How to create a financial forecast for a ride-hail cab firm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your ride-hail cab firm.
Putting together a ride-hail cab firm financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your ride-hail cab firm.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a ride-hail cab firm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your ride-hail cab firm and ensure that it can be financially viable in the years to come.
A financial plan for a ride-hail cab firm 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 ride-hail cab firm 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 ride-hail cab firm'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 ride-hail cab firm financial forecast?
A ride-hail cab firm'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 ride-hail cab firm.
If you are creating (or updating) the forecast of an existing ride-hail cab firm, 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 ride-hail cab firm 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 ride-hail cab firm 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 ride-hail cab firm's financial forecast.
The sales forecast for a ride-hail cab firm
From experience, it usually makes sense to start your ride-hail cab firm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your ride-hail cab firm (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 ride-hail cab firm'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:
- Local regulations: Changes in local regulations, such as stricter licensing requirements or increased fees, can impact the number of drivers available for your ride-hail cab firm, potentially affecting the average price and number of monthly transactions.
- Competition: The presence of other ride-hail cab firms in your area can lead to price wars and affect your business's average price. Additionally, if competitors offer more incentives or better benefits for drivers, it could impact the number of drivers available for your firm.
- Gas prices: Fluctuations in gas prices can directly affect the cost of running a ride-hail cab, which can impact the average price for customers and the number of monthly transactions as drivers may be less likely to take on more rides if their expenses are higher.
- Emerging technologies: The emergence of new technologies, such as self-driving cars or electric vehicles, could potentially disrupt the ride-hail cab industry and affect both the average price and number of monthly transactions for your business.
- Economic conditions: Economic factors, such as a recession or a booming economy, can impact consumer spending and the demand for ride-hail cab services. This could affect the average price and number of monthly transactions for your business.
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 ride-hail cab firm
The next step is to estimate the costs you’ll have to incur to operate your ride-hail cab firm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your ride-hail cab firm's operating expenses should normally include the following items:
- Vehicle Maintenance: This includes regular maintenance and repairs for your fleet of ride-hail cabs.
- Fuel Expenses: The cost of fuel for your cabs is a major expense that you will need to account for.
- Insurance Premiums: To protect your company and your drivers, you will need to pay for insurance coverage.
- Staff Salaries: Your drivers and other staff members, such as customer service representatives, will need to be paid for their services.
- Accounting and Bookkeeping Fees: It's important to keep accurate financial records, so you may need to hire an accountant or bookkeeper to help you.
- Marketing and Advertising Costs: To attract customers and grow your business, you may need to spend money on marketing and advertising campaigns.
- Software Licenses: You will need to pay for software licenses for any programs or platforms you use to manage your ride-hail cab operations.
- Banking Fees: Processing payments and managing your finances will likely come with associated banking fees.
- Office Rent: If you have a physical office space for your ride-hail cab firm, you will need to pay rent for it.
- Utilities: You will need to cover the costs of utilities such as electricity, water, and internet for your office space.
- Taxes: As a business owner, you will need to pay various taxes, such as income tax and sales tax.
- Vehicle Registration and Licensing Fees: Each of your ride-hail cabs will need to be registered and licensed, which will come with associated fees.
- Credit Card Processing Fees: If you accept credit card payments, you will need to pay fees for each transaction.
- Legal Fees: You may need to hire a lawyer to help you with any legal matters related to your ride-hail cab firm.
- Vehicle Cleaning and Detailing: To maintain a professional and clean image, you may need to regularly clean and detail your cabs.
This list is not exhaustive by any means, and will need to be tailored to your ride-hail cab firm's specific circumstances.
What investments are needed to start or grow a ride-hail cab firm?
Your ride-hail cab firm 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 ride-hail cab firm, these could include:
- Vehicle Purchases: As a ride-hail cab firm, one of your main capital expenditures will be purchasing vehicles for your drivers to use. This includes both new and used vehicles, as well as any necessary modifications or upgrades to make them suitable for ride-hail services.
- Technology and Equipment: In order to operate a successful ride-hail cab firm, you will need to invest in various technologies and equipment. This could include GPS systems, dispatch software, mobile payment devices, and other tools to help manage and streamline your operations.
- Facility Costs: Depending on the size and scale of your ride-hail cab firm, you may need to invest in a facility to serve as your headquarters or base of operations. This could include purchasing or leasing office space, as well as any necessary renovations or improvements.
- Insurance and Licensing: As with any transportation business, insurance and licensing are essential expenses that must be factored into your expenditure forecast. This includes commercial auto insurance for your vehicles and any necessary permits or licenses required to operate in your area.
- Maintenance and Repairs: In order to keep your vehicles in good working condition and maintain a high level of service for your customers, you will need to budget for ongoing maintenance and repair costs. This could include regular oil changes, tire replacements, and other necessary repairs.
Again, this list will need to be adjusted according to the size and ambitions of your ride-hail cab firm.
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 ride-hail cab firm
The next step in the creation of your financial forecast for your ride-hail cab firm 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 ride-hail cab firm?
Now let's have a look at the main output tables of your ride-hail cab firm'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 ride-hail cab firm'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 ride-hail cab firm will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your ride-hail cab firm'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 ride-hail cab firm. 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 projection
The cash flow forecast of your ride-hail cab firm will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the ride-hail cab firm's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your ride-hail cab firm is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your ride-hail cab firm's financial plan.
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 ride-hail cab firm's financial projections?
Building a ride-hail cab firm 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 ride-hail cab firm'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional ride-hail cab firm 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 ride-hail cab firm's financial forecast?
Creating an accurate and error-free ride-hail cab firm 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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own ride-hail cab firm, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your ride-hail cab firm
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 ride-hail cab firm.
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 ride-hail cab firm. 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?
- Sample financial forecast for business idea
Know someone who runs or wants to start a ride-hail cab firm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
