How to create a financial forecast for a roadside restaurant?

Creating a financial forecast for your roadside restaurant, 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 roadside restaurant 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 roadside restaurant?

Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your roadside restaurant and ensure that it can be financially viable in the years to come.

A financial plan for a roadside restaurant 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 roadside restaurant 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 roadside restaurant'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.

What information is used as input to build a roadside restaurant financial forecast?

A roadside restaurant'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 roadside restaurant, 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 roadside restaurant 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 roadside restaurant 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 roadside restaurant's financial forecast.

The sales forecast for a roadside restaurant

The sales forecast, also called topline projection, is normally where you will start when building your roadside restaurant 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 roadside restaurants), and consider the elements below:

After the sales forecast comes the operating expenses budget, which we will now look into in more detail.

The operating expenses for a roadside restaurant

Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your roadside restaurant 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 roadside restaurant will include some of the following items:

This list will need to be tailored to the specificities of your roadside restaurant, but should offer a good starting point for your budget.

What investments are needed to start or grow a roadside restaurant?

Creating and expanding a roadside restaurant also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for a roadside restaurant could include elements such as:

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your roadside restaurant.

The financing plan of your roadside restaurant

The next step in the creation of your financial forecast for your roadside restaurant 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 roadside restaurant?

Now let's have a look at the main output tables of your roadside restaurant's financial forecast.

The profit & loss forecast

The forecasted profit & loss statement will enable you to visualise your roadside restaurant's expected growth and profitability over the next three to five years.

A financially viable P&L statement for a roadside restaurant 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

Your roadside restaurant's projected balance sheet provides a snapshot of your business’s financial position at year-end.

It is composed of three types of elements: assets, liabilities and equity:

• Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
• 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 projection

The cash flow forecast of your roadside restaurant 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 roadside restaurant'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 roadside restaurant 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 roadside restaurant's financial plan. 

Which tool should you use to create your roadside restaurant's financial projections?

Building a roadside restaurant 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 projection software to build your roadside restaurant's forecast

The modern and easiest way to build a forecast is to use professional financial projection 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 roadside restaurant 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 roadside restaurant's financial forecast?

Creating an accurate and error-free roadside restaurant 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.

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 roadside restaurant, 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

1. Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
2. Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your roadside restaurant future cash flows may look like.
3. Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.

This is the end of our guide on how to build the financial forecast for a roadside restaurant, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.

Also on The Business Plan Shop

• Example of financial forecast
• How to project sales for a business?
• Example of financial forecast for business idea

Know someone who owns or is thinking of starting a roadside restaurant? Share our forecasting guide with them!