How to create a financial forecast for a private secondary school?
Developing and maintaining an up-to-date financial forecast for your private secondary school 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 private secondary school 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 private secondary school?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your private secondary school and ensure that it can be financially viable in the years to come.
A financial plan for a private secondary school 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 private secondary school 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 private secondary school'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 private secondary school financial forecast?
A private secondary school'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 private secondary school.
If you are creating (or updating) the forecast of an existing private secondary school, 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 private secondary school 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 private secondary school 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 private secondary school's financial forecast.
The sales forecast for a private secondary school
The sales forecast, also called topline projection, is normally where you will start when building your private secondary school 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 private secondary schools), and consider the elements below:
- Student enrollment: The number of students enrolled in your school can greatly affect the average price per student. If your school sees an increase in enrollment, you may be able to offer more competitive prices for tuition. On the other hand, a decrease in enrollment may lead to higher prices in order to cover fixed costs and maintain the quality of education.
- Demand for extracurricular activities: Offering a variety of extracurricular activities can attract more students and justify higher tuition prices. If there is a high demand for these activities, you may be able to charge a premium for them, increasing your average price.
- School reputation: The reputation of your school can play a significant role in determining the average price you can charge. A well-established and reputable school may be able to charge higher prices due to the perceived value of its education.
- Teacher salaries: The salaries of your teachers can impact the overall cost of running your school and, in turn, affect the average price. Higher salaries may lead to higher tuition prices, while lower salaries may allow for lower prices.
- Economic conditions: Economic conditions can also affect the average price of your school's tuition. During times of economic downturn, families may be more price-sensitive and may not be able to afford higher tuition prices. On the other hand, during times of economic growth, families may be more willing to pay higher prices for their child's education.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a private secondary school
The next step is to estimate the expenses needed to run your private secondary school 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 private secondary school's operating expenses should include the following items at a minimum:
- Staff Salaries: This includes all salaries for teachers, administrative staff, and support staff.
- Benefits: You will need to budget for employee benefits such as health insurance, retirement contributions, and paid time off.
- Utilities: This includes electricity, water, and gas for your school building.
- Rent: If you do not own your school building, you will need to budget for rent payments.
- Supplies: This includes all classroom and office supplies such as textbooks, paper, and pens.
- Technology: You will need to budget for software licenses, computer equipment, and maintenance costs.
- Professional Development: To ensure your teachers are up-to-date with the latest teaching methods and techniques, you will need to budget for professional development opportunities.
- Insurance: It is important to have insurance to protect your school from any potential lawsuits or accidents.
- Accounting Fees: You may choose to hire an accountant to handle your school's finances, which will incur additional fees.
- Marketing and Advertising: To attract students and promote your school, you will need to budget for marketing and advertising expenses.
- Transportation: If your school provides transportation services for students, you will need to budget for bus maintenance and fuel costs.
- Food Services: If your school offers meals to students, you will need to budget for food costs and kitchen staff salaries.
- Uniforms: If your school requires students to wear uniforms, you will need to budget for purchasing and maintaining them.
- Tuition Assistance: Some students may require financial assistance, so you will need to budget for tuition assistance programs.
- Banking Fees: You will need to budget for fees associated with your school's bank accounts and transactions.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small private secondary school might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a private secondary school?
Creating and expanding a private secondary school also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a private secondary school could include elements such as:
- Classroom Renovations: As a private secondary school, you may need to update and renovate your classrooms to create a more conducive learning environment for your students. This could include installing new flooring, updating technology and equipment, and creating a more modern and functional layout.
- Athletic Facilities: Investing in high-quality athletic facilities can be a major expense for a private secondary school, but it can also be a valuable asset in attracting and retaining students. This could include building or renovating a gymnasium, track, or sports fields, as well as purchasing equipment and uniforms for sports teams.
- Library Resources: A well-stocked and modern library is an important resource for students to have access to. Investing in new books, e-resources, and technology for your library can enhance the educational experience for your students and improve their academic success.
- Transportation Vehicles: Depending on the size and location of your private secondary school, you may need to provide transportation for students. This could include purchasing vans or buses to transport students to and from school, as well as for field trips and other extracurricular activities.
- Security Measures: In order to ensure the safety and well-being of your students, it may be necessary to invest in security measures such as surveillance cameras, keyless entry systems, and security personnel. These capital expenditures can provide peace of mind for both students and parents.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your private secondary school.
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 private secondary school
The next step in the creation of your financial forecast for your private secondary school 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 private secondary school?
Now let's have a look at the main output tables of your private secondary school's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your private secondary school's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a private secondary school should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
The projected balance sheet gives an overview of your private secondary school'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 private secondary school. 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 forecast
Your private secondary school'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 private secondary school:
- 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 private secondary school'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 private secondary school'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 private secondary school's financial forecast?
Using the right tool or solution will make the creation of your private secondary school's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your private secondary school's projections
The modern and easiest way is to use professional online financial forecasting 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 private secondary school 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 private secondary school'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 private secondary school 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 private secondary school'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 private secondary school.
- 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 private secondary school. 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 sales for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
