How to create a financial forecast for a vertical transportation firm?
Creating a financial forecast for your vertical transportation firm, 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 vertical transportation firm 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 vertical transportation firm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your vertical transportation firm and ensure that it can be financially viable in the years to come.
A financial plan for a vertical transportation firm enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date vertical transportation firm forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your vertical transportation firm's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 vertical transportation firm financial forecast?
A vertical transportation firm'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 vertical transportation firm.
If you are creating (or updating) the forecast of an existing vertical transportation firm, 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 vertical transportation firm 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 vertical transportation firm 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 vertical transportation firm's financial forecast.
The sales forecast for a vertical transportation firm
From experience, it is usually best to start creating your vertical transportation firm financial forecast by your sales forecast.
To create an accurate sales forecast for your vertical transportation firm, you will have to rely on the data collected in your market research, or if you're running an existing vertical transportation firm, 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:
- Local Building Codes: As a vertical transportation firm, you are subject to local building codes and regulations. Changes in these codes, such as requiring elevators in all new buildings over a certain height, can directly affect your average price and number of monthly transactions.
- Technological Advancements: The vertical transportation industry is constantly evolving with new technologies and innovations. If your competitors are offering newer, more efficient elevators, it may impact your average price and number of monthly transactions as customers may be drawn to the latest and greatest options.
- Economic Conditions: The state of the economy can also have a significant impact on your business. During times of economic downturn, customers may be less likely to invest in new elevators or may opt for cheaper, budget-friendly options. This can result in a decrease in your average price and number of monthly transactions.
- Population Growth: As cities continue to grow and expand, the demand for vertical transportation in new buildings and developments will also increase. This can lead to an increase in your average price and number of monthly transactions as there is a higher demand for your services.
- Maintenance Contracts: Offering maintenance contracts to your customers can have an impact on your average price and number of monthly transactions. By providing regular maintenance and upkeep, you may be able to charge a higher price and secure more consistent monthly transactions from your customers.
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 vertical transportation firm
The next step is to estimate the costs you’ll have to incur to operate your vertical transportation firm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your vertical transportation firm's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and training for employees who are responsible for operating and maintaining vertical transportation equipment such as elevators and escalators.
- Accountancy fees: Hiring a professional accountant can help you keep track of your finances and ensure compliance with tax laws and regulations.
- Insurance costs: As a vertical transportation firm, you will need to have insurance coverage for potential accidents or damages involving your equipment.
- Software licenses: You may need to purchase or renew software licenses for programs that help you manage and monitor the performance of your vertical transportation equipment.
- Banking fees: This includes charges for using banking services such as wire transfers, credit card processing, and account maintenance.
- Maintenance and repair costs: Regular maintenance and occasional repairs are necessary to keep your vertical transportation equipment in good working condition.
- Utility expenses: Vertical transportation equipment requires electricity to operate, so you will need to account for utility expenses in your operating costs.
- Marketing and advertising: Promoting your services and reaching potential clients through marketing and advertising initiatives can be a valuable operating expense for your firm.
- Office supplies and equipment: These include items such as paper, pens, and computers that are necessary for day-to-day operations in your office.
- Professional fees: You may need to hire consultants or legal advisors to assist with specific projects or to ensure compliance with industry regulations.
- Training and development: Continuing education and training for your employees can help improve the quality of your services and keep your firm competitive.
- Rent and utilities for office space: If you have a physical office space, you will need to factor in rent and utility expenses in your operating costs.
- Travel expenses: If your firm operates in multiple locations, you may need to account for travel expenses for employees to visit and service different sites.
- Legal and insurance fees: In addition to insurance costs, you may also need to pay for legal fees associated with contracts, permits, or other legal matters related to your business.
- Vehicle expenses: If your firm owns vehicles for transporting equipment or employees, you will need to factor in expenses such as gas, maintenance, and insurance.
This list is not exhaustive by any means, and will need to be tailored to your vertical transportation firm's specific circumstances.
What investments are needed to start or grow a vertical transportation firm?
Once you have an idea of how much sales you could achieve and what it will cost to run your vertical transportation firm, it is time to look into the equipment required to launch or expand the activity.
For a vertical transportation firm, capital expenditures and initial working capital items could include:
- Elevators: These are a crucial asset for a vertical transportation firm as they allow for efficient movement of people and goods between different floors of a building. This can include the cost of purchasing and installing new elevators, as well as maintenance and repairs.
- Escalators: Similar to elevators, escalators are another important capital expenditure for a vertical transportation firm. They are often used in larger buildings and retail spaces to move people between floors. These can also include the cost of purchasing, installing, and maintaining escalators.
- Lifts: Lifts, also known as vertical platforms or wheelchair lifts, are essential for providing accessibility in buildings with multiple floors. These can include the cost of purchasing, installing, and maintaining lifts for people with mobility impairments.
- Hoists: Hoists are used for lifting heavy objects or equipment to different floors of a building. These can be used in construction or maintenance projects and may require regular maintenance and repairs to ensure safety and efficiency.
- Control Systems: Control systems are a crucial component of a vertical transportation firm as they ensure the smooth operation of elevators, escalators, and other equipment. These may include the cost of purchasing, installing, and maintaining control systems, as well as upgrades to ensure the latest technology is being used.
Again, this list will need to be adjusted according to the specificities of your vertical transportation firm.
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 vertical transportation firm
The next step in the creation of your financial forecast for your vertical transportation firm 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 vertical transportation firm?
Now let's have a look at the main output tables of your vertical transportation firm'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 vertical transportation firm'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 vertical transportation firm will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your vertical transportation firm'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 vertical transportation firm. 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 vertical transportation firm 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 vertical transportation firm'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 vertical transportation firm 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 vertical transportation firm's financial forecast?
Using the right tool or solution will make the creation of your vertical transportation firm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your vertical transportation firm'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 vertical transportation firm 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 vertical transportation firm's financial forecast?
Creating an accurate and error-free vertical transportation firm 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 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 vertical transportation firm, 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 vertical transportation firm
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 vertical transportation firm.
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 vertical transportation firm. 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 turnover forecast for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a vertical transportation firm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
