How to create a financial forecast for a tobacco products wholesaler?
Creating a financial forecast for your tobacco products wholesaler, 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 tobacco products wholesaler 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 tobacco products wholesaler?
The financial projections for your tobacco products wholesaler 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 tobacco products wholesaler'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 tobacco products wholesaler financial forecast?
A tobacco products wholesaler'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 tobacco products wholesaler.
If you are creating (or updating) the forecast of an existing tobacco products wholesaler, 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 tobacco products wholesaler 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 tobacco products wholesaler 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 tobacco products wholesaler's financial forecast.
The sales forecast for a tobacco products wholesaler
From experience, it usually makes sense to start your tobacco products wholesaler's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your tobacco products wholesaler (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 tobacco products wholesaler'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:
- Changes in tobacco taxes: You should consider the potential impact of changes in tobacco taxes on your average price and number of monthly transactions. If taxes increase, it could drive up the price of your products and potentially decrease the number of transactions as customers may look for cheaper alternatives.
- Competition from online retailers: With the rise of e-commerce, online retailers may pose a threat to your business. Customers may choose to purchase tobacco products from online retailers at lower prices, impacting your average price and potentially decreasing your number of monthly transactions.
- Fluctuations in tobacco supply: Changes in the availability and cost of tobacco can affect your average price and number of monthly transactions. If there is a shortage of tobacco, prices may increase and decrease the number of transactions. Alternatively, if there is an oversupply, prices may decrease, but you may see an increase in transactions.
- Smoking bans and regulations: As more countries and cities implement smoking bans and stricter regulations on tobacco products, it could impact your business. This could lead to a decrease in the number of transactions as fewer people are smoking, or it could result in an increase in the average price of your products as customers may be willing to pay more for restricted products.
- Health concerns and public perception: Increased awareness of the health risks associated with tobacco use may lead to a decrease in demand for your products. This could result in a decrease in both your average price and number of monthly transactions. Keep an eye on public perception and any potential changes in attitudes towards tobacco use.
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 tobacco products wholesaler
The next step is to estimate the costs you’ll have to incur to operate your tobacco products wholesaler.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your tobacco products wholesaler's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and taxes for all employees working at your tobacco products wholesale business. This may also include bonuses or commissions for sales staff.
- Accountancy fees: Hiring an accountant or accounting firm to manage your finances, taxes, and other financial matters.
- Insurance costs: This includes general liability insurance, property insurance, and any other insurance policies you may need to protect your business.
- Software licenses: Purchasing or renewing licenses for software programs used in your business, such as accounting software, inventory management software, or customer relationship management (CRM) software.
- Banking fees: Fees associated with maintaining a business bank account, such as monthly account fees, transaction fees, and fees for bank services.
- Rent and utilities: The cost of renting a warehouse or office space for your business, as well as utilities such as electricity, water, and internet.
- Marketing and advertising: Promoting your wholesale tobacco products through various marketing channels, such as print ads, online ads, and trade shows.
- Transportation and logistics: The cost of shipping and delivering your tobacco products to retailers, as well as any transportation expenses for employees or business-related travel.
- Inventory costs: The cost of purchasing and storing inventory, including tobacco products, packaging materials, and other supplies.
- Legal fees: The cost of hiring a lawyer or law firm for legal advice, contracts, and any other legal matters related to your business.
- Office supplies: The cost of purchasing supplies for your office, such as paper, pens, printer ink, and other stationary items.
- Repairs and maintenance: The cost of repairing and maintaining equipment, vehicles, and facilities used in your business.
- Training and development: The cost of training and developing employees, such as attending industry conferences or workshops, or providing in-house training programs.
- Taxes and licenses: The cost of business licenses, permits, and taxes required to operate a tobacco products wholesale business in your area.
- Miscellaneous expenses: Any other operating expenses that do not fit into the categories listed above, such as office cleaning services or business association fees.
This list is not exhaustive by any means, and will need to be tailored to your tobacco products wholesaler's specific circumstances.
What investments are needed to start or grow a tobacco products wholesaler?
Once you have an idea of how much sales you could achieve and what it will cost to run your tobacco products wholesaler, it is time to look into the equipment required to launch or expand the activity.
For a tobacco products wholesaler, capital expenditures and initial working capital items could include:
- Warehouse space: As a tobacco products wholesaler, you will need a large warehouse space to store your inventory. This will include costs for renting or purchasing the space, as well as any necessary renovations or improvements.
- Delivery vehicles: In order to transport your products to your clients, you will need to invest in delivery vehicles. This can include trucks, vans, or other vehicles that are suitable for transporting tobacco products.
- Inventory: As a wholesaler, you will need to purchase a large quantity of tobacco products from manufacturers in order to sell to your clients. This will require a significant capital investment to purchase the initial inventory.
- Furniture and fixtures: Your warehouse and office space will require furniture and fixtures such as shelving, tables, and chairs. These items are essential for organizing your inventory and providing a comfortable and functional workspace for your employees.
- Technology and equipment: In order to efficiently manage your business, you will need to invest in technology and equipment such as computers, printers, barcode scanners, and other office equipment. This will help streamline your operations and improve productivity.
Again, this list will need to be adjusted according to the specificities of your tobacco products wholesaler.
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 tobacco products wholesaler
The next step in the creation of your financial forecast for your tobacco products wholesaler 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 tobacco products wholesaler?
Now let's have a look at the main output tables of your tobacco products wholesaler'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 tobacco products wholesaler'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 tobacco products wholesaler will look different than for a startup.
The projected balance sheet
Your tobacco products wholesaler'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 cash flow forecast
Your tobacco products wholesaler'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 tobacco products wholesaler:
- 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 tobacco products wholesaler'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 tobacco products wholesaler'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 tobacco products wholesaler's financial projections?
Building a tobacco products wholesaler financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your tobacco products wholesaler'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 tobacco products wholesaler 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 tobacco products wholesaler'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 tobacco products wholesaler 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 tobacco products wholesaler'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 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 tobacco products wholesaler, 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
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your tobacco products wholesaler.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a tobacco products wholesaler. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to create a sales forecast for a business?
- Sample financial forecast for business idea
Know someone who runs or wants to start a tobacco products wholesaler? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
