How to create a financial forecast for a taxi and minicab firm?
Creating a financial forecast for your taxi and minicab 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 taxi and minicab 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 taxi and minicab firm?
The financial projections for your taxi and minicab 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 taxi and minicab 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 used as input to build a taxi and minicab firm financial forecast?
A taxi and minicab firm'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 taxi and minicab firm.
If you are creating (or updating) the forecast of an existing taxi and minicab firm, 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 taxi and minicab firm 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 taxi and minicab firm 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 taxi and minicab firm's financial forecast.
The sales forecast for a taxi and minicab firm
From experience, it usually makes sense to start your taxi and minicab firm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your taxi and minicab firm (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 taxi and minicab firm'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:
- Location: The location of your business can greatly affect the average price and number of monthly transactions. If your taxi and minicab firm is located in a busy city center, you can expect higher prices and more frequent transactions due to the high demand for transportation services.
- Competition: The number and quality of competitors in your area can also impact your sales forecast. If there are many other taxi and minicab firms in your location, you may have to lower your prices or offer promotions to attract customers, which can decrease your average price and increase the number of monthly transactions.
- Seasonal events: Events such as holidays, festivals, and sporting events can significantly affect the demand for transportation services. During peak periods, such as Christmas or a big concert, you may experience a surge in demand and can charge higher prices. On the other hand, during slower seasons, you may have to lower your prices to attract customers.
- Vehicle maintenance: The condition and maintenance of your vehicles can also impact your sales forecast. If your vehicles are well-maintained and in good condition, you can charge higher prices and attract more customers. However, if your vehicles are constantly breaking down or in poor condition, you may lose customers and have to lower your prices to remain competitive.
- Customer demographics: The demographics of your target customers can also affect your sales forecast. For example, if your business primarily serves business travelers who require luxury transportation, you can charge higher prices and expect fewer monthly transactions. However, if your target customers are budget-conscious tourists, you may have to offer lower prices to attract them and have a higher number of monthly 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.
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 taxi and minicab firm
The next step is to estimate the costs you’ll have to incur to operate your taxi and minicab firm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your taxi and minicab firm's operating expenses should normally include the following items:
- Staff costs: This includes the salaries and wages of your drivers, dispatchers, and other employees.
- Vehicle maintenance: You will need to budget for regular maintenance and repairs for your taxi and minicab fleet.
- Fuel: Fuel costs will make up a significant portion of your operating expenses, so it's important to factor this in.
- Insurance: As a taxi and minicab firm, you will need to have insurance for your vehicles, drivers, and business operations.
- Licenses and permits: You will need to pay for any necessary licenses and permits to operate your business legally.
- Accountancy fees: Hiring an accountant to manage your finances and taxes can be a worthwhile expense for your business.
- Marketing and advertising: To attract customers, you may need to spend money on marketing and advertising efforts.
- Rent or lease: If you don't own your own fleet of vehicles, you will need to budget for rent or lease payments for your vehicles.
- Office expenses: This includes expenses such as office supplies, utilities, and rent for your office space.
- Software licenses: You may need to purchase software licenses to manage your bookings, dispatching, and other business operations.
- Banking fees: As a business, you will likely have bank accounts and may incur fees for transactions, wire transfers, etc.
- Taxes: You will need to budget for various taxes, including income tax, sales tax, and payroll taxes.
- Vehicle cleaning and detailing: Keeping your vehicles clean and presentable is important for your business, and this expense should be factored into your budget.
- Training and development: To keep your drivers and employees up-to-date and improve their skills, you may need to invest in training and development programs.
- Legal fees: In case of any legal issues or disputes, you may need to pay for legal fees, so it's important to have this in your budget.
This list is not exhaustive by any means, and will need to be tailored to your taxi and minicab firm's specific circumstances.
What investments are needed to start or grow a taxi and minicab firm?
Your taxi and minicab firm 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 taxi and minicab firm, these could include:
- Vehicles: As a taxi and minicab firm, one of your main capital expenditures will be purchasing or leasing vehicles for your fleet. This includes cars, vans, and other vehicles that will be used to transport passengers.
- Communication and technology equipment: In order to efficiently run your business, you will need to invest in communication and technology equipment such as radios, GPS systems, and computer software for dispatch and booking.
- Office furniture and equipment: Your taxi and minicab firm will need a physical office space where you can manage your operations and handle administrative tasks. This will require purchasing office furniture such as desks, chairs, and filing cabinets, as well as office equipment like computers, printers, and phones.
- Maintenance and repairs: Regular maintenance and repairs of your vehicles and equipment is crucial for the smooth operation of your taxi and minicab firm. This includes costs for oil changes, tire replacements, and repairs for any damages or malfunctions.
- Insurance and licenses: In addition to the initial cost of purchasing or leasing vehicles, you will also need to factor in ongoing expenses for insurance and licenses. This includes commercial vehicle insurance, liability insurance, and any necessary licenses or permits required by your local government.
Again, this list will need to be adjusted according to the size and ambitions of your taxi and minicab 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 taxi and minicab firm
The next step in the creation of your financial forecast for your taxi and minicab 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 taxi and minicab firm?
Now let's have a look at the main output tables of your taxi and minicab firm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your taxi and minicab firm is likely to be in the years to come.
For your taxi and minicab firm 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 taxi and minicab firms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your taxi and minicab firm'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 taxi and minicab firm 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 taxi and minicab firm'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 taxi and minicab firm 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 taxi and minicab firm's financial forecast?
Using the right tool or solution will make the creation of your taxi and minicab firm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your taxi and minicab 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 taxi and minicab 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 taxi and minicab firm'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 taxi and minicab firm 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 taxi and minicab firm'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 taxi and minicab firm, 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 taxi and minicab firm
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 taxi and minicab 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 taxi and minicab 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 project revenues for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
