How to create a financial forecast for a plastic and rubber machinery maker?
Developing and maintaining an up-to-date financial forecast for your plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your plastic and rubber machinery manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business'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 plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business, 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 plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business, 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 plastic and rubber machinery manufacturing business's financial forecast.
The sales forecast for a plastic and rubber machinery manufacturing business
From experience, it is usually best to start creating your plastic and rubber machinery manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your plastic and rubber machinery manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing plastic and rubber machinery manufacturing business, 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:
- Industry demand: The overall demand for plastic and rubber machinery can affect the average price and number of monthly transactions for your business. If the industry experiences a surge in demand, you may be able to increase prices and sell more machinery each month. Conversely, a decrease in demand could lead to lower prices and fewer transactions.
- Raw material costs: The cost of raw materials used to manufacture plastic and rubber machinery can have a direct impact on your average price. If the cost of raw materials increases, you may need to raise your prices to maintain profitability. This could potentially lead to a decrease in monthly transactions if customers are unwilling to pay the higher prices.
- Competition: Your competitors' pricing strategies can also affect your average price and number of monthly transactions. If your competitors offer lower prices or discounts, you may need to adjust your prices accordingly to remain competitive. This could lead to a decrease in average price and an increase in monthly transactions if customers are drawn to the lower prices.
- Technological advancements: As technology advances, it can impact both the average price and number of monthly transactions for your plastic and rubber machinery. If new technologies emerge that make your machinery more efficient or cost-effective, you may be able to increase your prices and sell more machinery each month. On the other hand, if your competitors adopt new technologies and offer more advanced machinery at lower prices, you may need to adjust your prices to remain competitive.
- Economic conditions: Economic factors such as inflation, interest rates, and consumer spending can also affect your business's average price and number of monthly transactions. If the economy is strong and consumers have more disposable income, they may be more willing to invest in new machinery, leading to an increase in average price and monthly transactions. However, during an economic downturn, customers may be more cautious with their spending, leading to a decrease in average price and monthly 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.
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 plastic and rubber machinery manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees, including production workers, engineers, and administrative staff.
- Raw Materials: This includes the cost of purchasing plastic and rubber materials used in the manufacturing process.
- Energy Costs: This includes the cost of electricity, gas, and other utilities used in the production of plastic and rubber machinery.
- Rent/Lease: This includes the cost of renting or leasing manufacturing facilities, warehouses, and office space.
- Equipment Maintenance: This includes the cost of regular maintenance and repairs for production equipment and machinery.
- Marketing and Advertising: This includes the cost of promoting your business and products through various channels, such as trade shows, online advertising, and print media.
- Accountancy Fees: This includes the cost of hiring an accountant or accounting firm to manage your financial records and tax filings.
- Insurance Costs: This includes the cost of insuring your business, employees, and equipment against potential risks and liabilities.
- Software Licences: This includes the cost of purchasing and renewing software licences for programs used in the design and production of plastic and rubber machinery.
- Banking Fees: This includes the cost of bank account maintenance, transaction fees, and other banking services used for managing your business finances.
- Legal Fees: This includes the cost of hiring a lawyer or law firm for legal advice and services related to your business operations.
- Transportation and Logistics: This includes the cost of shipping and delivering finished products to customers or receiving raw materials from suppliers.
- Training and Development: This includes the cost of training programs and professional development for employees to enhance their skills and knowledge.
- Office Supplies: This includes the cost of purchasing office supplies, such as paper, ink, and other materials used in day-to-day operations.
- Taxes and Licences: This includes the cost of business taxes, licenses, and permits required for operating a plastic and rubber machinery manufacturing business.
This list will need to be tailored to the specificities of your plastic and rubber machinery manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a plastic and rubber machinery manufacturing business?
Your plastic and rubber machinery manufacturing business financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a plastic and rubber machinery manufacturing business, these could include:
- Machinery and equipment: This includes all the tools and machinery needed for the manufacturing process, such as injection molding machines, extruders, and mixers. These are essential fixed assets for a plastic and rubber machinery manufacturing business.
- Factory or production facility: The cost of purchasing or leasing a factory or production facility is a significant capital expenditure for this type of business. This includes the building itself, as well as any renovations or modifications needed to make it suitable for manufacturing plastic and rubber machinery.
- Raw materials and inventory: In order to manufacture plastic and rubber machinery, you will need to purchase raw materials such as plastic resin and rubber compounds. These can be costly and should be included in your expenditure forecast.
- Transportation and shipping: As a manufacturer, you will need to transport your finished products to customers or distributors. This may involve purchasing trucks or other vehicles, as well as paying for shipping and logistics services. These costs should be factored into your expenditure forecast.
- Research and development: To stay competitive in the market, you may need to invest in research and development to improve your products and processes. This can include costs for new technology, hiring specialized staff, and conducting experiments and trials. It is important to include these expenses in your expenditure forecast to ensure your business stays innovative and successful.
Again, this list will need to be adjusted according to the size and ambitions of your plastic and rubber machinery manufacturing business.
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 plastic and rubber machinery manufacturing business
The next step in the creation of your financial forecast for your plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business?
Now let's have a look at the main output tables of your plastic and rubber machinery manufacturing business'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 plastic and rubber machinery manufacturing business'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 plastic and rubber machinery manufacturing business will look different than for a startup.
The projected balance sheet
Your plastic and rubber machinery manufacturing business'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 projected cash flow statement
A projected cash flow statement for a plastic and rubber machinery manufacturing business 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 plastic and rubber machinery manufacturing business'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 plastic and rubber machinery manufacturing 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 plastic and rubber machinery manufacturing business's financial forecast?
Creating your plastic and rubber machinery manufacturing business'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 plastic and rubber machinery manufacturing business'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional plastic and rubber machinery manufacturing business financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your plastic and rubber machinery manufacturing business's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free plastic and rubber machinery manufacturing business financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your plastic and rubber machinery manufacturing business's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 plastic and rubber machinery manufacturing business, 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 plastic and rubber machinery manufacturing business
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 plastic and rubber machinery manufacturing business.
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 plastic and rubber machinery manufacturing business. 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 sales forecast for a business?
- Sample financial forecast for business idea
Know someone who runs or wants to start a plastic and rubber machinery manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
