How to create a financial forecast for a waste collection company?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your waste collection company.
Putting together a waste collection company financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your waste collection company.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a waste collection 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 waste collection company becomes handy.
Creating a waste collection 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 waste collection 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 waste collection 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 waste collection 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 waste collection company financial forecast?
A waste collection 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 waste collection 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 waste collection 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 waste collection 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 waste collection company's financial forecast.
The sales forecast for a waste collection company
The sales forecast, also called topline projection, is normally where you will start when building your waste collection 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 waste collection company), and consider the elements below:
- Changes in waste disposal regulations: Government regulations on waste disposal, such as increased fees or stricter guidelines, can impact the average price of waste collection services.
- Shift towards environmentally-friendly practices: As more and more consumers and businesses prioritize sustainability, your waste collection company may need to invest in specialized equipment or processes, which could affect your average price.
- Population growth in service area: With a growing population, your company may see an increase in the number of monthly transactions as more households and businesses require waste collection services.
- Competition from other waste collection companies: The presence of other waste collection companies in your service area can impact your average price as you may need to adjust your rates to remain competitive.
- Changes in fuel costs: Fluctuations in fuel prices can affect the cost of operating waste collection vehicles, which could ultimately impact your average price for services.
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 waste collection company
The next step is to estimate the costs you’ll have to incur to operate your waste collection company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your waste collection company's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, benefits, and training for your employees who will be responsible for waste collection, sorting, and disposal.
- Vehicle Expenses: This includes fuel, maintenance, and repairs for the trucks and other vehicles used for waste collection and transportation.
- Equipment Rental: You may need to rent specialized equipment such as garbage compactors or shredders to efficiently collect and process waste.
- Disposal Fees: You will need to pay fees to dispose of waste at landfills or other waste management facilities.
- Accountancy Fees: You will need to hire an accountant or use accounting software to manage your financial records and prepare tax returns.
- Insurance Costs: You will need to have insurance coverage for your vehicles, equipment, and employees to protect against accidents and liability.
- Advertising and Marketing: To attract new customers and promote your services, you may need to invest in advertising and marketing efforts.
- Software Licences: You may need to purchase software licenses for waste management and tracking systems.
- Rent: If you lease office or warehouse space for your waste collection operations, you will need to pay rent.
- Utilities: You will need to cover the costs of electricity, water, and other utilities for your office and warehouse.
- Telecommunication Expenses: You may need to pay for phone and internet services to communicate with customers and manage your operations.
- Banking Fees: You will need to pay fees for bank accounts, credit card processing, and other financial services.
- Office Supplies: This includes items such as paper, pens, and printer ink that are necessary for day-to-day operations.
- Training and Development: To ensure your employees are up-to-date with waste management regulations and best practices, you may need to invest in training and development programs.
- Legal and Regulatory Compliance: You may need to hire a lawyer or consultant to ensure your waste collection company is compliant with all relevant laws and regulations.
This list is not exhaustive by any means, and will need to be tailored to your waste collection company's specific circumstances.
What investments are needed to start or grow a waste collection company?
Creating and expanding a waste collection company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a waste collection company could include elements such as:
- Waste collection vehicles: You will need to purchase or lease trucks and other vehicles specifically designed for waste collection. These vehicles can range from standard garbage trucks to specialized trucks for collecting hazardous or bulky waste.
- Bins and containers: You will need to invest in a variety of bins and containers to collect different types of waste. This may include standard trash bins, recycling bins, and specialized containers for hazardous waste or composting.
- Processing equipment: Depending on the type of waste your company collects, you may need to invest in processing equipment such as shredders, compactors, or sorting machines. These machines will help you efficiently process and prepare waste for disposal or recycling.
- Landfill or transfer station: If your company plans on disposing of waste in a landfill or transfer station, you will need to purchase or lease the land and construct the necessary infrastructure. This may include building access roads, constructing a landfill cell, or installing equipment for waste compaction.
- Office and administrative equipment: While not directly related to waste collection, you will also need to invest in office and administrative equipment such as computers, printers, and software to manage your company's operations and finances.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your waste collection 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 waste collection company
The next step in the creation of your financial forecast for your waste collection 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 waste collection company?
Now let's have a look at the main output tables of your waste collection 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 waste collection 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 waste collection company will look different than for a startup.
The projected balance sheet
Your waste collection 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 waste collection 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 waste collection 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 waste collection 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 waste collection 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 waste collection company's financial forecast?
Creating your waste collection 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 projection software to build your waste collection company'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 waste collection 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 waste collection company's financial forecast?
Creating an accurate and error-free waste collection company financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 waste collection 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 forecast shows expected growth, profitability, and cash generation metrics for your waste collection company.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a waste collection company. Don't hesitate to contact us if you 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
- Financial forecast example
- How to create a turnover forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
