How to create a financial forecast for a television studio?
Creating a financial forecast for your television studio, 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 television studio 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 television studio?
The financial projections for your television studio 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 television studio'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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What information is needed to build a television studio 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 television studio, 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 television studio 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 television studio, 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 television studio's financial forecast.
The sales forecast for a television studio
The sales forecast, also called topline projection, is normally where you will start when building your television studio 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 television studios), and consider the elements below:
- Programming Content: The quality and popularity of the television shows produced by your studio can greatly impact the average price of your studio's offerings. If your studio consistently produces highly-rated and critically acclaimed shows, you can command a higher price for advertising and licensing deals.
- Competition: The number and strength of competitors in the television industry can also affect the average price of your studio's offerings. If there are many other well-established studios producing similar content, you may need to lower your prices in order to stay competitive.
- Technology: The constant advancements in technology can impact the number of monthly transactions for your studio. For example, the rise of streaming services and the decline of traditional cable subscriptions may affect the demand for your studio's content and the average price you can charge for it.
- Economic Conditions: Economic factors such as the overall health of the economy, consumer confidence, and disposable income can all play a role in the average price and number of transactions for your studio. During times of economic downturn, consumers may be less likely to spend money on television content, while a booming economy may lead to increased demand.
- Talent: The talent and star power of the actors, writers, and producers involved in your studio's shows can also impact the average price of your offerings. A show with A-list actors and top-notch writers may be able to command a higher price than a show with lesser-known talent.
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 television studio
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your television studio 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 television studio will include some of the following items:
- Staff costs: This includes salaries, benefits, and payroll taxes for all employees working in the television studio such as producers, directors, camera operators, and administrative staff.
- Accountancy fees: You will need to hire an accountant or accounting firm to handle your financial records, tax filings, and other financial matters.
- Insurance costs: As a television studio, you will need to have insurance to protect your equipment, property, and liability in case of accidents or other unforeseen events.
- Software licenses: You will need to purchase or renew licenses for software used in the production and post-production process, such as video editing software.
- Banking fees: This includes fees for maintaining business accounts, wire transfers, and credit card processing fees for payments from clients.
- Rent or lease: You will need a physical space to operate your television studio, whether it is through renting or leasing a building or studio space.
- Utilities: This includes electricity, water, and internet costs for your studio.
- Equipment maintenance: You will need to regularly maintain and repair your equipment, such as cameras, microphones, and lighting equipment, to ensure they are in good working condition.
- Marketing and advertising: To attract clients and promote your studio, you will need to allocate funds for marketing and advertising efforts, such as creating promotional materials and running ads.
- Travel expenses: If you have to travel for filming or production purposes, you will need to budget for transportation, lodging, and other travel-related expenses.
- Catering: For longer shoots or events, you may need to provide meals and refreshments for your staff and crew.
- Professional fees: This includes fees for hiring consultants, lawyers, or other professionals for specific projects or legal matters.
- Office supplies: You will need to purchase office supplies, such as paper, ink, and other materials, for administrative purposes.
- Training and development: To keep your staff up-to-date with the latest industry trends and technologies, you may need to provide training and development opportunities.
- Miscellaneous expenses: This includes any other operating expenses that do not fall under the categories listed above, such as parking fees, subscriptions, or fees for permits and licenses.
This list will need to be tailored to the specificities of your television studio, but should offer a good starting point for your budget.
What investments are needed to start or grow a television studio?
Your television studio 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 television studio, these could include:
- Cameras: As a television studio, one of your main assets will be your cameras. These are necessary for capturing high-quality footage and are a major capital expenditure for your studio.
- Lighting equipment: Proper lighting is essential for creating a visually appealing and professional looking show. This includes lighting fixtures, control boards, and other equipment.
- Audio equipment: Good sound quality is crucial for a successful television show. This can include microphones, mixers, speakers, and other audio equipment.
- Editing software: As a television studio, you will need to invest in professional editing software to produce high-quality content. This can include programs like Avid, Final Cut Pro, or Adobe Premiere.
- Production sets and props: Depending on the type of show you are producing, you may need to invest in sets and props for your studio. This can range from simple talk show sets to elaborate sets for dramas or game shows.
Again, this list will need to be adjusted according to the size and ambitions of your television studio.
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 television studio
The next step in the creation of your financial forecast for your television studio 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 television studio?
Now let's have a look at the main output tables of your television studio's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your television studio's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a television studio should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your television studio'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 cash flow forecast
Your television studio'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 television studio:
- 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 television studio'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 television studio'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 television studio's financial forecast?
Creating your television studio'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 television studio's projections
The modern and easiest way is to use professional online financial forecasting 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional television studio financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your television studio's financial forecast?
Creating an accurate and error-free television studio financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 television studio, 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 television studio 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 television studio, 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
Know someone who owns or is thinking of starting a television studio? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
