How to create a financial forecast for a surf rental company?
Creating a financial forecast for your surf rental company, 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 surf rental company 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 surf rental company?
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 surf rental company becomes handy.
Creating a surf rental company 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 surf rental company.
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 surf rental company 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 surf rental company'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 needed to build a surf rental company 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 surf rental company, 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 surf rental company 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 surf rental company, 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 surf rental company's financial forecast.
The sales forecast for a surf rental company
From experience, it is usually best to start creating your surf rental company financial forecast by your sales forecast.
To create an accurate sales forecast for your surf rental company, you will have to rely on the data collected in your market research, or if you're running an existing surf rental company, 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:
- Seasonal Demand: As a surf rental company, your average price and number of monthly transactions may be affected by the seasonal demand for surfing. During peak surfing seasons, such as summer or holidays, you can expect a higher average price and more monthly transactions due to increased demand for your rental services.
- Weather Conditions: The weather can greatly impact the average price and number of monthly transactions for your surf rental business. Inclement weather, such as heavy rain or strong winds, can lead to a decrease in demand for surfing, resulting in lower average prices and fewer monthly transactions.
- Competition: The presence of other surf rental companies in your area can also affect your average price and number of monthly transactions. If there are many competitors offering similar services, you may need to lower your prices to remain competitive, which can result in a decrease in your average price. Additionally, if there are limited customers to go around, you may see a decrease in your monthly transactions.
- Tourism: The tourism industry plays a significant role in the success of a surf rental business. If your location is a popular tourist destination, you can expect to see an increase in demand for your rental services during peak tourism seasons. This can lead to a higher average price and more monthly transactions for your business.
- Surfing Conditions: The quality of surfing conditions can also affect your average price and number of monthly transactions. If the waves are consistently good, you may be able to charge higher prices and see an increase in monthly transactions as more people are interested in surfing during those conditions. On the other hand, if the surfing conditions are poor, you may need to lower your prices and may see a decrease in monthly transactions.
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 surf rental company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your surf rental company 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 surf rental company will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for your employees who will be managing the rental store, maintaining the equipment, and providing customer service.
- Accountancy fees: You may need to hire an accountant to help you with bookkeeping, tax preparation, and financial reporting for your surf rental business.
- Insurance costs: It's important to have insurance coverage for your rental equipment, store, and liability in case of accidents or damages.
- Software licenses: You may need to purchase software licenses for booking and reservation systems, accounting software, and point-of-sale systems.
- Banking fees: This includes transaction fees for credit and debit card payments, as well as fees for maintaining a business bank account.
- Rent: If you are renting a physical location for your surf rental store, this will be a significant operating expense.
- Utilities: You will need to pay for utilities such as electricity, water, and internet for your rental store.
- Marketing and advertising: It's important to promote your surf rental business to attract customers, so budget for expenses such as online ads, flyers, and social media marketing.
- Maintenance and repairs: Your surf equipment will need to be regularly maintained and repaired, so budget for expenses such as surfboard wax, fins, and repairs for damaged equipment.
- Cleaning supplies: You will need to keep your rental store and equipment clean, so budget for expenses such as cleaning products and supplies.
- Fuel and transportation: If you offer delivery or pickup services for your rental equipment, budget for expenses such as fuel and vehicle maintenance.
- Permits and licenses: Depending on your location, you may need to obtain permits and licenses to operate your surf rental business, so budget for these expenses.
- Office supplies: You will need basic office supplies such as paper, pens, and printer ink for your rental store.
- Professional services: You may need to hire lawyers or consultants for legal and business advice, so budget for these expenses.
- Taxes: Don't forget to budget for income and sales taxes for your surf rental business.
This list will need to be tailored to the specificities of your surf rental company, but should offer a good starting point for your budget.
What investments are needed to start or grow a surf rental company?
Creating and expanding a surf rental company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a surf rental company could include elements such as:
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your surf rental company.
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 surf rental company
The next step in the creation of your financial forecast for your surf rental company 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 surf rental company?
Now let's have a look at the main output tables of your surf rental company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your surf rental company is likely to be in the years to come.
For your surf rental company to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established surf rental companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your surf rental company'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 projected cash flow statement
A projected cash flow statement for a surf rental company 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 surf rental company'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 surf rental company 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 surf rental company's financial forecast?
Creating your surf rental company's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your surf rental company'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 surf rental company 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 surf rental company'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 surf rental company 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 surf rental company'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 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 surf rental company 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 surf rental company, 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 project sales for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a surf rental company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
