How to create a financial forecast for a plastic tube and hose manufacturer?
Developing and maintaining an up-to-date financial forecast for your plastic tube and hose 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 tube and hose 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 tube and hose manufacturing business?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your plastic tube and hose manufacturing business becomes handy.
Creating a plastic tube and hose manufacturing business financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your plastic tube and hose manufacturing business.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a plastic tube and hose manufacturing business is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your plastic tube and hose manufacturing business's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is used as input to build a plastic tube and hose manufacturing business financial forecast?
A plastic tube and hose manufacturing business'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 plastic tube and hose manufacturing business.
If you are creating (or updating) the forecast of an existing plastic tube and hose manufacturing business, 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 plastic tube and hose manufacturing business 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 plastic tube and hose manufacturing business 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 plastic tube and hose manufacturing business's financial forecast.
The sales forecast for a plastic tube and hose manufacturing business
From experience, it usually makes sense to start your plastic tube and hose manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your plastic tube and hose manufacturing business (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 plastic tube and hose manufacturing business'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:
- Raw material costs: The cost of raw materials such as plastic resins and additives can directly affect the average price of your plastic tubes and hoses. Fluctuations in the prices of these materials can impact your profitability and may require you to adjust your prices accordingly.
- Competition: The level of competition in the market can also affect the average price of your products. If there are many other plastic tube and hose manufacturers in your area, you may need to lower your prices to remain competitive. On the other hand, if you are the only manufacturer in the region, you may be able to charge higher prices.
- Demand for specialized products: The demand for specialized plastic tubes and hoses, such as those with unique sizes or properties, can also impact your average price. If there is a high demand for these specialized products, you may be able to charge a premium price. However, if the demand is low, you may need to lower your prices to attract customers.
- Seasonality: The time of year can also affect the number of monthly transactions for your business. For example, if your plastic tubes and hoses are mainly used in outdoor activities, you may experience higher sales during the summer months. On the other hand, if your products are used in construction, you may see a decrease in sales during the winter months.
- Technological advancements: The introduction of new technologies and manufacturing processes can also impact your business's average price and number of transactions. If you are able to adopt new technologies that improve the quality or efficiency of your products, you may be able to charge higher prices. On the other hand, if your competitors are using more advanced technologies, you may need to lower your prices to remain competitive.
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 plastic tube and hose manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your plastic tube and hose 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 tube and hose manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other costs associated with employing staff. As a plastic tube and hose manufacturing business, you will need a team of skilled workers to operate machinery, handle production, and manage other aspects of the business.
- Raw Materials: This expense includes the cost of purchasing raw materials such as plastic, PVC, and other materials needed to produce tubes and hoses. As a manufacturing business, this will be a significant expense for your company.
- Utilities: As a manufacturing business, you will need to pay for electricity, water, and other utilities to operate your machinery and keep your facility running. These costs can add up quickly, especially if your production process is energy-intensive.
- Rent/Lease: If you do not own your business premises, you will need to pay rent or lease payments. This expense can vary depending on the location and size of your facility.
- Insurance: It is essential to have insurance for your manufacturing business to protect against potential risks and liabilities. This expense includes property insurance, liability insurance, and other relevant insurance policies.
- Accountancy Fees: You will need to hire an accountant or engage an accounting firm to manage your financial records, prepare taxes, and provide financial advice. Accountancy fees can be a significant expense for your business, but it is crucial to have accurate financial records and comply with tax regulations.
- Marketing and Advertising: To attract customers and promote your products, you will need to invest in marketing and advertising. This expense can include creating a website, developing marketing materials, and running advertising campaigns.
- Software Licenses: As a manufacturing business, you may need to use specialized software to manage inventory, track sales, and other aspects of your operations. These software licenses can be a recurring expense for your business.
- Maintenance and Repairs: Machinery and equipment used in the production process may require regular maintenance and occasional repairs. This expense is crucial to ensure the smooth running of your manufacturing operations.
- Taxes and Licenses: As a business, you will need to pay taxes and obtain relevant licenses to operate legally. These costs can vary depending on your location and the size of your business.
- Transportation and Shipping: If you sell your products locally or internationally, you will need to budget for transportation and shipping costs. This expense includes shipping materials, packaging, and delivery services.
- Banking Fees: As a business, you will need to maintain a business account and pay for banking services such as wire transfers, check processing, and credit card transactions. These fees can add up over time.
- Legal Fees: You may need to hire a lawyer or seek legal advice for various aspects of your business, such as contracts, intellectual property, and other legal matters. These fees can be a significant expense for your business.
- Training and Development: To keep your staff up to date with industry standards and improve their skills, you may need to invest in training and development programs. This expense can help your business stay competitive and improve productivity.
- Office Supplies: Running a manufacturing business also requires regular office supplies such as paper, ink, and other stationery. These costs may seem small, but they can add up over time.
This list will need to be tailored to the specificities of your plastic tube and hose manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a plastic tube and hose manufacturing business?
Creating and expanding a plastic tube and hose manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a plastic tube and hose manufacturing business could include elements such as:
- Machinery and Equipment: This includes the cost of purchasing and installing machinery and equipment necessary for the production of plastic tubes and hoses. Examples include extrusion machines, cutting machines, and packaging machinery.
- Factory and Warehouse Space: The cost of renting or purchasing a suitable space for manufacturing and storing plastic tubes and hoses is an essential capital expenditure. This may include lease deposits, renovations, and utility setup fees.
- Raw Materials and Inventory: As a plastic tube and hose manufacturer, you will need to purchase raw materials such as plastic resins, colorants, and additives in bulk. The cost of these materials and maintaining inventory levels should be included in your expenditure forecast.
- Transportation and Distribution: If your business plans to sell your products to customers outside of your local area, you will need to budget for transportation and distribution expenses. This may include the purchase of delivery vehicles, fuel costs, and distribution fees.
- Technology and Software: In today's digital age, investing in technology and software is crucial for the success of any business. As a plastic tube and hose manufacturer, you may need to purchase software for design and production, as well as equipment such as computers and printers.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your plastic tube and hose 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 tube and hose manufacturing business
The next step in the creation of your financial forecast for your plastic tube and hose 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 tube and hose manufacturing business?
Now let's have a look at the main output tables of your plastic tube and hose 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 tube and hose 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 tube and hose manufacturing business will look different than for a startup.
The projected balance sheet
Your plastic tube and hose 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 tube and hose 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 tube and hose 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 tube and hose 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 tube and hose manufacturing business's financial projections?
Building a plastic tube and hose manufacturing business 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 plastic tube and hose manufacturing business'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional plastic tube and hose manufacturing business financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your plastic tube and hose 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 tube and hose 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 tube and hose 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 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 forecast shows expected growth, profitability, and cash generation metrics for your plastic tube and hose manufacturing business.
- 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 plastic tube and hose manufacturing business. 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
- How to project revenues for a business?
- Sample financial forecast for business idea
Know someone who runs a plastic tube and hose manufacturing business? Share our business guide with them!
Founder & CEO at The Business Plan Shop Ltd
