activity.
For a plastering company, capital expenditures and initial working capital items could include:
- Plastering Equipment - This includes items such as trowels, hawks, and floats. These tools are essential for applying and smoothing plaster onto walls and ceilings.
- Scaffolding - As a plastering company, you will need to have access to high-quality scaffolding for working on high walls and ceilings. This is a necessary expense for safety and efficiency.
- Plaster Mixing Machine - A plaster mixing machine is a fixed asset that is used to mix and blend plaster with water and other additives. This machine is essential for ensuring a consistent and high-quality mix for your plastering jobs.
- Transportation Vehicles - Whether it's a truck or a van, a reliable transportation vehicle is necessary for a plastering company to transport equipment, tools, and materials to and from job sites.
- Storage Facility - As a plastering company, you will need a secure and weatherproof storage facility to store your equipment, tools, and materials when they are not in use. This is a fixed asset that will protect your investments and save you money in the long run.
Again, this list will need to be adjusted according to the specificities of your plastering 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 plastering company
The next step in the creation of your financial forecast for your plastering 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 plastering company?
Now let's have a look at the main output tables of your plastering company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your plastering company is likely to be in the years to come.
For your plastering company 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 plastering companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your plastering company'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 projected cash flow statement
A projected cash flow statement for a plastering company is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your plastering company's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the plastering company 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 plastering company's financial projections?
Building a plastering 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 projection software to build your plastering company's forecast
The modern and easiest way to build a forecast is to use professional financial projection software 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 forecasting software for free by signing up here.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your plastering 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 plastering company's financial forecast?
Creating an accurate and error-free plastering company 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 plastering company, 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 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 plastering company.
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 plastering company. 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
- How to create a turnover forecast for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a plastering company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
