How to create a financial forecast for a recreational centre?
Developing and maintaining an up-to-date financial forecast for your recreational centre 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 recreational centre 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 recreational centre?
The financial projections for your recreational centre 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 recreational centre'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 recreational centre financial forecast?
A recreational centre'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 recreational centre, 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 recreational centre 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 recreational centre 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 recreational centre's financial forecast.
The sales forecast for a recreational centre
The sales forecast, also called topline projection, is normally where you will start when building your recreational centre 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 recreational centres), and consider the elements below:
- Seasonal Demand: As a recreational centre owner, you know that the average price and number of monthly transactions can be impacted by the seasonal demand for certain activities. For example, during the summer months, there may be an increase in demand for swimming lessons or outdoor sports, which could drive up the average price and number of transactions.
- Facility Upgrades: If you are planning on making upgrades or renovations to your recreational centre, this could also affect the average price and number of monthly transactions. For instance, if you add a new feature or improve an existing one, you may be able to charge higher prices and attract more customers, resulting in an increase in both metrics.
- Competition: The level of competition in your local area can also impact your average price and number of monthly transactions. If there are other recreational centres offering similar activities and amenities, you may need to adjust your prices or offer promotions to stay competitive. This could affect the average price and number of transactions in either direction.
- Economic Conditions: Economic conditions, such as a recession or a booming economy, can also influence the average price and number of monthly transactions for your recreational centre. During tough economic times, people may be more hesitant to spend money on leisure activities, resulting in a decrease in both metrics. On the other hand, during prosperous times, people may have more disposable income to spend on recreational activities, leading to an increase in both metrics.
- Customer Loyalty: The loyalty of your customers can also play a role in your sales forecast. If you have a loyal customer base who consistently returns to your recreational centre, this can help maintain a steady average price and number of monthly transactions. However, if you are unable to retain customers and have a high turnover rate, this could negatively impact both metrics.
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 recreational centre
The next step is to estimate the costs you’ll have to incur to operate your recreational centre.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your recreational centre's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and payroll taxes for all employees working at the recreational centre.
- Accountancy fees: You will need to hire an accountant to help you manage your financial records and prepare tax returns for your recreational centre.
- Insurance costs: It is important to have insurance coverage for your recreational centre to protect against any potential accidents or liabilities.
- Software licences: You will need to purchase software licences for any programs or applications used in managing the operations of your recreational centre.
- Banking fees: This includes fees for maintaining a bank account, processing transactions, and any other banking services used by your recreational centre.
- Advertising and marketing costs: You will need to invest in advertising and marketing strategies to promote your recreational centre and attract customers.
- Maintenance and repair expenses: This includes the costs of maintaining and repairing equipment, facilities, and amenities in your recreational centre.
- Utilities: You will need to pay for electricity, water, and other utilities used in operating your recreational centre.
- Supplies: This includes the costs of purchasing supplies such as paper, office supplies, and cleaning products for your recreational centre.
- Professional fees: You may need to hire consultants, lawyers, or other professionals for specific services related to your recreational centre.
- Rent or lease: If you do not own the property for your recreational centre, you will need to pay rent or lease fees to the landlord.
- Training and development: It is important to invest in training and development programs for your staff to ensure they have the necessary skills to run the recreational centre successfully.
- Taxes and licenses: You will need to pay taxes and obtain necessary licenses and permits to operate your recreational centre legally.
- Security and surveillance: This includes the costs of installing and maintaining security systems and surveillance cameras to ensure the safety of your customers and staff.
- Waste disposal: You will need to pay for waste disposal services to properly manage and dispose of any garbage produced by your recreational centre.
This list is not exhaustive by any means, and will need to be tailored to your recreational centre's specific circumstances.
What investments are needed to start or grow a recreational centre?
Your recreational centre 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 recreational centre, these could include:
- Fitness equipment: This includes treadmills, ellipticals, weight machines, and other exercise equipment that is used by patrons of the recreational centre. These items have a longer lifespan and are considered fixed assets.
- Swimming pool: A recreational centre may have a swimming pool for patrons to use for exercise or leisure. The cost of constructing and maintaining a swimming pool can be a significant capital expenditure.
- Sports courts: Recreational centres may have basketball, tennis, or squash courts that require regular maintenance and occasional renovation. These are considered fixed assets and can be a significant expense for the centre.
- Furniture and fixtures: This includes tables, chairs, benches, and other furniture used in common areas or for events at the recreational centre. These items have a longer lifespan and are considered fixed assets.
- Building renovations: As a recreational centre ages, it may require renovations to keep the facilities up to date and appealing to patrons. This could include new flooring, paint, or other structural changes that are considered capital expenditures.
Again, this list will need to be adjusted according to the size and ambitions of your recreational centre.
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 recreational centre
The next step in the creation of your financial forecast for your recreational centre 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 recreational centre?
Now let's have a look at the main output tables of your recreational centre's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your recreational centre is likely to be in the years to come.
For your recreational centre 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 recreational centres, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your recreational centre'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 recreational centre'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 recreational centre:
- 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 recreational centre'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 recreational centre'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 recreational centre's financial projections?
Building a recreational centre 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 forecasting software to build your recreational centre'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional recreational centre 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 recreational centre'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 recreational centre 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 recreational centre'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 recreational centre.
- 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 recreational centre. 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 create a turnover forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
