How to create a financial forecast for a wallpaper manufacturer?
Developing and maintaining an up-to-date financial forecast for your wallpaper manufacturing business 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 wallpaper manufacturing business 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 wallpaper manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your wallpaper manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a wallpaper manufacturing business 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 wallpaper manufacturing business 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 wallpaper manufacturing business'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 needed to build a wallpaper 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 wallpaper 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 wallpaper 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 wallpaper 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 wallpaper manufacturing business's financial forecast.
The sales forecast for a wallpaper manufacturing business
From experience, it is usually best to start creating your wallpaper manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your wallpaper manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing wallpaper 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:
- Seasonal trends: As the demand for wallpaper is typically higher during the spring and summer months, you can expect to see a higher number of monthly transactions during these times. This may also affect your average price, as customers may be willing to pay more during peak season.
- Economic conditions: A strong economy can positively impact your business, as consumers may have more disposable income to spend on home renovations and decorating. On the other hand, a weak economy may lead to a decrease in demand for your products, which could result in lower average prices and fewer transactions.
- Trends in home design: As home design trends change, so does the demand for certain types of wallpaper. Keeping up with current trends and offering a variety of styles can help increase your average price and number of monthly transactions as customers seek out the latest designs.
- Competition: The presence of other wallpaper manufacturers in the market can impact your sales forecast. If there are many competitors offering similar products at lower prices, you may need to adjust your average price to remain competitive and attract customers.
- Raw material costs: Changes in the cost of raw materials, such as paper and ink, can affect your production costs and ultimately impact your average price. If these costs increase, you may need to raise your prices in order to maintain profitability, which could lead to a decrease in monthly transactions.
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 wallpaper manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your wallpaper 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 wallpaper manufacturing business will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for all employees, including factory workers, administrative staff, and management.
- Raw materials: This covers the cost of purchasing materials used in the production of wallpaper, such as paper, ink, adhesives, and packaging materials.
- Equipment and machinery maintenance: As a wallpaper manufacturing business, you will need to regularly maintain and repair your equipment and machinery to ensure efficient production.
- Utilities: This includes the cost of electricity, water, and gas used in the manufacturing process and in the office.
- Rent or mortgage: If you own your factory or office space, you will have mortgage payments. If you rent, this expense will cover your monthly rent payments.
- Marketing and advertising: To promote your wallpaper business and attract customers, you will need to allocate funds for marketing and advertising efforts, such as creating brochures, attending trade shows, and running online campaigns.
- Accountancy fees: It is important to hire an accountant to help you manage your finances, prepare tax returns, and provide financial advice.
- Insurance costs: As a business owner, you need to protect your assets and employees with insurance coverage, such as property insurance, liability insurance, and worker's compensation insurance.
- Software licenses: You may need to purchase licenses for software programs used in your business, such as design software or accounting software.
- Banking fees: This includes fees for maintaining a business bank account, wire transfers, and processing credit card payments.
- Professional fees: This covers fees for legal services, consulting services, and other professional services that may be necessary for your business.
- Travel and transportation: If you need to attend trade shows or visit suppliers, you will need to budget for travel and transportation expenses, such as airfare, hotel accommodations, and car rentals.
- Office supplies: This includes the cost of purchasing office supplies, such as paper, ink, pens, and other items necessary for day-to-day operations.
- Training and development: To ensure that your employees have the necessary skills to perform their jobs effectively, you may need to provide training and development opportunities, which may include workshops, seminars, and online courses.
- Taxes: As a business, you will be responsible for paying various taxes, such as income tax, sales tax, and property tax.
This list will need to be tailored to the specificities of your wallpaper manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a wallpaper manufacturing business?
Your wallpaper manufacturing business 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 wallpaper manufacturing business, these could include:
- Machinery and Equipment: This includes the purchase or lease of equipment such as printing machines, cutting machines, and packaging machines. These are essential for the production of wallpaper and should be included in your expenditure forecast.
- Facility Renovations: If you are starting your business from scratch, you may need to invest in renovating a space to serve as your manufacturing facility. This may include things like flooring, lighting, and ventilation systems. Even if you are renting a facility, you may need to make some renovations to meet your specific needs.
- Inventory: As a wallpaper manufacturer, you will need to keep a stock of raw materials such as paper, ink, and adhesives. These materials can be expensive, so it is important to include them in your expenditure forecast. Additionally, you may also need to invest in storage solutions for your inventory.
- Transportation Vehicles: If you will be delivering your wallpaper products to customers, you may need to purchase or lease transportation vehicles such as trucks or vans. These vehicles will incur initial costs as well as ongoing maintenance expenses, so it is important to factor them into your forecast.
- Technology and Software: In today's digital age, it is important for businesses to have up-to-date technology and software to stay competitive. As a wallpaper manufacturer, you may need to invest in design software, accounting software, and other technology to help streamline your operations and improve efficiency.
Again, this list will need to be adjusted according to the size and ambitions of your wallpaper 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 wallpaper manufacturing business
The next step in the creation of your financial forecast for your wallpaper 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 wallpaper manufacturing business?
Now let's have a look at the main output tables of your wallpaper manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your wallpaper manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a wallpaper 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
The projected balance sheet gives an overview of your wallpaper manufacturing business'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 wallpaper manufacturing business. 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 wallpaper manufacturing business 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 wallpaper manufacturing business'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 wallpaper manufacturing 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 wallpaper manufacturing business's financial forecast?
Creating your wallpaper 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 projection software to build your wallpaper manufacturing business's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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 wallpaper manufacturing business 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 wallpaper 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 wallpaper 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 wallpaper 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 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 wallpaper manufacturing business, 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 wallpaper manufacturing business
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 wallpaper 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 wallpaper 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 sales for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a wallpaper manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
