How to create a financial forecast for a toy and game wholesaler?
Developing and maintaining an up-to-date financial forecast for your toy and game wholesaler is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a toy and game wholesaler financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a toy and game wholesaler?
The financial projections for your toy and game 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 toy and game 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 toy and game wholesaler financial forecast?
A toy and game wholesaler's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing toy and game wholesaler, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a toy and game wholesaler startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the toy and game wholesaler running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your toy and game wholesaler's financial forecast.
The sales forecast for a toy and game wholesaler
The sales forecast, also called topline projection, is normally where you will start when building your toy and game wholesaler 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 toy and game wholesalers), and consider the elements below:
- Seasonal Trends: As a toy and game wholesaler, you may experience fluctuations in the average price and number of monthly transactions depending on the time of year. For example, during the holiday season, there may be a higher demand for toys and games, leading to an increase in prices and transactions. On the other hand, during slower months, prices may decrease to attract customers and transactions may decrease as well.
- Popularity of Trends: The popularity of certain trends in the toy and game industry can greatly impact your average price and number of monthly transactions. For instance, if a particular toy or game becomes highly sought after, you may be able to increase the price and see a surge in transactions. On the other hand, if a trend dies down, you may need to lower prices to move inventory and transactions may decrease as well.
- Competition: The level of competition in the market can also affect your average price and number of monthly transactions. If there are many other wholesalers offering similar products at lower prices, you may need to adjust your prices to stay competitive and maintain transactions. On the other hand, if you are the only supplier of popular products, you may be able to increase prices and see a higher number of transactions.
- Economic Conditions: Economic conditions can have a significant impact on the toy and game industry and ultimately affect your average price and number of monthly transactions. During times of economic downturn, consumers may cut back on non-essential purchases, leading to a decrease in prices and transactions. Conversely, during times of economic growth, consumers may be more willing to spend on toys and games, leading to an increase in prices and transactions.
- Supplier Costs: Your average price and number of monthly transactions can also be affected by the costs of your suppliers. If the cost of raw materials or production increases, you may need to pass on those costs to your customers, resulting in higher prices and potentially lower transactions. On the other hand, if you are able to negotiate lower costs with your suppliers, you may be able to offer lower prices and see an increase in transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 toy and game wholesaler
The next step is to estimate the costs you’ll have to incur to operate your toy and game wholesaler.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your toy and game wholesaler's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, benefits, and payroll taxes for all employees working in your toy and game wholesale business.
- Accountancy Fees: You will need to hire an accountant to handle your financial records, tax filings, and other financial tasks.
- Insurance Costs: As a wholesaler, you will need to insure your inventory, warehouse, and other assets against potential risks such as theft, fire, or natural disasters.
- Software Licences: To manage your inventory, sales, and other business operations, you may need to purchase software and obtain licenses for them.
- Banking Fees: You will need to pay transaction fees, account maintenance fees, and other banking fees for managing your business bank accounts and processing payments.
- Rent: If you are leasing a warehouse or office space, you will need to pay rent on a monthly basis.
- Utilities: This includes electricity, water, and other utility bills for your warehouse and office space.
- Transportation Costs: You will need to pay for transportation of your products from the manufacturer to your warehouse, and from your warehouse to your customers.
- Marketing and Advertising: To promote your business and reach potential customers, you may need to invest in marketing and advertising efforts such as social media, print ads, and trade shows.
- Office Supplies: This includes expenses for office furniture, equipment, and other supplies needed to run your business.
- Travel Expenses: If you need to travel for business purposes, you will need to budget for travel expenses such as airfare, lodging, and meals.
- Professional Memberships: To stay updated on industry trends and network with other professionals, you may need to pay for membership fees to join professional organizations.
- Legal Fees: As a business owner, you may need to seek legal advice or assistance with contracts, trademarks, and other legal matters, which may result in legal fees.
- Office Rent: If you have an office space separate from your warehouse, you will need to budget for rent and utilities for that space.
- Office Staff Supplies: This includes expenses for office staff supplies such as paper, printer ink, and other office essentials.
This list is not exhaustive by any means, and will need to be tailored to your toy and game wholesaler's specific circumstances.
What investments are needed to start or grow a toy and game wholesaler?
Your toy and game wholesaler 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 toy and game wholesaler, these could include:
Again, this list will need to be adjusted according to the size and ambitions of your toy and game 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 toy and game wholesaler
The next step in the creation of your financial forecast for your toy and game 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 toy and game wholesaler?
Now let's have a look at the main output tables of your toy and game wholesaler's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your toy and game wholesaler is likely to be in the years to come.
For your toy and game wholesaler 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 toy and game wholesalers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your toy and game 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 toy and game 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 toy and game 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 toy and game 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 toy and game 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 toy and game wholesaler's financial projections?
Building a toy and game 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 toy and game wholesaler'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
Outsourcing the creation of your toy and game wholesaler financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your toy and game 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 toy and game 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 toy and game 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 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 toy and game wholesaler, 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 toy and game wholesaler
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your toy and game wholesaler.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a toy and game wholesaler. Don't hesitate to contact us if you 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
- Financial forecast example
- How to create a turnover forecast for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
