How to create a financial forecast for a racket club?
Developing and maintaining an up-to-date financial forecast for your racket club 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 racket club 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 racket club?
The financial projections for your racket club act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your racket club's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 racket club financial forecast?
A racket club'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 racket club, 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 racket club 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 racket club 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 racket club's financial forecast.
The sales forecast for a racket club
The sales forecast, also called topline projection, is normally where you will start when building your racket club 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 racket clubs), and consider the elements below:
- Membership retention rates: Your club's average price and number of monthly transactions may be affected by the number of members who renew their memberships each year. If your club is able to retain a high percentage of members, you may see a steady stream of monthly transactions and a consistent average price. On the other hand, if your retention rates are low, you may have to constantly attract new members, leading to fluctuations in your monthly transactions and average price.
- Competition: The presence of other racket clubs in the area may impact your business's average price and number of monthly transactions. If there are many other clubs offering similar services, you may have to lower your prices to remain competitive, resulting in a decrease in your average price. Additionally, competition may also affect the number of monthly transactions as customers may choose to go to other clubs with better deals or amenities.
- Local events and tournaments: Local events and tournaments, especially those related to racket sports, can have a significant impact on your business's average price and number of monthly transactions. These events can attract a large number of players and spectators to the area, which can lead to an increase in demand for your club's services. As a result, you may be able to charge higher prices and see an increase in your monthly transactions during these events.
- Seasonal trends: The time of year can also affect your racket club's average price and number of monthly transactions. For example, during the summer months, outdoor activities may be more popular, which could lead to a decrease in demand for indoor racket sports. This could result in a decrease in your average price and number of monthly transactions during this time. On the other hand, during the colder months, your club may see an increase in demand and therefore an increase in your average price and monthly transactions.
- Facility upgrades and maintenance: The condition and amenities of your club's facilities can also impact your average price and number of monthly transactions. If your facilities are well-maintained and offer modern amenities, you may be able to charge higher prices and attract more customers, resulting in an increase in your monthly transactions. On the other hand, if your facilities are outdated or not well-maintained, this may deter customers and lead to a decrease in both your average price and number of monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
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The operating expenses for a racket club
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your racket club 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 racket club will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees of the racket club, such as coaches, maintenance staff, and front desk staff.
- Accountancy Fees: You will need to hire an accountant to handle the financial records and taxes for your racket club.
- Insurance Costs: It is important to have insurance coverage for your racket club, including liability insurance and property insurance.
- Software Licences: You may need to purchase licenses for software programs used in the operation of your racket club, such as scheduling software or accounting software.
- Banking Fees: You will need to pay fees for bank accounts, credit card processing, and other financial services.
- Utilities: This includes expenses for electricity, water, and gas used in the club's facilities.
- Rent/Lease: If you do not own the building where your racket club is located, you will need to pay rent or lease payments.
- Equipment Maintenance: Regular maintenance and repairs for equipment used in the club, such as tennis courts, fitness equipment, and lighting.
- Supplies: This includes any supplies needed for the daily operation of the club, such as office supplies, cleaning supplies, and sports equipment.
- Marketing and Advertising: To attract new members and promote your club, you will need to budget for marketing and advertising expenses.
- Professional Memberships: You may need to pay fees for professional memberships, such as the United States Tennis Association, to stay current with industry standards and regulations.
- Training and Education: It is important to invest in the professional development of your staff through training and educational opportunities.
- Property Taxes: If you own the building where your club is located, you will need to budget for property taxes.
- Legal Fees: In case of any legal issues, you may need to hire a lawyer and pay legal fees.
- Maintenance and Upgrades: To keep your club facilities in top shape, you will need to budget for regular maintenance and occasional upgrades.
This list will need to be tailored to the specificities of your racket club, but should offer a good starting point for your budget.
What investments are needed to start or grow a racket club?
Your racket club 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 racket club, these could include:
- Court Resurfacing: As a racket club, you know that maintaining your courts is crucial for the safety and satisfaction of your members. This includes resurfacing the courts every few years to keep them in top condition.
- Equipment Upgrades: Your racket club may need to invest in new equipment such as ball machines, nets, and scoreboards in order to provide the best experience for your members. These upgrades can also help attract new members and retain current ones.
- Lighting System Improvements: Good lighting is essential for playing tennis and other racket sports, especially for evening games. Upgrading your lighting system can improve visibility and safety for your members.
- Clubhouse Renovations: The clubhouse is an important gathering place for your members and is often the first impression they have of your racket club. Consider investing in renovations to improve the aesthetics and functionality of the space.
- New Court Construction: If your racket club is expanding or looking to add new amenities, you may need to invest in new court construction. This can include building new tennis or pickleball courts, as well as adding other amenities like a basketball court or a pool.
Again, this list will need to be adjusted according to the size and ambitions of your racket club.
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 racket club
The next step in the creation of your financial forecast for your racket club 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 racket club?
Now let's have a look at the main output tables of your racket club's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your racket club is likely to be in the years to come.
For your racket club 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 racket clubs, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your racket club'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 racket club. 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 racket club'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 racket club:
- 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 racket club'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 racket club'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 racket club's financial forecast?
Using the right tool or solution will make the creation of your racket club's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your racket club'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 racket club 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 racket club's financial forecast?
Creating an accurate and error-free racket club financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 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 racket club.
- 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 racket club. 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.
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Founder & CEO at The Business Plan Shop Ltd
