How to create a financial forecast for a street sweeper manufacturer?
Creating a financial forecast for your street sweeper 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 street sweeper 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 street sweeper manufacturing business?
The financial projections for your street sweeper 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 street sweeper 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.
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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.
What information is needed to build a street sweeper manufacturing business 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 street sweeper manufacturing business, 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 street sweeper manufacturing business 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 street sweeper manufacturing business, 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 street sweeper manufacturing business's financial forecast.
The sales forecast for a street sweeper manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your street sweeper manufacturing business 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 street sweeper manufacturers), and consider the elements below:
- Economic Conditions: The state of the economy can have a significant impact on the average price and number of monthly transactions for your street sweeper manufacturing business. During a recession, customers may be more price-sensitive and purchase fewer street sweepers, causing a decrease in both average price and monthly transactions. On the other hand, during a period of economic growth, customers may be more willing to invest in new street sweepers, leading to an increase in both average price and monthly transactions.
- Competition: The level of competition in the market can also influence your average price and monthly transactions. If there are many competitors in the market producing similar street sweepers, you may need to adjust your prices to stay competitive. This could lead to a decrease in average price. Additionally, intense competition may also result in customers having more options, leading to a potential decrease in monthly transactions.
- Technological Advancements: The advancement of technology in the street sweeper industry can also impact your business's sales forecast. If your competitors are using newer and more efficient technology, they may be able to offer their street sweepers at a lower price, forcing you to lower your prices as well. On the other hand, if your business is able to stay ahead of technological advancements and offer innovative street sweepers, you may be able to charge a higher average price and attract more monthly transactions.
- Seasonal Demand: Depending on the location of your customers, there may be seasonal fluctuations in demand for street sweepers. For example, if your business operates in an area with harsh winter weather, customers may be more likely to purchase street sweepers in the spring and summer months. This could result in a higher average price and more monthly transactions during those seasons, but a decrease in sales during the winter months.
- Government Regulations: Changes in government regulations, such as emissions standards or safety requirements, can also affect your sales forecast. If new regulations require your street sweepers to meet certain criteria, you may need to invest in upgrades or modifications, which could increase your average price. On the other hand, if regulations become more lenient, you may be able to offer your street sweepers at a lower price, potentially increasing the number of monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a street sweeper manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your street sweeper 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 street sweeper manufacturing business will include some of the following items:
- Staff costs: This includes salaries, benefits, and bonuses for your employees, such as engineers, technicians, and assembly line workers.
- Accountancy fees: You will need to hire an accountant to help you with financial planning, tax preparation, and other financial tasks for your business.
- Insurance costs: As a manufacturer, you will need to have insurance to protect your business from risks such as product liability, property damage, and worker injuries.
- Software licences: Your business may need various software programs for design, inventory management, and accounting, which require annual licence fees.
- Banking fees: You will need to maintain a business bank account and may incur fees for services such as wire transfers, check processing, and account maintenance.
- Raw materials: This includes the cost of purchasing materials, such as steel, plastic, and rubber, to manufacture your street sweepers.
- Utilities: Your business will need electricity, water, and other utilities to operate, which will incur monthly costs.
- Rent or mortgage: If you do not own your manufacturing facility, you will need to pay rent or a mortgage for your business location.
- Maintenance and repairs: Your street sweepers will need regular maintenance and occasional repairs, which will incur costs for parts and labor.
- Marketing and advertising: You will need to promote your business and products through various channels, such as trade shows, online ads, and print materials.
- Shipping and logistics: You will need to ship your street sweepers to customers, which will incur costs for packaging, transportation, and handling.
- Taxes and licenses: Your business will need to pay various taxes, such as income tax, sales tax, and property tax, as well as obtain necessary licenses and permits.
- Training and development: You will need to train your employees and invest in their professional development to ensure the quality of your street sweepers.
- Office supplies and equipment: Your business will need basic office supplies, such as paper and ink, as well as equipment, such as computers and printers.
- Legal fees: You may need to hire a lawyer to help you with legal matters, such as contracts, patents, and intellectual property protection.
This list will need to be tailored to the specificities of your street sweeper manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a street sweeper manufacturing business?
Creating and expanding a street sweeper manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a street sweeper manufacturing business could include elements such as:
- Factory Equipment: This includes machinery and tools necessary for the production of street sweepers such as welding machines, assembly lines, and cutting tools.
- Warehouse and Storage: As a street sweeper manufacturing business, you will need a dedicated space to store and organize your raw materials, finished products, and spare parts. This may include shelves, racks, and forklifts.
- Vehicles: In order to transport your street sweepers to clients or to deliver raw materials to your factory, you will need to invest in vehicles such as trucks or vans. These vehicles may also need to be equipped with specialized equipment for loading and unloading the street sweepers.
- Building and Land: Depending on the size and scale of your business, you may need to purchase or lease a building and land to house your factory, warehouse, and office space. This can be a significant capital expenditure, but it is necessary for the long-term success of your business.
- Technology and Software: In today's digital age, it is important for a street sweeper manufacturing business to have up-to-date technology and software for designing, engineering, and managing production processes. This may include CAD software, inventory management systems, and accounting software.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your street sweeper 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 street sweeper manufacturing business
The next step in the creation of your financial forecast for your street sweeper 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 street sweeper manufacturing business?
Now let's have a look at the main output tables of your street sweeper 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 street sweeper 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 street sweeper manufacturing business will look different than for a startup.
The projected balance sheet
Your street sweeper manufacturing business'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 street sweeper manufacturing business 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 street sweeper manufacturing business'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 street sweeper manufacturing 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 street sweeper manufacturing business's financial forecast?
Creating your street sweeper 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 street sweeper 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.
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 street sweeper 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 street sweeper manufacturing business's financial forecast?
Creating an accurate and error-free street sweeper 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 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 street sweeper manufacturing business, 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
- 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 street sweeper manufacturing business 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 street sweeper manufacturing business, 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
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- Example of financial forecast for business idea
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