How to create a financial forecast for a stalls and markets trading firm?
Creating a financial forecast for your stalls and markets trading firm, 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 stalls and markets trading firm 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 stalls and markets trading firm?
The financial projections for your stalls and markets trading firm 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 stalls and markets trading firm'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 needed to build a stalls and markets trading firm financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a stalls and markets trading firm, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the stalls and markets trading firm on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing stalls and markets trading firm, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your stalls and markets trading firm's financial forecast.
The sales forecast for a stalls and markets trading firm
The sales forecast, also called topline projection, is normally where you will start when building your stalls and markets trading firm financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing stalls and markets trading firms), and consider the elements below:
- Seasonal Demand: As a stalls and markets trading firm, your average price and number of monthly transactions may be affected by seasonal demand. For example, during the summer months, customers may be more likely to purchase fresh produce and outdoor items, leading to higher prices and increased transactions. On the other hand, during the winter months, demand for these items may decrease, resulting in lower prices and fewer transactions.
- Competition: The level of competition in your local area can also impact your average price and number of monthly transactions. If there are many other stalls and markets in close proximity, you may need to adjust your prices to stay competitive and attract customers. This may also affect the number of transactions, as customers may choose to purchase from a competitor with lower prices.
- Location: Your business's location can also play a role in determining average price and number of monthly transactions. If your stall is located in a busy and popular area, you may be able to charge higher prices and attract more customers. However, if your location is less desirable, you may need to lower your prices in order to entice customers to visit your stall.
- Product Selection: The products you choose to sell can also impact your average price and number of monthly transactions. If you offer unique and in-demand products, you may be able to charge higher prices and attract more customers. However, if your products are similar to those offered by other stalls, you may need to lower your prices in order to stand out and attract customers.
- Customer Demographics: The demographics of your target customers can also affect your average price and number of monthly transactions. For example, if your target market is made up of budget-conscious individuals, you may need to keep your prices low to appeal to them. On the other hand, if your target market is more affluent, you may be able to charge higher prices and still attract customers.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 stalls and markets trading firm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your stalls and markets trading firm 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 stalls and markets trading firm will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees, including managers, cashiers, and other staff members.
- Accountancy Fees: You will need to hire an accountant to help you manage your finances and keep track of your profits and losses.
- Insurance Costs: It is important to have insurance coverage for your stalls and markets trading firm to protect against any potential liabilities or damages.
- Software Licences: You will need to purchase software licences for any programs or tools you use to manage your inventory, sales, and finances.
- Banking Fees: This includes fees for maintaining a business bank account, processing transactions, and any other banking services you may need.
- Rent/Lease: If you are leasing a space for your stalls and markets trading firm, you will have to pay rent each month.
- Utilities: This includes electricity, water, and gas bills for your business premises.
- Marketing and Advertising: You will need to allocate a budget for promoting your stalls and markets trading firm through various channels such as social media, flyers, and events.
- Inventory Costs: This includes the cost of purchasing or producing goods to sell in your stalls and markets.
- Maintenance and Repairs: You may need to repair or replace equipment, fixtures, or other items used in your stalls and markets trading firm from time to time.
- Legal Fees: You may need to seek legal advice or services for contracts, agreements, or any other legal matters related to your business.
- Taxes and Licences: You will need to pay taxes and obtain any necessary licences or permits for your stalls and markets trading firm.
- Transportation Costs: This includes any transportation fees for delivering goods to and from your stalls and markets.
- Supplies: This includes any necessary supplies such as packaging materials, cleaning products, and office supplies for your stalls and markets trading firm.
- Training and Development: You may need to provide training or development opportunities for your employees to improve their skills and knowledge.
This list will need to be tailored to the specificities of your stalls and markets trading firm, but should offer a good starting point for your budget.
What investments are needed to start or grow a stalls and markets trading firm?
Creating and expanding a stalls and markets trading firm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a stalls and markets trading firm could include elements such as:
- Equipment for stall setup and operations, such as tables, tents, and display racks
- Inventory and stock for selling at the market, including fresh produce, handmade goods, or other products
- Transportation and storage expenses, such as renting a truck or purchasing a refrigerated storage unit
- Renovation or improvement costs for the stall or market space, such as installing new flooring or upgrading electrical wiring
- Technology and software investments for managing inventory, sales, and customer data, such as a point-of-sale system or bookkeeping software
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your stalls and markets trading firm.
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 stalls and markets trading firm
The next step in the creation of your financial forecast for your stalls and markets trading firm 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 stalls and markets trading firm?
Now let's have a look at the main output tables of your stalls and markets trading firm'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 stalls and markets trading firm'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 stalls and markets trading firm will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your stalls and markets trading firm'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 stalls and markets trading firm. 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 stalls and markets trading firm'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 stalls and markets trading firm:
- 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 stalls and markets trading firm'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 stalls and markets trading firm'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 stalls and markets trading firm's financial forecast?
Creating your stalls and markets trading firm'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 stalls and markets trading firm'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.
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 stalls and markets trading firm 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 stalls and markets trading firm's financial forecast?
Creating an accurate and error-free stalls and markets trading firm 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
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your stalls and markets trading firm future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a stalls and markets trading firm, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to create a turnover forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
