How to create a financial forecast for a snowmobile manufacturer?
Creating a financial forecast for your snowmobile manufacturing business, 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 snowmobile manufacturing business 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 snowmobile manufacturing business?
The financial projections for your snowmobile manufacturing business 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 snowmobile manufacturing business'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 snowmobile manufacturing business financial forecast?
A snowmobile manufacturing business'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 snowmobile manufacturing business, 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 snowmobile manufacturing business 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 snowmobile manufacturing business 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 snowmobile manufacturing business's financial forecast.
The sales forecast for a snowmobile manufacturing business
From experience, it is usually best to start creating your snowmobile manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your snowmobile manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing snowmobile manufacturing business, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Weather Conditions: The weather can greatly affect snowmobile sales. Harsh winter weather with heavy snowfall can lead to increased demand for snowmobiles, while mild or dry winters can result in lower sales.
- Economic Conditions: The state of the economy can also impact snowmobile sales. During times of economic downturn, consumers may be less likely to make big purchases like a snowmobile.
- Competitor Activity: Keep an eye on your competitors' pricing and sales strategies. If they are offering discounts or promotions, it may affect your sales and average price.
- Technology Advances: As technology advances, newer and more advanced snowmobile models may enter the market, potentially affecting the demand and average price of your products.
- Tourism and Events: If your business is located in an area popular for winter tourism or hosts events such as snowmobile races, this can drive up demand for your products and increase the number of monthly transactions.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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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 snowmobile manufacturing business
The next step is to estimate the expenses needed to run your snowmobile manufacturing business 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 snowmobile manufacturing business's operating expenses should include the following items at a minimum:
- Staff Costs: This includes the salaries, wages, and benefits for all employees working in the snowmobile manufacturing business. This may also include training costs and employee incentives.
- Accountancy Fees: You will need to hire an accountant to handle your financial records, tax filings, and other financial tasks. They may charge an hourly rate or a monthly retainer fee.
- Insurance Costs: It is important to have insurance to protect your business from any potential risks or liabilities. This may include general liability insurance, product liability insurance, and workers' compensation insurance.
- Software Licences: As a snowmobile manufacturing business, you may need to invest in software licences for design, manufacturing, and inventory management. These licences may have annual or monthly fees.
- Banking Fees: You will need a business bank account to manage your finances. This may include fees for maintaining the account, wire transfers, and other banking services.
- Raw Materials: This includes the cost of purchasing the materials needed to manufacture snowmobiles, such as metal, plastic, and other components.
- Manufacturing Equipment: You will need to purchase or lease equipment to manufacture snowmobiles, such as welding machines, drills, and cutting tools.
- Utilities: This includes the cost of electricity, water, and gas for your manufacturing facility.
- Rent or Mortgage: If you do not own your manufacturing facility, you will need to pay rent or a mortgage for the space.
- Marketing and Advertising: You will need to promote your snowmobiles to attract customers. This may include digital marketing, print advertisements, and trade show expenses.
- Shipping and Freight: If you sell your snowmobiles to customers in different locations, you will need to cover the cost of shipping and freight.
- Maintenance and Repairs: It is important to regularly maintain and repair your manufacturing equipment to ensure efficient operations.
- Travel Expenses: If you need to travel for business purposes, such as attending trade shows or meeting with clients, you will need to cover the costs of transportation, accommodations, and meals.
- Taxes and Licences: You will need to pay taxes on your business income and obtain any necessary licenses to operate your snowmobile manufacturing business.
- Professional Services: This may include consulting fees for business advice, legal fees for contracts and agreements, and other professional services needed for your business.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small snowmobile manufacturing business might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a snowmobile manufacturing business?
Your snowmobile manufacturing business 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 snowmobile manufacturing business, these could include:
- Manufacturing equipment: This includes machinery, tools, and equipment necessary for the production of snowmobiles. This could include items such as welding machines, lathes, or presses.
- Facility upgrades: As a snowmobile manufacturing business, you will need a suitable facility to house your operations. This could include renovations or upgrades to the building, such as installing heating systems, ventilation, or specialized flooring for handling heavy equipment.
- Raw materials inventory: In order to produce snowmobiles, you will need to purchase raw materials such as steel, aluminum, and plastic. These materials can be expensive, so it is important to include them in your expenditure forecast.
Again, this list will need to be adjusted according to the size and ambitions of your snowmobile manufacturing business.
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 snowmobile manufacturing business
The next step in the creation of your financial forecast for your snowmobile manufacturing business 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 snowmobile manufacturing business?
Now let's have a look at the main output tables of your snowmobile manufacturing business'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 snowmobile manufacturing business'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 snowmobile manufacturing business will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your snowmobile manufacturing business'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 snowmobile manufacturing business. 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 projected cash flow statement
A projected cash flow statement for a snowmobile manufacturing business 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 snowmobile manufacturing business'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 snowmobile manufacturing business 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 snowmobile manufacturing business's financial projections?
Building a snowmobile manufacturing business 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 snowmobile manufacturing business'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 snowmobile manufacturing business 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 snowmobile manufacturing business's financial forecast?
Creating an accurate and error-free snowmobile manufacturing business 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 snowmobile manufacturing business, 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 snowmobile manufacturing business
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your snowmobile manufacturing business.
- 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 snowmobile manufacturing business. 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?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
