How to create a financial forecast for a vehicle body and cab maker?
Creating a financial forecast for your vehicle body and cab manufacturing business, 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 vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business?
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 vehicle body and cab manufacturing business becomes handy.
Creating a vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business.
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 vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business'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 vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business, 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 vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business, 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 vehicle body and cab manufacturing business's financial forecast.
The sales forecast for a vehicle body and cab manufacturing business
From experience, it is usually best to start creating your vehicle body and cab manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your vehicle body and cab manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing vehicle body and cab manufacturing business, 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:
- Fluctuations in the economy: As the economy experiences ups and downs, the demand for new vehicles may change. If the economy is strong, people may have more disposable income to purchase new cars, leading to an increase in sales for your business. On the other hand, during a recession, people may hold off on purchasing new vehicles, which could result in a decrease in your business's average price and number of monthly transactions.
- Changes in consumer preferences: Consumer preferences for vehicle body and cab designs may change over time, impacting your business's sales. For example, if there is a shift towards more eco-friendly vehicles, you may need to adjust your production to meet the demand for these types of cars. Failure to do so could result in a decrease in your business's average price and number of monthly transactions.
- Competition: The presence of new competitors in the market can affect your business's sales. If a new company enters the market with similar products at a lower price, it could lead to a decrease in your business's average price and number of monthly transactions. On the other hand, if your business is the only one offering a particular type of vehicle body or cab, it could lead to an increase in your business's average price and number of monthly transactions.
- Changes in regulations: Changes in government regulations, such as emission standards or safety requirements, can significantly impact your business. If these regulations become stricter, you may need to invest in new equipment or change your production process, leading to an increase in your business's average price. Alternatively, if regulations become more relaxed, it could lead to a decrease in your business's average price as you may not need to make as many costly changes.
- Technological advancements: Advancements in technology can also affect your business's sales. For example, the rise of electric vehicles may lead to a decrease in demand for traditional gas-powered cars, impacting your business's sales. Additionally, advancements in manufacturing technology could make it easier and cheaper to produce certain types of vehicle bodies and cabs, potentially leading to a decrease in your business's average price.
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 vehicle body and cab manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business will include some of the following items:
- Raw materials: As a vehicle body and cab manufacturing business, you will need to purchase various raw materials such as steel, aluminum, plastic, and other materials to construct the bodies and cabs of your vehicles.
- Labor costs: This includes the salaries and wages of your employees who will be involved in the manufacturing process, such as welders, assemblers, and painters.
- Accountancy fees: You will need to hire an accountant or a professional accounting firm to manage your financial records, prepare tax returns, and provide financial advice.
- Insurance costs: It is crucial to have insurance coverage for your business to protect against potential risks, such as property damage, liability claims, and worker's compensation.
- Software licenses: To streamline your operations and improve efficiency, you may need to purchase software licenses for accounting, inventory management, and other business processes.
- Banking fees: You will incur fees for services such as wire transfers, check processing, and credit card transactions. Shop around for the best banking options to minimize these costs.
- Marketing expenses: To attract customers and promote your business, you may need to spend on advertising, trade shows, and other marketing initiatives.
- Utilities: Your manufacturing facility will require electricity, water, and other utilities to operate. These costs can add up, so it's essential to monitor and reduce energy consumption where possible.
- Rent or mortgage: If you do not own the building where your manufacturing facility is located, you will need to pay rent. If you own the building, you will have mortgage payments to make.
- Repairs and maintenance: Machinery and equipment used in the manufacturing process will require regular maintenance and occasional repairs, which can be costly.
- Transportation costs: You may need to transport raw materials and finished products from suppliers to your facility and then to customers. These transportation costs can vary depending on the distance and mode of transportation.
- Taxes and licenses: As a business, you will be responsible for paying various taxes, such as income tax, property tax, and sales tax. You will also need to renew business licenses and permits regularly.
- Office expenses: You will need to purchase office supplies, such as stationery, printer ink, and other office equipment, to run your business efficiently.
- Employee benefits: In addition to salaries and wages, you may also need to provide benefits such as health insurance, retirement plans, and paid time off to attract and retain skilled employees.
- Training and development: It is essential to invest in the training and development of your employees to enhance their skills and keep them up-to-date with the latest industry trends and technologies.
This list will need to be tailored to the specificities of your vehicle body and cab manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a vehicle body and cab manufacturing business?
Once you have an idea of how much sales you could achieve and what it will cost to run your vehicle body and cab manufacturing business, it is time to look into the equipment required to launch or expand the activity.
For a vehicle body and cab manufacturing business, capital expenditures and initial working capital items could include:
- Machinery and Equipment: This includes the cost of purchasing and maintaining machinery and equipment used in the manufacturing process. This can include items such as cutting machines, welding machines, and paint booths.
- Factory/Production Facility: The cost of purchasing or leasing a factory or production facility to house the manufacturing operations. This can include expenses such as rent, utilities, and property taxes.
- Raw Materials: The cost of purchasing raw materials needed to produce the vehicle bodies and cabs. This can include materials such as metal, plastic, and glass.
- Tooling and Molds: The cost of creating or purchasing the specialized tools and molds needed for the manufacturing process. This can include items such as jigs, fixtures, and molds for specific vehicle models.
- Transportation and Shipping: The cost of transporting raw materials and finished products to and from the manufacturing facility. This can include expenses such as fuel, maintenance, and shipping fees.
Again, this list will need to be adjusted according to the specificities of your vehicle body and cab manufacturing 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.
The financing plan of your vehicle body and cab manufacturing business
The next step in the creation of your financial forecast for your vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business?
Now let's have a look at the main output tables of your vehicle body and cab manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your vehicle body and cab manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business'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 projection
The cash flow forecast of your vehicle body and cab manufacturing business will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the vehicle body and cab manufacturing business's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your vehicle body and cab manufacturing business is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your vehicle body and cab manufacturing business's financial plan.
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 vehicle body and cab manufacturing business's financial forecast?
Creating your vehicle body and cab manufacturing business'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 vehicle body and cab manufacturing business'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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business'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 vehicle body and cab manufacturing business 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 vehicle body and cab manufacturing business'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
- 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 vehicle body and cab manufacturing business.
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 vehicle body and cab manufacturing business. 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 project revenues for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a vehicle body and cab manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
