How to create a financial forecast for a vehicle cleaning company?
Developing and maintaining an up-to-date financial forecast for your vehicle cleaning company 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 vehicle cleaning company 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 vehicle cleaning company?
The financial projections for your vehicle cleaning company 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 vehicle cleaning company'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 vehicle cleaning company financial forecast?
A vehicle cleaning company'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 vehicle cleaning company, 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 vehicle cleaning company 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 vehicle cleaning company 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 vehicle cleaning company's financial forecast.
The sales forecast for a vehicle cleaning company
The sales forecast, also called topline projection, is normally where you will start when building your vehicle cleaning company 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 vehicle cleaning companies), and consider the elements below:
- Your location: The average price and number of monthly transactions for your vehicle cleaning business may be affected by your location. For example, if your business is located in a busy city center, you may be able to charge higher prices and have a higher volume of transactions compared to a business located in a rural area.
- Competition: The presence of competitors in your area may also impact your average price and number of monthly transactions. If there are many other vehicle cleaning businesses nearby, you may need to lower your prices or offer unique services to attract customers.
- Seasonality: The time of year can also affect your business's sales forecast. For instance, during the winter months, there may be less demand for vehicle cleaning services, resulting in lower prices and fewer transactions.
- Types of vehicles: The type of vehicles your business specializes in cleaning may also play a role in your sales forecast. For example, if your business primarily cleans luxury cars, you may be able to charge higher prices and have fewer transactions compared to a business that focuses on cleaning standard vehicles.
- Customer demographics: The demographics of your target customers can also influence your average price and number of monthly transactions. For instance, if your business primarily caters to high-income individuals, you may be able to charge higher prices and have a lower volume of transactions compared to a business that targets budget-conscious customers.
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 vehicle cleaning company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your vehicle cleaning company 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 cleaning company will include some of the following items:
- Staff costs: This includes the salaries and wages of your employees, as well as any bonuses or benefits you may offer.
- Accountancy fees: As a business, you'll need to keep track of your finances and file taxes. You may need to hire an accountant to help you with this, which will incur fees.
- Insurance costs: You'll need various types of insurance to protect your business, such as liability insurance, property insurance, and worker's compensation insurance.
- Cleaning supplies: These are the products and tools you'll need to clean vehicles, such as soap, sponges, towels, and wax.
- Water and electricity: Running a vehicle cleaning company requires a lot of water and electricity, so factor in the cost of these utilities.
- Marketing and advertising: To attract customers, you'll need to invest in marketing and advertising efforts, such as flyers, social media ads, and signage.
- Rent or lease: If you're not operating from your own property, you'll need to pay rent or lease fees for your business location.
- Vehicle maintenance: As a vehicle cleaning company, you may have company vehicles that require regular maintenance and repairs.
- Software licenses: You may need to purchase software to help with scheduling, invoicing, and other business tasks.
- Uniforms: Your employees may need to wear uniforms while working, so factor in the cost of purchasing and maintaining these.
- Taxes and permits: As a business owner, you'll need to pay various taxes and obtain permits and licenses to operate legally.
- Banking fees: You'll need a bank account for your business, which may incur fees for transactions, wire transfers, and other services.
- Training and development: To provide high-quality services, you may need to invest in training and development for your employees.
- Office supplies: You may need to purchase various office supplies, such as paper, pens, and printer ink, to run your business.
- Waste disposal: Properly disposing of waste from cleaning vehicles is important and may incur fees, such as for hazardous materials.
This list will need to be tailored to the specificities of your vehicle cleaning company, but should offer a good starting point for your budget.
What investments are needed to start or grow a vehicle cleaning company?
Creating and expanding a vehicle cleaning company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a vehicle cleaning company could include elements such as:
- Vehicle Fleet: As a vehicle cleaning company, you will need to invest in a fleet of vehicles that will be used to transport your equipment and staff to various locations for cleaning services. This includes purchasing or leasing vans, trucks, or other types of vehicles that are large enough to hold your equipment and supplies.
- Cleaning Equipment: In order to effectively clean vehicles, you will need to invest in high-quality cleaning equipment such as pressure washers, vacuums, steam cleaners, and various types of brushes and sponges. These items can be quite expensive, but they are necessary for providing top-notch cleaning services to your customers.
- Water Treatment System: A water treatment system is another important capital expenditure for a vehicle cleaning company. This system is used to filter and purify the water that is used in your cleaning equipment and can help to reduce costs in the long run by extending the lifespan of your equipment.
- Storage Facility: As your business grows, you may need to invest in a storage facility to store your cleaning equipment, supplies, and vehicles. This will help to keep your equipment safe and organized, and also provide a central location for your staff to access equipment when needed.
- Office Equipment: While not directly related to vehicle cleaning, office equipment such as computers, printers, and furniture may also be necessary for running your business. This includes items like accounting software, customer management systems, and other tools that will help you to streamline your operations and manage your finances.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your vehicle cleaning company.
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 cleaning company
The next step in the creation of your financial forecast for your vehicle cleaning company 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 cleaning company?
Now let's have a look at the main output tables of your vehicle cleaning company'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 vehicle cleaning company'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 vehicle cleaning company will look different than for a startup.
The projected balance sheet
Your vehicle cleaning company'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 projection
The cash flow forecast of your vehicle cleaning company 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 cleaning company'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 cleaning company 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 cleaning company'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 cleaning company's financial forecast?
Creating your vehicle cleaning company'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 cleaning company'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 vehicle cleaning company 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 cleaning company'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 cleaning company 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 cleaning company'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 vehicle cleaning company, 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 vehicle cleaning company
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 vehicle cleaning company 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 vehicle cleaning company, 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?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a vehicle cleaning company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
