How to create a financial forecast for a scaffolding company?
Developing and maintaining an up-to-date financial forecast for your scaffolding company 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 scaffolding company 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 scaffolding company?
The financial projections for your scaffolding company 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 scaffolding company'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 scaffolding company financial forecast?
A scaffolding company'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 scaffolding company, 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 scaffolding company 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 scaffolding company 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 scaffolding company's financial forecast.
The sales forecast for a scaffolding company
The sales forecast, also called topline projection, is normally where you will start when building your scaffolding company 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 scaffolding companies), and consider the elements below:
- Construction Industry Trends: As the construction industry experiences growth or decline, it can directly impact the demand for scaffolding services and ultimately affect your average price and number of monthly transactions.
- Labor Costs: Changes in labor costs, such as increases in minimum wage or union negotiations, can impact your pricing structure and potentially affect your monthly transactions if you need to adjust your workforce.
- Regulatory Changes: Changes in safety regulations or building codes may require your company to invest in new equipment or training, which can increase your costs and potentially affect your average price and monthly transactions.
- Weather Conditions: Inclement weather, such as heavy rain or snow, can delay construction projects and cause a decrease in demand for scaffolding services, which can affect your monthly transactions.
- Competition: The presence of new competitors or changes in market share among existing competitors can impact your pricing strategy and potentially affect 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?
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 scaffolding company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your scaffolding company 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 scaffolding company will include some of the following items:
- Staff costs: This includes the salaries, wages, and benefits for your employees who work on the scaffolding projects. This also includes any training or development costs for your staff.
- Accountancy fees: As a scaffolding company, you will need to hire an accountant to help you with your bookkeeping, tax preparation, and financial planning.
- Insurance costs: It is important to have insurance coverage for your scaffolding company to protect against any accidents or damages that may occur on the job. This includes liability insurance, workers' compensation insurance, and property insurance.
- Software licenses: You may need to purchase software licenses for programs such as project management software, accounting software, or design software to help you run your business more efficiently.
- Banking fees: As a business owner, you will have to pay transaction fees for any banking services you use, such as wire transfers, check deposits, and credit card processing fees.
- Equipment maintenance: Your scaffolding equipment will need regular maintenance and repairs to ensure it is safe to use on job sites. This includes inspections, replacements, and repairs.
- Rent or lease: You may need to rent or lease a warehouse or storage space to store your scaffolding equipment and supplies.
- Vehicle expenses: If you have company vehicles, you will need to budget for expenses such as gas, maintenance, and insurance for these vehicles.
- Advertising and marketing: To attract new clients and promote your scaffolding services, you may need to invest in advertising and marketing efforts such as online ads, print ads, or attending trade shows.
- Permits and licenses: As a scaffolding company, you will need to obtain permits and licenses from the local government to operate legally. These may include building permits, business licenses, or safety certifications.
- Office supplies: This includes any supplies or materials you need to run your office, such as paper, printer ink, pens, and other office supplies.
- Utilities: You will have to pay for utilities such as electricity, water, and internet for your office and warehouse space.
- Travel expenses: If you have to travel for business purposes, you will need to budget for expenses such as airfare, lodging, and meals.
- Legal fees: You may need to seek legal advice or services for contracts, disputes, or other legal matters related to your scaffolding business.
- Professional development: It is important to stay current with industry trends and regulations, so budgeting for professional development courses or conferences is essential.
This list will need to be tailored to the specificities of your scaffolding company, but should offer a good starting point for your budget.
What investments are needed to start or grow a scaffolding company?
Once you have an idea of how much sales you could achieve and what it will cost to run your scaffolding company, it is time to look into the equipment required to launch or expand the activity.
For a scaffolding company, capital expenditures and initial working capital items could include:
- Scaffolding Equipment: This includes the purchase or rental of items such as scaffolding frames, planks, braces, and safety equipment like harnesses and ladders. These are essential for any scaffolding company as they are used on a daily basis for construction projects.
- Trucks and Vehicles: As a scaffolding company, you will need trucks and vehicles to transport your equipment to different job sites. These include trucks for transporting scaffolding frames and vans for smaller equipment. You may also need to purchase or lease forklifts for loading and unloading materials.
- Office and Warehouse Space: Your scaffolding company will need a physical location to store equipment and conduct business operations. This may include renting or purchasing a warehouse or office space. Keep in mind the cost of utilities, maintenance, and insurance for these spaces in your expenditure forecast.
- Computer and Software: In today's digital age, having a reliable computer and software is crucial for any business. As a scaffolding company, you will need a computer for tasks such as creating estimates, managing finances, and communicating with clients. You may also need specialized software for project management and scheduling.
- Tools and Supplies: Along with scaffolding equipment, you will also need to purchase or rent various tools and supplies for construction projects. These may include drills, saws, hammers, and safety gear for workers. Keep track of the cost of these items and factor them into your expenditure forecast.
Again, this list will need to be adjusted according to the specificities of your scaffolding company.
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 scaffolding company
The next step in the creation of your financial forecast for your scaffolding company 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 scaffolding company?
Now let's have a look at the main output tables of your scaffolding company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your scaffolding company is likely to be in the years to come.
For your scaffolding company 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 scaffolding companies, 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 scaffolding company'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 scaffolding company. 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 scaffolding company 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 scaffolding company'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 scaffolding company 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 scaffolding company'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 scaffolding company's financial forecast?
Creating your scaffolding company's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your scaffolding company'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional scaffolding company financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your scaffolding company'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 scaffolding company 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 scaffolding company'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 scaffolding company.
- 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 scaffolding company. 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
