How to create a financial forecast for a spa and wellness centre?
Creating a financial forecast for your spa and wellness centre, 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 spa and wellness centre 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 spa and wellness centre?
The financial projections for your spa and wellness centre 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 spa and wellness centre'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 spa and wellness centre financial forecast?
A spa and wellness centre'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 spa and wellness centre, 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 spa and wellness centre 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 spa and wellness centre 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 spa and wellness centre's financial forecast.
The sales forecast for a spa and wellness centre
From experience, it is usually best to start creating your spa and wellness centre financial forecast by your sales forecast.
To create an accurate sales forecast for your spa and wellness centre, you will have to rely on the data collected in your market research, or if you're running an existing spa and wellness centre, 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:
- Seasonal trends: You may experience fluctuations in your average price and monthly transactions due to seasonal trends. For example, during the summer months, your average price may increase as more people seek out your spa services for relaxation and pampering. On the other hand, during the winter months, your average price may decrease as people tend to prioritize holiday spending over self-care.
- Economic conditions: Economic conditions can also have an impact on your spa and wellness centre's sales forecast. During a recession, people may be less likely to spend money on luxury services like spa treatments, resulting in a decrease in both your average price and number of monthly transactions. Conversely, during a booming economy, people may have more disposable income and be more willing to invest in self-care, leading to an increase in your average price and monthly transactions.
- Competition: The presence of competition in your area can also affect your sales forecast. If there are other spas and wellness centres offering similar services at lower prices, you may need to adjust your average price in order to stay competitive. Additionally, if a new spa or wellness centre opens up nearby, you may see a decrease in your monthly transactions as customers have more options to choose from.
- Demographics: The demographic makeup of your target market can also play a role in your sales forecast. For example, if your spa and wellness centre primarily caters to an older population, your average price may be higher as these individuals may have more disposable income and are willing to invest in self-care. On the other hand, if your target market is younger and more budget-conscious, you may need to offer lower prices in order to attract and retain customers.
- Technology: Advancements in technology can also affect your spa and wellness centre's sales forecast. For example, the emergence of online booking systems and mobile apps may make it easier for customers to make appointments and therefore increase your number of monthly transactions. On the other hand, if your competitors utilize technology in a way that you do not, you may see a decrease in your average price as customers may be drawn to the convenience and efficiency of their services.
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 spa and wellness centre
The next step is to estimate the expenses needed to run your spa and wellness centre 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 spa and wellness centre's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, and benefits for all employees, such as spa therapists, receptionists, and cleaning staff.
- Accountancy Fees: You may need to hire an accountant to manage your financial records and tax filings.
- Insurance Costs: It is important to have insurance to protect your business from any potential risks or liabilities.
- Software Licences: You may need to purchase software licenses for your spa's booking system, accounting software, and other business tools.
- Banking Fees: You will incur fees for bank transactions, such as wire transfers and credit card processing.
- Rent: This includes the cost of leasing or renting the space for your spa and wellness centre.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your spa running.
- Supplies and Inventory: This includes the cost of purchasing products and supplies for your spa, such as oils, lotions, and towels.
- Marketing and Advertising: You will need to budget for marketing and advertising efforts to attract new customers and promote your services.
- Training and Development: It is important to invest in the training and development of your employees to maintain high-quality services.
- Maintenance and Repairs: You may need to repair or replace equipment or facilities from time to time, which incurs costs.
- Cleaning and Sanitation: You will need to hire cleaning services or purchase cleaning supplies to maintain a clean and hygienic spa environment.
- Taxes and Licenses: You may need to pay for business licenses and taxes, such as sales tax and property tax.
- Professional Memberships: Joining professional organizations and memberships can help you stay updated on industry trends and connect with other professionals.
- Consulting and Legal Fees: You may need to seek advice from consultants or legal professionals for business decisions or to handle any legal matters.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small spa and wellness centre might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a spa and wellness centre?
Creating and expanding a spa and wellness centre also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a spa and wellness centre could include elements such as:
- Spa Equipment: This includes items such as massage tables, facial steamers, infrared saunas, and hydrotherapy tubs. These are essential fixed assets for a spa and wellness centre and can range from a few hundred to several thousand dollars depending on the quality and quantity of equipment you purchase.
- Furniture and Fixtures: This category includes items like reception desks, waiting room chairs, and storage units. These are necessary for creating a comfortable and welcoming atmosphere for your clients and can also add to the aesthetic appeal of your spa and wellness centre.
- Renovations and Remodeling: If you are opening a new spa and wellness centre or expanding an existing one, you may need to make changes to the physical space. This can include things like installing new flooring, updating the lighting, or adding new walls or partitions. These renovations can be costly but are important for creating a functional and visually appealing space.
- Technology and Software: In today's digital age, having the right technology and software is crucial for a successful spa and wellness centre. This can include things like booking and scheduling software, payment processing systems, and inventory management tools. While these may not be physical items, they are considered fixed assets and are necessary for running your business efficiently.
- Decor and Aesthetic Elements: The overall look and feel of your spa and wellness centre can play a big role in attracting and retaining clients. This can include elements such as artwork, plants, and decorative fixtures. While these may not be essential, they can add to the overall ambiance of your spa and create a more relaxing and luxurious experience for your clients.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your spa and wellness centre.
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 spa and wellness centre
The next step in the creation of your financial forecast for your spa and wellness centre 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 spa and wellness centre?
Now let's have a look at the main output tables of your spa and wellness centre's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your spa and wellness centre's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a spa and wellness centre should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
The projected balance sheet gives an overview of your spa and wellness centre'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 spa and wellness centre. 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 spa and wellness centre 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 spa and wellness centre'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 spa and wellness centre 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 spa and wellness centre's financial forecast?
Using the right tool or solution will make the creation of your spa and wellness centre's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your spa and wellness centre'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional spa and wellness centre 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 spa and wellness centre's financial forecast?
Creating an accurate and error-free spa and wellness centre 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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own spa and wellness centre, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your spa and wellness centre.
- 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 spa and wellness centre. 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
- Sample financial forecast for business idea
- How to project sales for a business?
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Founder & CEO at The Business Plan Shop Ltd
