How to create a financial forecast for a snow removal company?
Creating a financial forecast for your snow removal 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 snow removal 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 snow removal company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your snow removal company and ensure that it can be financially viable in the years to come.
A financial plan for a snow removal company 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 snow removal company 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 snow removal company'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 snow removal company financial forecast?
A snow removal 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 snow removal 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 snow removal 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 snow removal 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 snow removal company's financial forecast.
The sales forecast for a snow removal company
The sales forecast, also called topline projection, is normally where you will start when building your snow removal 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 snow removal companies), and consider the elements below:
- Weather conditions: As a snow removal company, you are highly dependent on the weather. Harsh winters with heavy snowfall can lead to an increase in demand for your services, resulting in higher prices and more monthly transactions. On the other hand, mild winters with less snow can lead to a decrease in demand, resulting in lower prices and fewer monthly transactions.
- Competition: The number of competitors in your area can have a direct impact on your average price and number of monthly transactions. If there are many other snow removal companies in your area, you may need to lower your prices to remain competitive and attract customers. This can result in a decrease in your average price and an increase in the number of monthly transactions.
- Economic conditions: The state of the economy can also affect your business. During times of economic downturn, people may be more hesitant to spend money on non-essential services like snow removal. This can lead to a decrease in demand, resulting in lower prices and fewer monthly transactions. On the other hand, during times of economic growth, people may be more willing to spend money on convenience services like snow removal, resulting in an increase in demand and potentially higher prices and more monthly transactions.
- Population demographics: The demographics of your target market can also play a role in your sales forecast. For example, if your target market consists mainly of elderly individuals or families with young children, they may be less likely to shovel snow themselves and more likely to hire a snow removal company. This can lead to a higher demand for your services and potentially higher prices and more monthly transactions.
- Equipment and technology: The type and quality of equipment and technology you use can also affect your sales forecast. Investing in newer and more efficient equipment can increase your productivity and allow you to take on more customers, resulting in an increase in your average price and number of monthly transactions. On the other hand, if your equipment is outdated or in need of repairs, it may hinder your ability to take on more customers, resulting in a decrease in 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 snow removal company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your snow removal 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 snow removal company will include some of the following items:
- Staff Costs: This includes wages, salaries, and benefits for your snow removal crew. You will need to budget for the cost of hiring and training new employees, as well as any overtime pay during peak snow removal periods.
- Equipment Maintenance: Your snow removal equipment will require regular maintenance and repairs to keep it in working order. This can include costs for parts, labor, and service fees.
- Fuel and Gasoline: Snow removal equipment runs on fuel and gasoline, so you will need to budget for this expense. Consider fluctuations in prices and usage during heavy snowfall periods.
- Insurance Costs: As a snow removal company, you will need to have liability insurance to protect your business in case of accidents or property damage. You may also want to consider insurance for your equipment and vehicles.
- Accounting Fees: It's important to keep your financial records in order, so you may need to hire an accountant or bookkeeper to help you with tax preparation and other financial tasks.
- Software Licenses: You may need to invest in software to help you manage your business operations, such as scheduling, billing, and customer management. These software licenses will come at a cost.
- Rent or Lease: If you don't own your own property, you will need to budget for rent or lease payments for your office space, storage facilities, or equipment.
- Marketing and Advertising: To attract new customers and promote your snow removal services, you may need to invest in marketing and advertising efforts, such as flyers, website development, and social media advertising.
- Banking Fees: You will have to pay fees for depositing and withdrawing money from your business bank account. These fees can add up over time.
- Permits and Licenses: Depending on where you operate your business, you may need to obtain permits and licenses to legally provide snow removal services. These can come at a cost.
- Uniforms and Safety Gear: Your employees will need appropriate uniforms and safety gear to protect them while they are working. This can include items such as boots, gloves, and reflective vests.
- Vehicle Expenses: If you own or lease vehicles for your snow removal business, you will have to budget for expenses such as gas, maintenance, and insurance.
- Office Supplies: You will need to purchase office supplies, such as paper, pens, and printer ink, to keep your business running smoothly.
- Training and Development: It's important to invest in the training and development of your employees to ensure they have the necessary skills to provide quality snow removal services.
- Utilities: You will need to pay for utilities such as electricity, heat, and internet for your office space and any storage facilities you may use.
This list will need to be tailored to the specificities of your snow removal company, but should offer a good starting point for your budget.
What investments are needed to start or grow a snow removal company?
Creating and expanding a snow removal company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a snow removal company could include elements such as:
- Snowplows - These are essential for any snow removal company and will likely be your biggest capital expenditure. You will need to invest in a fleet of snowplows to effectively clear snow from roads, parking lots, and sidewalks.
- Salt Spreaders - Another important piece of equipment for a snow removal company is a salt spreader. This will allow you to efficiently and evenly spread salt on roads and walkways to prevent ice from forming.
- Snow Blowers - Snow blowers are a valuable asset for clearing snow from smaller areas and tight spaces. They can also be used for clearing snow from driveways and sidewalks, making them a necessary investment for any snow removal company.
- Trucks - In addition to snowplows, you will also need to invest in a fleet of trucks to transport your equipment and crew to various job sites. These trucks should be equipped with four-wheel drive and snow tires to navigate through snow-covered roads.
- Storage Facility - A storage facility is a fixed asset that is crucial for a snow removal company. This is where you will store all your equipment when it's not in use, protecting it from the elements and ensuring it's ready for the next snowfall.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your snow removal 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 snow removal company
The next step in the creation of your financial forecast for your snow removal 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 snow removal company?
Now let's have a look at the main output tables of your snow removal company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your snow removal company is likely to be in the years to come.
For your snow removal 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 snow removal 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 snow removal company'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 cash flow projection
The cash flow forecast of your snow removal 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 snow removal 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 snow removal 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 snow removal 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 snow removal company's financial projections?
Building a snow removal 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 snow removal 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 snow removal 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 snow removal company's financial forecast?
Creating an accurate and error-free snow removal company 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 snow removal company, 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 snow removal company
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 snow removal 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 snow removal 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 create a sales forecast for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a snow removal company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
