How to create a financial forecast for a pop-up shop?
Creating a financial forecast for your pop-up shop, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your pop-up shop is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a pop-up shop?
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 pop-up shop becomes handy.
Creating a pop-up shop 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 pop-up shop.
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 pop-up shop 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 pop-up shop'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 needed to build a pop-up shop 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 pop-up shop, 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 pop-up shop 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 pop-up shop, 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 pop-up shop's financial forecast.
The sales forecast for a pop-up shop
From experience, it is usually best to start creating your pop-up shop financial forecast by your sales forecast.
To create an accurate sales forecast for your pop-up shop, you will have to rely on the data collected in your market research, or if you're running an existing pop-up shop, 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:
- Seasonal Trends: As a pop-up shop, your sales will be heavily influenced by seasonal trends. For example, during the summer months, you may see an increase in sales due to more foot traffic and outdoor events.
- Location: The location of your pop-up shop can greatly impact your average price and number of monthly transactions. A prime location in a busy shopping district may attract more customers and allow you to charge higher prices.
- Limited Inventory: Since pop-up shops typically have limited inventory, this can affect your average price and number of monthly transactions. If you sell out of popular items quickly, you may need to increase prices or restock more frequently.
- Competition: The level of competition in your area can also affect your business. If there are many similar pop-up shops nearby, you may need to adjust your prices or marketing strategies to stand out and attract customers.
- Customer Feedback: The feedback from your customers can also impact your sales forecast. Positive reviews and word-of-mouth recommendations can lead to an increase in sales, while negative feedback can result in a decrease.
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 pop-up shop
The next step is to estimate the costs you’ll have to incur to operate your pop-up shop.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your pop-up shop's operating expenses should normally include the following items:
- Rent: This will be your major expense as it includes the cost of leasing the space for your pop-up shop. Depending on the location and duration of your pop-up, rent can vary greatly.
- Staff costs: You will need to pay your employees for their time and services. This can include wages, benefits, and any additional costs such as uniforms or training.
- Marketing and advertising: In order to attract customers to your pop-up shop, you will need to invest in marketing and advertising. This could include social media ads, flyers, or collaborations with other businesses.
- Utilities: You will be responsible for paying for utilities such as electricity, water, and internet for your pop-up shop.
- Inventory: You will need to purchase inventory to sell in your pop-up shop. This can include products, supplies, and materials.
- Accountancy fees: You may need to hire an accountant to help you keep track of your finances and file taxes for your pop-up shop.
- Insurance costs: It is important to have insurance coverage for your pop-up shop in case of any accidents or damages.
- Software licenses: You may need to purchase licenses for software programs that you use for your pop-up shop, such as a point-of-sale system.
- Packaging and shipping: If you plan on selling products online or shipping them to customers, you will need to budget for packaging materials and shipping costs.
- Banking fees: You may incur fees for banking services such as setting up a merchant account or processing credit card payments.
- Cleaning and maintenance: You will need to keep your pop-up shop clean and presentable, so budget for cleaning supplies and potential maintenance costs.
- Licenses and permits: Depending on your location and the type of products you sell, you may need to obtain licenses and permits for your pop-up shop.
- Security: In order to protect your inventory and ensure the safety of your employees and customers, you may need to invest in security measures such as cameras or security personnel.
- Professional fees: You may need to hire professionals such as lawyers or consultants for advice or services related to your pop-up shop.
- Miscellaneous: Unexpected expenses can always arise, so it's important to have a budget for miscellaneous expenses such as repairs, event fees, or unforeseen costs.
This list is not exhaustive by any means, and will need to be tailored to your pop-up shop's specific circumstances.
What investments are needed to start or grow a pop-up shop?
Your pop-up shop 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 pop-up shop, these could include:
- Rent for a physical space: This includes the cost of leasing a physical space for your pop-up shop, such as a storefront, kiosk, or event space. This is a fixed expense that will need to be paid for the duration of your pop-up shop.
- Fixtures and displays: These are the physical elements that will showcase your products and create a visually appealing space for customers. This can include shelves, racks, tables, mannequins, and other display materials. These items are considered fixed assets and will likely need to be purchased or rented for your pop-up shop.
- Technology and equipment: Depending on the nature of your pop-up shop, you may need to invest in technology and equipment. This can include a point-of-sale system, tablets or laptops for transactions, and any other equipment necessary for your shop's operations. These items are also considered fixed assets and will need to be included in your expenditure forecast.
- Decor and signage: In order to create a cohesive and attractive brand experience for your pop-up shop, you may need to invest in decor and signage. This can include items like lighting, wall art, and branded signage. These items are fixed assets that will add to the overall cost of your pop-up shop.
- Utilities and insurance: While these expenses may not be directly related to the physical elements of your pop-up shop, they are important fixed expenses to consider. This can include the cost of utilities like electricity and water, as well as insurance to protect your shop and its assets. These expenses will need to be factored into your expenditure forecast.
Again, this list will need to be adjusted according to the size and ambitions of your pop-up shop.
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 pop-up shop
The next step in the creation of your financial forecast for your pop-up shop 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 pop-up shop?
Now let's have a look at the main output tables of your pop-up shop'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 pop-up shop'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 pop-up shop will look different than for a startup.
The projected balance sheet
Your pop-up shop'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 pop-up shop'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 pop-up shop:
- 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 pop-up shop'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 pop-up shop'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 pop-up shop's financial forecast?
Using the right tool or solution will make the creation of your pop-up shop's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your pop-up shop'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 pop-up shop 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 pop-up shop's financial forecast?
Creating an accurate and error-free pop-up shop 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 pop-up shop, 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 pop-up shop.
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 pop-up shop. 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 project sales for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a pop-up shop? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
