How to create a financial forecast for a ski equipment rental company?
Creating a financial forecast for your ski equipment rental 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 ski equipment rental 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 ski equipment rental company?
The financial projections for your ski equipment rental 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 ski equipment rental 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 ski equipment rental company financial forecast?
A ski equipment rental 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 ski equipment rental company.
If you are creating (or updating) the forecast of an existing ski equipment rental 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 ski equipment rental 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 ski equipment rental 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 ski equipment rental company's financial forecast.
The sales forecast for a ski equipment rental company
From experience, it usually makes sense to start your ski equipment rental company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your ski equipment rental 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 ski equipment rental 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:
- Ski season length: The length of the ski season can greatly impact your average price and number of monthly transactions. A longer ski season means more time for customers to rent equipment, potentially increasing your average price and number of transactions. On the other hand, a shorter ski season may result in lower demand and lower prices.
- Weather conditions: Weather conditions can also have a significant impact on your business. A snowy winter can bring in more customers and increase your average price as they may be willing to pay more for quality equipment. However, a lack of snow or extreme weather conditions may lead to a decrease in demand and lower prices.
- Competition: The level of competition in your area can affect your average price and number of transactions. If there are many other ski rental companies in the area, you may have to lower your prices to remain competitive. On the other hand, if you are the only rental company in the area, you may be able to charge higher prices.
- Tourism trends: The number of tourists visiting your area can also impact your business. If there is an increase in tourism, you may see a rise in both your average price and number of transactions. However, a decrease in tourism can lead to a decline in demand and prices.
- Equipment availability: The availability of equipment can also affect your business. If you have a limited supply of equipment, you may have to increase your prices or turn away customers, which could decrease your number of transactions. On the other hand, if you have a surplus of equipment, you may be able to offer discounts and attract more customers.
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 ski equipment rental company
The next step is to estimate the costs you’ll have to incur to operate your ski equipment rental company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your ski equipment rental company's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, and benefits for employees such as ski rental technicians, customer service representatives, and managers.
- Accountancy fees: You will need to hire an accountant or a bookkeeper to handle your financial records and tax obligations.
- Insurance costs: Your ski equipment rental company will need insurance to protect against potential liabilities, such as injuries or damages to equipment.
- Software licenses: You may need to purchase software licenses for rental management, accounting, and other business operations.
- Banking fees: You will incur fees for maintaining a business bank account, processing credit card payments, and other banking services.
- Rent or lease: If you do not own the building where you operate the ski rental company, you will have to pay rent or lease payments.
- Utilities: You will need to pay for electricity, water, and other utilities necessary for running your business.
- Advertising and marketing: To attract customers, you may need to invest in advertising and marketing efforts, such as online ads, brochures, and event sponsorships.
- Maintenance and repairs: Ski equipment requires regular maintenance and occasional repairs, which can add up to significant expenses.
- Supplies: You will need to purchase supplies such as ski wax, boot liners, and other rental equipment accessories.
- Training and development: To ensure your staff is knowledgeable and competent, you may need to invest in training and development programs.
- Taxes: Your ski equipment rental company will be subject to various taxes, including income tax, sales tax, and property tax.
- Legal fees: You may need to consult with a lawyer for legal advice or representation, which can result in legal fees.
- Office supplies: You will need to purchase office supplies such as paper, ink, and pens to keep your business running smoothly.
- Credit card processing fees: If you accept credit card payments, you will be charged transaction fees by the credit card companies.
This list is not exhaustive by any means, and will need to be tailored to your ski equipment rental company's specific circumstances.
What investments are needed to start or grow a ski equipment rental company?
Once you have an idea of how much sales you could achieve and what it will cost to run your ski equipment rental company, it is time to look into the equipment required to launch or expand the activity.
For a ski equipment rental company, capital expenditures and initial working capital items could include:
- Ski Equipment - This includes all the necessary equipment for your rental business such as skis, boots, poles, helmets, and snowboards. These items are essential for your customers to enjoy their skiing experience and will require regular maintenance and replacement.
- Ski Lifts and Gondolas - These are fixed assets that are necessary for transporting your customers to the ski slopes. They require significant investment and regular maintenance to ensure the safety of your customers.
- Snowmaking Equipment - In order to provide a quality skiing experience, you will need to invest in snowmaking equipment to ensure that there is enough snow on the slopes. This equipment can be expensive and will require regular maintenance to ensure it is in good working condition.
- Rental Shop Building - Your rental shop building is a fixed asset that will house all of your equipment and provide a space for your customers to rent and return their items. This building will require initial investment as well as ongoing maintenance and repairs.
- Ski Resort Amenities - Depending on the size and location of your ski rental business, you may need to invest in additional amenities such as a lodge, restaurant, or parking lot for your customers. These amenities will require significant capital investment and ongoing maintenance costs.
Again, this list will need to be adjusted according to the specificities of your ski equipment rental 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 ski equipment rental company
The next step in the creation of your financial forecast for your ski equipment rental 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 ski equipment rental company?
Now let's have a look at the main output tables of your ski equipment rental company'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 ski equipment rental company'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 ski equipment rental company will look different than for a startup.
The projected balance sheet
Your ski equipment rental 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 ski equipment rental 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 ski equipment rental 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 ski equipment rental 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 ski equipment rental 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 ski equipment rental company's financial projections?
Building a ski equipment rental company 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 ski equipment rental company'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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your ski equipment rental company financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your ski equipment rental company's financial forecast?
Creating an accurate and error-free ski equipment rental company 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 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 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 ski equipment rental company.
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 ski equipment rental company. 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?
- Financial forecast for a business idea
Know someone who runs or wants to start a ski equipment rental company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
