How to create a financial forecast for a waste transportation company?
Creating a financial forecast for your waste transportation 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 waste transportation 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 waste transportation company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your waste transportation company and ensure that it can be financially viable in the years to come.
A financial plan for a waste transportation company 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 waste transportation company 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 waste transportation company'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 waste transportation company financial forecast?
A waste transportation 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 waste transportation company.
If you are creating (or updating) the forecast of an existing waste transportation 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 waste transportation 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 waste transportation 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 waste transportation company's financial forecast.
The sales forecast for a waste transportation company
From experience, it is usually best to start creating your waste transportation company financial forecast by your sales forecast.
To create an accurate sales forecast for your waste transportation company, you will have to rely on the data collected in your market research, or if you're running an existing waste transportation company, 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:
- Government regulations: As a waste transportation company, you may be subject to various government regulations that can affect your average price and number of monthly transactions. For example, new regulations on waste disposal or emissions can increase your costs, ultimately leading to higher prices for your services. On the other hand, government initiatives promoting recycling and waste reduction can lead to an increase in demand for your services.
- Fuel prices: Fuel is a major expense for waste transportation companies, and fluctuations in fuel prices can have a significant impact on your average price and number of monthly transactions. If fuel prices increase, you may need to raise your prices to cover the extra cost, which could potentially decrease the number of transactions. On the other hand, if fuel prices decrease, you may be able to offer lower prices to attract more customers.
- Competition: The level of competition in your market can also affect your average price and number of monthly transactions. If you operate in a highly competitive market with many waste transportation companies, you may need to lower your prices to stay competitive and attract more customers. However, if you have a unique selling point or offer high-quality services, you may be able to charge higher prices and still maintain a steady number of transactions.
- Population growth/decline: The overall population in your service area can also impact your business. If the population is growing, there may be an increase in demand for waste transportation services, leading to a higher number of transactions. On the other hand, if the population is declining, there may be a decrease in demand, and you may need to lower your prices to attract customers.
- Technological advancements: Advancements in waste management technology can also affect your business's average price and number of monthly transactions. For example, if new technology allows for more efficient waste disposal, you may be able to lower your prices and increase your transactions. On the other hand, if your competitors adopt new technology, you may need to adjust your prices to remain competitive.
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 waste transportation company
The next step is to estimate the costs you’ll have to incur to operate your waste transportation company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your waste transportation company's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, benefits, and training for your employees. As a waste transportation company, you will need drivers, loaders, and other support staff to operate your vehicles and manage the waste.
- Fuel Expenses: Your vehicles will require fuel to operate, and this can be a significant expense for your company. You will need to budget for the cost of diesel or gasoline to keep your trucks running.
- Vehicle Maintenance: Regular maintenance and repairs are essential to keep your fleet of vehicles in good working condition. This can include oil changes, tire replacements, and other mechanical repairs.
- Vehicle Insurance: As a waste transportation company, you will need to insure your vehicles against accidents and other risks. This can be a significant expense, especially if you have a large fleet of trucks.
- Accountancy Fees: It is important to keep accurate financial records for your waste transportation company. You may need to hire an accountant or pay for accounting software to manage your finances.
- Office Rent: You will need a physical location to manage your operations and store documents. This can include office space, warehouses, and other facilities to support your business.
- Insurance Costs: In addition to vehicle insurance, you may need to pay for general liability insurance, workers' compensation insurance, and other types of coverage to protect your business.
- Software Licenses: As a waste transportation company, you may need to use software for route planning, dispatching, and other aspects of your operations. This can include one-time license fees or monthly subscriptions.
- Banking Fees: You will need to open a business bank account to manage your finances. This can include fees for transactions, wire transfers, and other services.
- Marketing and Advertising: To attract customers and promote your services, you may need to invest in marketing and advertising. This can include online advertising, print materials, and other forms of promotion.
- Uniforms and Safety Gear: Your employees will need to wear uniforms and use safety gear to protect themselves while working. This can include high-visibility vests, hard hats, and other equipment.
- Permits and Licenses: Depending on where you operate, you may need to obtain permits and licenses to run a waste transportation company. This can include business licenses, vehicle registrations, and other types of permits.
- Legal Fees: It is important to have legal support for your waste transportation company. You may need to pay for legal advice, contracts, and other legal services.
- Training and Certifications: Your employees will need to be properly trained and certified to handle and transport waste. This can include initial training and ongoing certification renewals.
- Office Supplies: You will need to purchase office supplies such as paper, pens, and printer ink to keep your business running smoothly.
This list is not exhaustive by any means, and will need to be tailored to your waste transportation company's specific circumstances.
What investments are needed to start or grow a waste transportation company?
Creating and expanding a waste transportation company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a waste transportation company could include elements such as:
- Trucks: As a waste transportation company, one of your main capital expenditures will be purchasing trucks to transport waste from one location to another. These trucks can range from smaller pickup trucks to larger semi-trucks, depending on the type and amount of waste you will be transporting.
- Compactors: Another important capital expenditure for a waste transportation company is purchasing compactors. These machines are used to compress waste into smaller sizes, allowing for more efficient transportation and disposal. They come in various sizes and types, such as stationary or mobile compactors.
- Containers: Waste transportation companies also need to invest in containers to store and transport waste. These can include roll-off containers, front-end containers, and rear-load containers, depending on the type of waste and the equipment you have to handle it.
- Fueling and maintenance equipment: In order to keep your trucks and other equipment running smoothly, you will need to invest in fueling and maintenance equipment. This can include fuel pumps, oil and lubricant storage tanks, and tools for regular maintenance and repairs.
- Land and facilities: Depending on the size and scope of your waste transportation company, you may also need to invest in land and facilities. This can include a storage yard for your trucks and equipment, an office building for administrative tasks, and a processing facility for sorting and recycling waste.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your waste transportation 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 transportation company
The next step in the creation of your financial forecast for your waste transportation 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 transportation company?
Now let's have a look at the main output tables of your waste transportation company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your waste transportation company is likely to be in the years to come.
For your waste transportation company 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 waste transportation companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your waste transportation 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 waste transportation 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 cash flow forecast
Your waste transportation company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the waste transportation company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your waste transportation company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your waste transportation company's financial plan - so that banks or investors can assess seasonal variation and ensure your 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 waste transportation company's financial forecast?
Creating your waste transportation 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 waste transportation company'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional waste transportation company financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your waste transportation company'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 waste transportation company 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 waste transportation company'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 waste transportation company, 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 waste transportation company
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 waste transportation 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 waste transportation 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 create a turnover forecast for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a waste transportation company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
