How to create a financial forecast for a sewing workshop?
Developing and maintaining an up-to-date financial forecast for your sewing workshop 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 sewing workshop 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 sewing workshop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your sewing workshop and ensure that it can be financially viable in the years to come.
A financial plan for a sewing workshop 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 sewing workshop 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 sewing workshop'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 sewing workshop financial forecast?
A sewing workshop'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 sewing workshop.
If you are creating (or updating) the forecast of an existing sewing workshop, 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 sewing workshop 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 sewing workshop 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 sewing workshop's financial forecast.
The sales forecast for a sewing workshop
The sales forecast, also called topline projection, is normally where you will start when building your sewing workshop 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 sewing workshops), and consider the elements below:
- Seasonal demand: As a sewing workshop owner, you know that certain times of the year, such as the holiday season, may see an increase in demand for your services. This could result in a higher average price per transaction as customers are willing to pay more for last-minute gifts or special occasion garments.
- Trends in fashion: Fashion trends are constantly changing and evolving, which can greatly impact the demand for your sewing services. For example, if a particular style or garment becomes popular, you may experience a surge in orders for that specific item, resulting in a higher number of monthly transactions.
- Economic conditions: Economic factors, such as a recession or a booming economy, can affect consumer spending habits. During times of economic downturn, customers may be more price-sensitive and opt for more affordable sewing options, resulting in a lower average price per transaction.
- Competition: The presence of other sewing workshops in your area can also impact your business's average price and number of monthly transactions. If there is a high level of competition, you may need to adjust your prices or offer promotional deals to remain competitive and maintain a steady flow of transactions.
- Customer demographics: The demographics of your target market can also play a role in the success of your sewing workshop. For example, if your services cater to a higher-end clientele, you may be able to charge a premium price and have a lower number of monthly transactions, while a more budget-friendly customer base may result in a higher number of transactions at a lower average price.
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 sewing workshop
The next step is to estimate the expenses needed to run your sewing workshop on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your sewing workshop's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and training for your sewing workshop employees.
- Accountancy fees: You may need to hire an accountant to help you with tax filings and financial statements for your sewing workshop.
- Insurance costs: Protect your sewing workshop and its assets with insurance coverage for liability, property, and workers' compensation.
- Software licenses: You may need to purchase licenses for software programs such as design software for creating sewing patterns.
- Banking fees: Your sewing workshop will incur fees for bank transactions, such as depositing checks and making wire transfers.
- Rent or lease: If you do not own the building where your sewing workshop is located, you will have to pay rent or lease fees.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your sewing workshop running.
- Supplies: This includes all materials needed for sewing, such as fabric, thread, buttons, and zippers.
- Equipment maintenance: Your sewing machines and other equipment will need regular maintenance to keep them in good working condition.
- Marketing and advertising: To attract customers to your sewing workshop, you may need to spend money on marketing and advertising efforts.
- Professional fees: You may need to hire consultants or experts to help with specific aspects of your sewing workshop, such as branding or website design.
- Training and education: As a business owner, it's important to continue learning and improving your skills. You may need to invest in training and education programs related to sewing and business management.
- Travel expenses: If you attend sewing workshops or trade shows for your business, you will incur travel expenses such as airfare, lodging, and meals.
- Legal fees: You may need to hire a lawyer for legal advice or assistance with contracts and agreements for your sewing workshop.
- Office supplies: You will need basic office supplies such as paper, pens, and printer ink to run your sewing workshop.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small sewing workshop might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a sewing workshop?
Creating and expanding a sewing workshop also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a sewing workshop could include elements such as:
- Sewing Machines: These are the most essential fixed assets for your sewing workshop. Depending on the type and brand, sewing machines can range from basic models for beginners to more advanced ones for experienced sewers. It is important to invest in high-quality and durable sewing machines to ensure smooth operation and minimize maintenance costs.
- Cutting Table: A sturdy and spacious cutting table is necessary for preparing fabrics and patterns for sewing. It should be large enough to accommodate various sizes of fabric and have a flat surface for accurate cutting. Some cutting tables also come with storage options, which can be beneficial for organizing tools and supplies in your workshop.
- Iron and Ironing Board: Ironing is an important step in sewing to achieve clean and professional-looking finished products. A good quality iron and ironing board are necessary to ensure neat and wrinkle-free fabrics. Consider investing in a steam iron for better results.
- Storage Cabinets and Shelves: Keeping your workshop organized and clutter-free is crucial for efficient workflow. Investing in storage cabinets and shelves will help you store and organize all your tools, supplies, and materials. This will also save you time and effort in finding and retrieving items when you need them.
- Sewing Tools and Supplies: While not technically a fixed asset, it is important to include the cost of purchasing essential sewing tools and supplies in your expenditure forecast. This may include scissors, pins, needles, thread, measuring tape, and other items necessary for sewing. It is important to keep track of your inventory to ensure you have enough supplies for your projects.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your sewing workshop.
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 sewing workshop
The next step in the creation of your financial forecast for your sewing workshop 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 sewing workshop?
Now let's have a look at the main output tables of your sewing workshop'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 sewing workshop'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 sewing workshop will look different than for a startup.
The projected balance sheet
Your sewing workshop'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 projected cash flow statement
A projected cash flow statement for a sewing workshop is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your sewing workshop's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the sewing workshop 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 sewing workshop's financial forecast?
Creating your sewing workshop's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your sewing workshop'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 sewing workshop 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 sewing workshop's financial forecast?
Creating an accurate and error-free sewing workshop financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 sewing workshop, 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 sewing workshop
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your sewing workshop.
- 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 sewing workshop. 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 revenues for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
