How to create a financial forecast for a sports ball manufacturer?
Developing and maintaining an up-to-date financial forecast for your sports ball manufacturing business 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 sports ball manufacturing business 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 sports ball manufacturing business?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your sports ball manufacturing business becomes handy.
Creating a sports ball manufacturing business financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your sports ball manufacturing business.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a sports ball manufacturing business is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your sports ball manufacturing business's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is used as input to build a sports ball manufacturing business financial forecast?
A sports ball 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 sports ball 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 sports ball 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 sports ball 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 sports ball manufacturing business's financial forecast.
The sales forecast for a sports ball manufacturing business
From experience, it is usually best to start creating your sports ball manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your sports ball manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing sports ball 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:
- Changes in Material Costs: As a sports ball manufacturing business, you rely heavily on various materials to create your products. Fluctuations in the cost of these materials, such as rubber or leather, can directly impact your average price and ultimately affect the number of monthly transactions. Keep a close eye on the market prices and adjust your forecast accordingly.
- Emerging Technologies: With the constant development of new technologies, there may be advancements in the way sports balls are made. This could potentially lead to changes in manufacturing processes, resulting in higher or lower production costs and ultimately impacting your average price and monthly transactions. Stay informed and be prepared to adapt to any changes in the industry.
- Competition: As a sports ball manufacturer, you are operating in a highly competitive market. Changes in the strategies and offerings of your competitors can have a significant impact on your average price and monthly transactions. Keep a close eye on your competition and continuously strive to differentiate your products to maintain your market position.
- Sports Industry Trends: The demand for specific types of sports balls can be influenced by trends in the sports industry. For example, if a particular sport gains popularity, the demand for related equipment, including balls, may increase. Stay up to date with industry trends to anticipate any potential changes in demand for your products.
- Weather Conditions: Weather can play a significant role in the sports industry, affecting the frequency and intensity of outdoor activities. As a sports ball manufacturer, you may experience fluctuations in demand for your products depending on the weather conditions. Consider the seasonal variations and plan accordingly to adjust your sales forecast.
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.
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 sports ball manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your sports ball manufacturing business 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 sports ball manufacturing business will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for employees such as production workers, quality control specialists, and administrative staff.
- Accountancy fees: You will need to hire an accountant to handle your financial records, tax filings, and other financial matters specific to your sports ball manufacturing business.
- Insurance costs: It is important to have insurance for your business to protect against any potential liabilities, such as worker injuries or product defects.
- Software licences: You may need to purchase software licenses for specialized programs to help with design, production, and inventory management.
- Banking fees: Operating a business requires a business bank account, and there may be fees associated with transactions, wire transfers, and other banking services.
- Raw materials: This includes the cost of materials such as rubber, leather, or synthetic materials used to make sports balls.
- Equipment maintenance: Regular maintenance of machinery and equipment used in production is necessary to keep them in good working condition.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your production facility running.
- Rent: If you do not own your production facility, you will need to pay rent for the space you use.
- Marketing and advertising: To promote your sports ball manufacturing business, you may need to invest in marketing and advertising strategies, such as creating a website or participating in trade shows.
- Shipping and logistics: If you sell your sports balls to retailers or directly to customers, you will need to cover the costs of shipping and logistics.
- Packaging materials: You will need packaging materials, such as boxes and labels, to package and ship your sports balls.
- Legal fees: As a business owner, you may need to seek legal advice or services for matters such as contracts, trademarks, or intellectual property.
- Taxes: Your business will be subject to taxes, such as income tax and sales tax, which will need to be included in your operating expenses.
- Office supplies: You will need to purchase office supplies, such as paper, ink, and pens, to keep your administrative tasks running smoothly.
This list will need to be tailored to the specificities of your sports ball manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a sports ball manufacturing business?
Creating and expanding a sports ball manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a sports ball manufacturing business could include elements such as:
- Machinery and Equipment: This includes the cost of purchasing and maintaining specialized machinery and equipment used in the manufacturing process such as ball stitching machines, air compressors, and mold injection machines.
- Facility Renovations: If you are starting your sports ball manufacturing business from scratch, you may need to invest in renovating or constructing a facility to house your operations. This can include costs for building permits, construction materials, and labor.
- Inventory: As a sports ball manufacturing business, you will need to purchase raw materials such as rubber, leather, and thread to produce your products. You may also need to invest in bulk inventory of finished products to meet customer demand and ensure a steady supply for retailers.
- Transportation and Shipping: This includes the cost of purchasing or leasing vehicles to transport your products to retailers or distributors. It also includes expenses for shipping materials and finished products to and from suppliers and customers.
- Technology and Software: To streamline your operations and improve efficiency, you may need to invest in technology and software such as inventory management systems, customer relationship management software, and accounting software.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your sports ball 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 sports ball manufacturing business
The next step in the creation of your financial forecast for your sports ball 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 sports ball manufacturing business?
Now let's have a look at the main output tables of your sports ball 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 sports ball 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 sports ball manufacturing business will look different than for a startup.
The projected balance sheet
Your sports ball manufacturing business'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 forecast
Your sports ball manufacturing business's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the sports ball manufacturing business:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your sports ball manufacturing business's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your sports ball manufacturing business's financial plan - so that banks or investors can assess seasonal variation and ensure your 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 sports ball manufacturing business's financial forecast?
Creating your sports ball manufacturing business'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 sports ball manufacturing business'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 sports ball manufacturing business 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 sports ball manufacturing business's financial forecast?
Creating an accurate and error-free sports ball 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 sports ball 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 sports ball manufacturing business
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your sports ball 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 sports ball 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
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- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
