How to create a financial forecast for a Sri Lankan restaurant?
Creating a financial forecast for your Sri Lankan restaurant, 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 Sri Lankan restaurant 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 Sri Lankan restaurant?
The financial projections for your Sri Lankan restaurant 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 Sri Lankan restaurant'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 Sri Lankan restaurant financial forecast?
A Sri Lankan restaurant'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 Sri Lankan restaurant.
If you are creating (or updating) the forecast of an existing Sri Lankan restaurant, 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 Sri Lankan restaurant 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 Sri Lankan restaurant 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 Sri Lankan restaurant's financial forecast.
The sales forecast for a Sri Lankan restaurant
From experience, it usually makes sense to start your Sri Lankan restaurant's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your Sri Lankan restaurant (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 Sri Lankan restaurant'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:
- Tourist season: The influx of tourists during peak season can increase the average price of your dishes due to higher demand. This can also lead to an increase in the number of transactions as tourists tend to explore local cuisines.
- Competition: The presence of other Sri Lankan restaurants in the area can affect your average price and number of transactions. If there are many similar options available, customers may be more price-sensitive and look for the best deals. On the other hand, if you are the only Sri Lankan restaurant in the area, you may be able to charge a premium price.
- Holidays: Special holidays and festivals in Sri Lanka, such as Sinhala New Year or Vesak, can lead to an increase in the number of transactions as people tend to eat out more during these times. This can also affect your average price, as customers may be more willing to splurge on special dishes or set menus for these occasions.
- Ingredients: Changes in the availability and cost of key ingredients used in Sri Lankan cuisine, such as spices or seafood, can affect your average price. If there is a shortage or increase in price for these ingredients, you may have to adjust your menu prices accordingly.
- Local events: Hosting or catering for local events, such as cultural festivals or business conferences, can lead to a temporary increase in both the average price and number of transactions for your restaurant. This can be a great opportunity to showcase your cuisine to a larger audience and potentially attract new 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 Sri Lankan restaurant
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your Sri Lankan restaurant 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 Sri Lankan restaurant will include some of the following items:
- Staff costs: This includes salaries, benefits, and training for your restaurant's employees, such as chefs, waitstaff, and kitchen assistants.
- Food and beverage costs: This covers the cost of ingredients and supplies needed to create your Sri Lankan dishes, as well as the cost of any alcoholic or non-alcoholic beverages served in your restaurant.
- Rent or lease: If you do not own the building your restaurant is located in, you will need to pay rent or lease fees to the property owner.
- Utilities: This includes electricity, gas, water, and any other necessary utilities for your restaurant to function.
- Marketing and advertising: You will need to invest in marketing and advertising to promote your Sri Lankan restaurant and attract customers.
- Accountancy fees: Hiring an accountant or utilizing accounting software can help you manage your restaurant's finances effectively.
- Insurance costs: Protect your restaurant and its assets by investing in insurance coverage for potential risks, such as liability, property damage, and workers' compensation.
- Software licenses: If you use any software to manage your restaurant operations, you will need to pay for licenses or subscriptions.
- Banking fees: This includes fees for maintaining a business bank account, processing credit card transactions, and any other banking services you may need.
- Inventory: You will need to purchase and manage inventory to ensure you have enough ingredients and supplies for your dishes.
- Cleaning and maintenance: Keeping your restaurant clean and well-maintained is essential for creating a welcoming environment for customers.
- Waste disposal: Properly disposing of waste, such as food waste and packaging materials, is important for maintaining a clean and hygienic restaurant.
- Licenses and permits: Depending on your location, you may need to obtain various licenses and permits to legally operate your Sri Lankan restaurant.
- Training and development: Investing in training and development for your employees can improve their skills and enhance the overall quality of your restaurant's service.
- Repairs and maintenance: It is important to budget for unexpected repairs and maintenance for equipment and facilities in your restaurant.
This list will need to be tailored to the specificities of your Sri Lankan restaurant, but should offer a good starting point for your budget.
What investments are needed to start or grow a Sri Lankan restaurant?
Once you have an idea of how much sales you could achieve and what it will cost to run your Sri Lankan restaurant, it is time to look into the equipment required to launch or expand the activity.
For a Sri Lankan restaurant, capital expenditures and initial working capital items could include:
- Commercial Kitchen Equipment: This includes items such as stoves, ovens, grills, and other cooking equipment specific to Sri Lankan cuisine. These are essential for preparing authentic dishes and must be of high quality to ensure efficiency and consistency in food production.
- Furniture and Decor: A Sri Lankan restaurant will require unique and culturally relevant furniture and decor to create an inviting and authentic atmosphere for customers. This may include handcrafted tables and chairs, traditional artwork, and other decorative elements.
- Point-of-Sale System: A modern and efficient point-of-sale system is crucial for managing orders, tracking inventory, and processing payments in a Sri Lankan restaurant. This may include hardware such as cash registers, tablets, and printers, as well as software for tracking sales and managing customer data.
- Refrigeration Units: Proper refrigeration is essential for food safety and quality in a restaurant, especially for a cuisine that relies heavily on spices and fresh ingredients like Sri Lankan food. This may include walk-in freezers and refrigerators, as well as smaller units for storing specific ingredients.
- Dishware and Utensils: A Sri Lankan restaurant will need a variety of dishware and utensils specific to the cuisine, such as clay pots, curry bowls, and cutlery designed for eating with hands. These items should be durable and able to withstand frequent use and washing.
Again, this list will need to be adjusted according to the specificities of your Sri Lankan restaurant.
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 Sri Lankan restaurant
The next step in the creation of your financial forecast for your Sri Lankan restaurant 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 Sri Lankan restaurant?
Now let's have a look at the main output tables of your Sri Lankan restaurant's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your Sri Lankan restaurant's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a Sri Lankan restaurant 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
Your Sri Lankan restaurant'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 projected cash flow statement
A projected cash flow statement for a Sri Lankan restaurant 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 Sri Lankan restaurant'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 Sri Lankan restaurant 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 Sri Lankan restaurant's financial projections?
Building a Sri Lankan restaurant 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 Sri Lankan restaurant'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional Sri Lankan restaurant 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 Sri Lankan restaurant's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free Sri Lankan restaurant financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your Sri Lankan restaurant's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 Sri Lankan restaurant, 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 Sri Lankan restaurant
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your Sri Lankan restaurant.
- 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 Sri Lankan restaurant. 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 create a sales forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
