How to create a financial forecast for a warehouse store?
Creating a financial forecast for your warehouse store, 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 warehouse store 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 warehouse store?
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 warehouse store becomes handy.
Creating a warehouse store 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 warehouse store.
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 warehouse store 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 warehouse store'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 warehouse store financial forecast?
A warehouse store'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 warehouse store.
If you are creating (or updating) the forecast of an existing warehouse store, 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 warehouse store 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 warehouse store 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 warehouse store's financial forecast.
The sales forecast for a warehouse store
The sales forecast, also called topline projection, is normally where you will start when building your warehouse store 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 warehouse stores), and consider the elements below:
- Seasonal Demand: As a warehouse store owner, you may experience fluctuations in the number of monthly transactions based on the time of year. For example, during the holiday season, there may be an increase in demand for bulk items and gift sets, leading to higher average prices and more transactions.
- Economic Conditions: Changes in the economy can greatly impact your warehouse store's sales forecast. In times of economic growth, consumers may be more willing to spend on big-ticket items, increasing your average price and number of monthly transactions. Conversely, during an economic downturn, customers may be more budget-conscious, resulting in lower average prices and fewer transactions.
- Competition: The presence of other warehouse stores in your area can affect your sales forecast. If you have direct competitors offering similar products at lower prices, you may need to adjust your average price to remain competitive and maintain your number of monthly transactions.
- Product Availability: Your sales forecast may be impacted by the availability of certain products. For example, if a popular item is out of stock, customers may choose to shop at a different warehouse store, resulting in lower average prices and fewer transactions for your business.
- Customer Demographics: The demographic of your customer base can also influence your sales forecast. If your warehouse store caters to a younger demographic, you may see an increase in average prices and monthly transactions during back-to-school or summer break periods. On the other hand, if your target market is primarily retirees, you may experience a decline in sales during the winter months when many are traveling or staying indoors due to the weather.
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 warehouse store
The next step is to estimate the costs you’ll have to incur to operate your warehouse store.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your warehouse store's operating expenses should normally include the following items:
- Employee salaries and benefits: This includes wages, health insurance, retirement contributions, and other benefits for your warehouse store employees.
- Rent and utilities: You will have to pay for the warehouse space, as well as electricity, water, and other utilities to keep your store running.
- Inventory costs: This includes the cost of purchasing and storing inventory, as well as any fees for inventory management software.
- Accounting and bookkeeping fees: You may need to hire an accountant or bookkeeper to keep track of your financial records and ensure compliance with tax laws.
- Insurance costs: To protect your business from unexpected events, you will need to purchase insurance for your warehouse store.
- Marketing and advertising expenses: You will need to invest in marketing and advertising to attract customers to your warehouse store.
- Equipment rental and maintenance: If you do not own all of the equipment in your warehouse store, you will have to pay for rental fees and maintenance costs.
- Software licenses: In addition to inventory management software, you may need to purchase licenses for other business software, such as point-of-sale systems or accounting software.
- Banking fees: You will have to pay fees for processing credit and debit card transactions, as well as any fees for maintaining a business bank account.
- Shipping and delivery costs: If you offer shipping or delivery services for your products, you will have to cover the associated costs.
- Cleaning and maintenance expenses: To keep your warehouse store clean and presentable, you will need to pay for cleaning supplies, as well as any maintenance or repair costs.
- Office supplies: You will need to purchase basic office supplies, such as paper, pens, and printer ink, to keep your business operations running smoothly.
- Taxes and licenses: Depending on where your warehouse store is located, you may need to pay for business licenses and taxes.
- Security costs: To protect your inventory and premises from theft or damage, you may need to invest in security measures such as cameras or security guards.
- Training and development: It is important to invest in training and development programs for your employees to ensure they have the skills and knowledge needed to perform their jobs effectively.
This list is not exhaustive by any means, and will need to be tailored to your warehouse store's specific circumstances.
What investments are needed to start or grow a warehouse store?
Once you have an idea of how much sales you could achieve and what it will cost to run your warehouse store, it is time to look into the equipment required to launch or expand the activity.
For a warehouse store, capital expenditures and initial working capital items could include:
- Warehouse building: This includes the cost of purchasing or leasing the physical space for the warehouse store. It also includes any renovations or modifications required to make the space suitable for a warehouse store, such as installing loading docks or reinforcing floors for heavy equipment.
- Forklifts and other material handling equipment: These are essential for moving and organizing large quantities of products in a warehouse store. The cost of purchasing or leasing forklifts, pallet jacks, and other equipment should be included in the expenditure forecast.
- Shelving and storage systems: A warehouse store needs to have efficient and organized storage for its products. This may include purchasing or installing pallet racking, shelving units, and other storage systems. The cost of these items should be included in the expenditure forecast.
- Security systems: As a warehouse store will have a large inventory of products, it's important to invest in security systems to prevent theft or damage. This may include purchasing or installing CCTV cameras, alarm systems, and security gates. The cost of these systems should be included in the expenditure forecast.
- Delivery vehicles: If the warehouse store offers delivery services, the cost of purchasing or leasing delivery vehicles should be included in the expenditure forecast. This may also include insurance and maintenance costs for the vehicles.
Again, this list will need to be adjusted according to the specificities of your warehouse store.
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 warehouse store
The next step in the creation of your financial forecast for your warehouse store 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 warehouse store?
Now let's have a look at the main output tables of your warehouse store's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your warehouse store is likely to be in the years to come.
For your warehouse store to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established warehouse stores, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your warehouse store'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 projected cash flow statement
A projected cash flow statement for a warehouse store 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 warehouse store'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 warehouse store 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 warehouse store's financial forecast?
Creating your warehouse store'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 warehouse store'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 warehouse store 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 warehouse store'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 warehouse store 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 warehouse store'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
- 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 warehouse store 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 warehouse store, 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 create a turnover forecast for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a warehouse store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
