How to create a financial forecast for a sewer rehabilitation company?
Creating a financial forecast for your sewer rehabilitation company, 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 sewer rehabilitation company 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 sewer rehabilitation company?
The financial projections for your sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation company financial forecast?
A sewer rehabilitation company'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 sewer rehabilitation company.
If you are creating (or updating) the forecast of an existing sewer rehabilitation company, 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 sewer rehabilitation company 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 sewer rehabilitation company 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 sewer rehabilitation company's financial forecast.
The sales forecast for a sewer rehabilitation company
From experience, it usually makes sense to start your sewer rehabilitation company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your sewer rehabilitation company (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 sewer rehabilitation company'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:
- Seasonal Changes: As a sewer rehabilitation company, you may experience fluctuations in demand and pricing throughout the year due to weather conditions. For example, during rainy seasons, there may be a higher demand for your services as sewer systems are more likely to be backed up and in need of repair.
- Competition: The presence of other sewer rehabilitation companies in your area can greatly impact your average price and number of monthly transactions. If there is a high level of competition, you may need to lower your prices to stay competitive and attract customers, which could decrease your average price. On the other hand, if you are the only company in the market, you may be able to charge higher prices and see an increase in transactions.
- Age of Infrastructure: The age of the sewer infrastructure in your area can also affect your business. If there are newer systems in place, there may be fewer repair and rehabilitation needs, resulting in a decrease in transactions. However, if the infrastructure is old and in need of constant maintenance, you may see an increase in demand for your services and potentially higher prices.
- Government Regulations: Changes in government regulations, such as stricter environmental laws, can have an impact on your business. If there are new regulations that require more frequent sewer inspections or repairs, you may see an increase in transactions and potentially higher prices to cover the additional costs.
- Economic Conditions: Economic factors, such as a recession, can also affect your business's average price and number of monthly transactions. During tough economic times, customers may be less likely to invest in sewer rehabilitation services, resulting in a decrease in both pricing and transactions. On the other hand, during economic booms, customers may be more willing to spend money on these services, resulting in potential increases in both pricing and transactions.
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.
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The operating expenses for a sewer rehabilitation company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your sewer rehabilitation 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 sewer rehabilitation company will include some of the following items:
- Staff costs: Includes salaries, benefits, and training for your team of sewer rehabilitation technicians and support staff.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, taxes, and financial planning for your company.
- Insurance costs: As a sewer rehabilitation company, you will need insurance to protect your business and employees from potential risks and accidents.
- Software licenses: You may need to invest in specialized software for managing projects, tracking inventory, and communicating with clients.
- Banking fees: Your company will have various banking needs such as processing payments, depositing checks, and managing cash flow.
- Vehicle expenses: If your company provides transportation for employees or equipment, you will need to budget for gas, maintenance, and insurance costs.
- Equipment maintenance: Regular maintenance and repairs for your sewer rehabilitation equipment will help ensure efficient and safe operations.
- Supplies and materials: This includes items such as pipes, fittings, chemicals, and safety gear that are necessary for completing sewer rehabilitation projects.
- Rent or lease: If you do not own a facility for your company, you will need to budget for rent or lease payments for your office and storage space.
- Marketing and advertising: To attract new clients and promote your services, you may need to invest in marketing efforts such as website development, print ads, and social media campaigns.
- Travel expenses: If your company takes on projects in different locations, you will need to budget for travel expenses such as airfare, lodging, and meals.
- Legal fees: You may need to seek legal advice or representation for contracts, permits, or other legal matters related to your sewer rehabilitation company.
- Utilities: This includes costs for electricity, water, and other utilities needed to operate your company's office and equipment.
- Training and certifications: Your employees may need to attend training or obtain certifications to stay updated on industry standards and regulations.
- Professional services: You may need to hire consultants or experts in areas such as engineering, environmental assessments, or project management for specific projects.
This list will need to be tailored to the specificities of your sewer rehabilitation company, but should offer a good starting point for your budget.
What investments are needed to start or grow a sewer rehabilitation company?
Your sewer rehabilitation company 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 sewer rehabilitation company, these could include:
- Sewer Rehabilitation Equipment: This includes items such as sewer cameras, pipe lining equipment, and hydro jetting machines. These are essential tools for a sewer rehabilitation company to complete repairs and maintenance on sewer lines.
- Vehicles: A sewer rehabilitation company may need to purchase or lease vehicles to transport equipment and employees to job sites. These could include vans, trucks, or specialized vehicles for transporting heavy machinery.
- Office Equipment: To run a successful sewer rehabilitation company, you will need office equipment such as computers, printers, and software to manage projects and keep track of finances.
- Tools and Supplies: In addition to specialized equipment, a sewer rehabilitation company will need tools and supplies for daily operations, such as shovels, safety gear, and repair materials.
- Facility Upgrades: If you plan to have a physical location for your company, you may need to invest in renovations, such as plumbing and electrical upgrades, to accommodate your equipment and staff.
Again, this list will need to be adjusted according to the size and ambitions of your sewer rehabilitation 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 sewer rehabilitation company
The next step in the creation of your financial forecast for your sewer rehabilitation 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 sewer rehabilitation company?
Now let's have a look at the main output tables of your sewer rehabilitation company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your sewer rehabilitation company is likely to be in the years to come.
For your sewer rehabilitation 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 sewer rehabilitation companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your sewer rehabilitation company'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 sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation company's financial forecast?
Creating your sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation 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 sewer rehabilitation 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
- 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.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your sewer rehabilitation company future cash flows may look like.
- 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 sewer rehabilitation company, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to project revenues for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a sewer rehabilitation company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
