How to create a financial forecast for a vending machine company?
Creating a financial forecast for your vending machine company, 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 vending machine company 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 vending machine company?
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 vending machine company becomes handy.
Creating a vending machine company 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 vending machine company.
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 vending machine company 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 vending machine company'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 used as input to build a vending machine company financial forecast?
A vending machine company'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 vending machine company.
If you are creating (or updating) the forecast of an existing vending machine company, 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 vending machine company 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 vending machine company 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 vending machine company's financial forecast.
The sales forecast for a vending machine company
The sales forecast, also called topline projection, is normally where you will start when building your vending machine 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 vending machine companies), and consider the elements below:
- Location: The location of your vending machines can greatly impact the average price and number of monthly transactions. For example, if your machines are placed in high-traffic areas such as office buildings or schools, you may be able to charge a higher price for your products and also see an increase in the number of transactions.
- Seasonal Demand: The time of year can also affect your sales. For instance, during the summer months, when people are more likely to be outside and on-the-go, you may see an increase in transactions as people grab a quick snack or drink from your vending machines.
- Product Variety: The variety of products offered in your vending machines can impact your average price and number of transactions. By offering a diverse selection of products, you may be able to attract a wider range of customers and potentially charge higher prices for specialty items.
- Competition: The presence of competition in the same location can also affect your sales. If there are other vending machines or convenience stores nearby, you may need to adjust your prices to remain competitive and retain customers.
- Customer Feedback: Pay attention to customer feedback and adjust your prices accordingly. If customers consistently mention that your prices are too high, you may need to lower them to maintain a steady flow of transactions.
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 vending machine company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your vending machine 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 vending machine company will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for your employees, such as vending machine operators and administrative staff.
- Accountancy fees: You may need to hire an accountant to help you with tax preparation, bookkeeping, and financial analysis for your vending machine company.
- Insurance costs: As with any business, it's important to have insurance to protect your vending machines, employees, and customers in case of accidents or other unforeseen events.
- Software licenses: Many vending machine companies use specialized software for inventory management, sales tracking, and other aspects of their business operations.
- Banking fees: This includes charges for processing credit and debit card transactions, ATM fees, and other banking services that are necessary for your vending machine company.
- Maintenance and repairs: Vending machines need regular maintenance and occasional repairs to keep them in good working condition, which can be a significant expense for your company.
- Supplies and inventory: You will need to purchase snacks, drinks, and other items to stock your vending machines, as well as supplies like cups, napkins, and cleaning products.
- Marketing and advertising: To attract customers and increase sales, you may need to invest in marketing and advertising efforts, such as creating flyers, running promotions, or advertising online.
- Rent and utilities: If you have a physical location for your vending machine company, you will need to pay rent and utilities, such as electricity, water, and internet.
- Vehicle expenses: If you have a company vehicle for restocking and servicing your vending machines, you will need to budget for fuel, maintenance, and insurance costs.
- Legal fees: You may need to consult with a lawyer to ensure that your vending machine company is compliant with all laws and regulations, which can result in legal fees.
- Training and development: It's important to invest in the training and development of your employees to ensure that they have the skills and knowledge to effectively operate and maintain your vending machines.
- Taxes: As a business owner, you will need to pay various taxes, including income tax, sales tax, and payroll taxes.
- Office expenses: Even if you don't have a physical office, you may still have expenses such as phone and internet bills, office supplies, and postage for mailing invoices and other documents.
- Consulting fees: You may need to hire consultants, such as vending machine experts or marketing specialists, to help you improve your business operations and increase profits.
This list will need to be tailored to the specificities of your vending machine company, but should offer a good starting point for your budget.
What investments are needed to start or grow a vending machine company?
Creating and expanding a vending machine company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a vending machine company could include elements such as:
- Vending machines: These are the main capital expenditures for your vending machine company. You will need to purchase or lease the vending machines that will dispense your products. This can include traditional snack and beverage vending machines, as well as more specialized machines for items like fresh food or coffee.
- Vehicle expenses: If you plan on operating a fleet of vending machines, you may need to purchase or lease a vehicle to transport and restock them. This can include a van or truck, as well as any necessary equipment for loading and unloading the machines.
- Warehouse or storage facility: Depending on the size of your vending machine company, you may need to invest in a warehouse or storage facility to store your inventory and supplies. This can include rent or mortgage payments, as well as any necessary equipment for organizing and managing your inventory.
- Technology and software: As technology continues to advance, vending machine companies are incorporating more digital and automated features into their machines. This can include purchasing or leasing specialized software for inventory management, cashless payments, and remote monitoring and maintenance of your machines.
- Maintenance and repair costs: Vending machines require regular maintenance and occasional repairs to keep them in good working condition. This can include the cost of parts and labor for repairs, as well as ongoing maintenance expenses like cleaning and restocking supplies.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your vending machine 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 vending machine company
The next step in the creation of your financial forecast for your vending machine 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 vending machine company?
Now let's have a look at the main output tables of your vending machine company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your vending machine company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a vending machine company 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
The projected balance sheet gives an overview of your vending machine company's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your vending machine company. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The projected cash flow statement
A projected cash flow statement for a vending machine company is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your vending machine company's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the vending machine company 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 vending machine company's financial forecast?
Creating your vending machine 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 vending machine company'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional vending machine company financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your vending machine company's financial forecast?
Creating an accurate and error-free vending machine company 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 vending machine company, 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 vending machine company.
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 vending machine company. 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 sales for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
