How to create a financial forecast for a stage-set manufacturer?
Creating a financial forecast for your stage-set 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 stage-set 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 stage-set manufacturing business?
The financial projections for your stage-set 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 stage-set 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 stage-set manufacturing business financial forecast?
A stage-set manufacturing business'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 stage-set manufacturing business.
If you are creating (or updating) the forecast of an existing stage-set manufacturing business, 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 stage-set manufacturing business 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 stage-set manufacturing business 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 stage-set manufacturing business's financial forecast.
The sales forecast for a stage-set manufacturing business
From experience, it usually makes sense to start your stage-set manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your stage-set manufacturing business (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 stage-set manufacturing business'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:
- Local Events: Local events such as concerts, festivals, and theater productions can drive up demand for stage-sets, leading to an increase in the average price and monthly transactions for your business.
- Economic Growth: An overall growth in the economy can result in an increase in corporate events, trade shows, and conferences, leading to a higher demand for stage-sets and potentially higher prices.
- Competition: The presence of other stage-set manufacturers in your area can affect your average price and monthly transactions. If there are many competitors, you may need to lower your prices to stay competitive, resulting in a decrease in average price. On the other hand, if you offer unique and high-quality stage-sets, you may be able to charge higher prices and attract more customers.
- Technology Advancements: Advancements in technology, such as 3D printing and virtual reality, can affect the prices of stage-sets. If your business is able to utilize these technologies to create more efficient and visually stunning stage-sets, you may be able to charge higher prices and attract more customers.
- Seasonality: The time of year can also impact your business's average price and monthly transactions. For example, the holiday season and summer months may see a higher demand for stage-sets due to events such as holiday parties and outdoor concerts, resulting in an increase in prices and transactions. On the other hand, the slow winter months may result in a decrease in prices and transactions.
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.
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The operating expenses for a stage-set manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your stage-set 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 stage-set manufacturing business will include some of the following items:
- Staff Costs: As a stage-set manufacturing business, your biggest operating expense will likely be staff costs. This includes salaries, wages, benefits, and payroll taxes for all employees, including designers, carpenters, and production crew.
- Accountancy Fees: You will need to hire an accountant or accounting firm to help you manage your financial records, prepare tax returns, and provide financial advice for your business.
- Insurance Costs: To protect your business and employees, you will need to purchase various types of insurance, such as liability insurance, property insurance, and worker's compensation insurance.
- Software Licenses: As a stage-set manufacturing business, you will likely need to use specialized software for design, project management, and inventory management. These software licenses will be an ongoing expense for your business.
- Banking Fees: You will need to open a business bank account to manage your finances and process transactions. This will involve monthly fees, transaction fees, and other banking charges.
- Materials and Supplies: To create stage sets, you will need to purchase various materials and supplies, such as wood, paint, fabric, and hardware. These costs will fluctuate depending on the size and complexity of each project.
- Rent or Mortgage: If you have a physical location for your business, you will need to pay rent or a mortgage for the space. This expense will vary depending on the location and size of your facility.
- Utilities: You will need to cover the cost of utilities, such as electricity, water, and internet, for your business location.
- Marketing and Advertising: To attract clients, you will need to invest in marketing and advertising efforts, such as creating a website, attending trade shows, and running social media ads.
- Travel and Transportation: If your business involves setting up stage sets at different locations, you will need to cover travel and transportation expenses for your employees and equipment.
- Training and Development: As your business grows, you may need to invest in training and development programs for your employees to enhance their skills and knowledge.
- Maintenance and Repairs: You will need to regularly maintain and repair your equipment, tools, and facilities to ensure they are in good working condition.
- Office Supplies: You will need to purchase office supplies, such as paper, ink, and pens, to keep your business operations running smoothly.
- Legal Fees: You may need to seek legal advice or services for contracts, intellectual property protection, or other legal matters related to your business.
- Taxes: As a business owner, you will be responsible for paying various taxes, including income tax, sales tax, and payroll taxes.
This list will need to be tailored to the specificities of your stage-set manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a stage-set manufacturing business?
Your stage-set 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 stage-set manufacturing business, these could include:
- Stage-set construction materials and equipment: This includes materials such as wood, metal, fabric, and paint, as well as tools and equipment like saws, drills, and paint sprayers. These items are essential for building and assembling stage-sets and will need to be purchased upfront.
- Lighting and sound equipment: As a stage-set manufacturing business, you will likely be responsible for providing lighting and sound equipment for productions. This may include stage lights, microphones, speakers, and mixing boards. These items can be expensive, but are necessary to create a professional production.
- Trucks and transportation: If you will be delivering stage-sets to different venues, you may need to purchase or lease trucks and other vehicles. These vehicles will need to be properly maintained and insured, adding to your overall expenditure.
- Computer hardware and software: In today's digital age, it is important to have the necessary computer technology to design and plan stage-sets. This may include purchasing computers, software, and other equipment like printers and scanners.
- Storage and warehouse space: As a stage-set manufacturing business, you will need a space to store and organize materials and finished sets. This may require renting or purchasing a warehouse or storage unit, which will incur a monthly or yearly cost.
Again, this list will need to be adjusted according to the size and ambitions of your stage-set 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 stage-set manufacturing business
The next step in the creation of your financial forecast for your stage-set 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 stage-set manufacturing business?
Now let's have a look at the main output tables of your stage-set 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 stage-set 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 stage-set manufacturing business will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your stage-set 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 stage-set 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 cash flow forecast
Your stage-set 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 stage-set 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 stage-set 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 stage-set 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 stage-set manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your stage-set manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your stage-set 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional stage-set manufacturing business 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 stage-set manufacturing business's financial forecast?
Creating an accurate and error-free stage-set 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your stage-set 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 stage-set 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 revenues for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
