How to create a financial forecast for a watch and jewellery repair shop?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your watch and jewellery repair shop.
Putting together a watch and jewellery repair shop 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 watch and jewellery repair shop.
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 watch and jewellery repair shop?
The financial projections for your watch and jewellery repair shop act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your watch and jewellery repair shop's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 watch and jewellery repair shop financial forecast?
A watch and jewellery repair shop'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 watch and jewellery repair shop.
If you are creating (or updating) the forecast of an existing watch and jewellery repair shop, 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 watch and jewellery repair shop 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 watch and jewellery repair shop 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 watch and jewellery repair shop's financial forecast.
The sales forecast for a watch and jewellery repair shop
The sales forecast, also called topline projection, is normally where you will start when building your watch and jewellery repair shop 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 watch and jewellery repair shops), and consider the elements below:
- Competition: As more watch and jewellery repair shops enter the market, the average price for repairs may decrease as customers have more options to choose from. On the other hand, if there is a limited number of competitors, you may be able to charge a higher price for your services.
- Economic conditions: In times of economic downturn, people may delay or forgo repairs as they prioritize their spending. This could result in a decrease in the number of monthly transactions for your shop. Conversely, during a period of economic growth, people may be more willing to spend on luxury items, leading to an increase in both average price and monthly transactions.
- Product availability: If there is a shortage of watch and jewellery repair materials or parts, you may have to increase your prices to cover the higher cost of obtaining these items. This could result in a decrease in the number of monthly transactions as customers may be deterred by the higher prices.
- Technological advancements: The introduction of new technology in the watch and jewellery industry may impact your business. For example, if there is a rise in smartwatches that do not require traditional repairs, your average price and number of transactions for watch repairs may decrease. On the other hand, if there is a growing trend of vintage watch enthusiasts who require specialized repairs, you may see an increase in both metrics.
- Seasonality: Your sales forecast may also be affected by seasonal changes. For example, during the holiday season, you may see a significant increase in repairs as people buy and receive new watches and jewellery as gifts. This could lead to a higher average price for repairs and an increase in monthly transactions. However, during slow seasons, you may need to adjust your prices to attract more customers and maintain a steady stream of transactions.
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 watch and jewellery repair shop
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your watch and jewellery repair shop 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 watch and jewellery repair shop will include some of the following items:
- Staff costs: This includes the salaries, benefits, and any training expenses for your employees. You will need skilled repair technicians, sales staff, and administrative support to run your shop effectively.
- Accountancy fees: As a business owner, you will need to hire an accountant to help you keep track of your finances and taxes. They can also provide valuable advice on how to improve the financial health of your business.
- Insurance costs: It is important to have insurance to protect your shop from any unexpected events such as theft, damage to your inventory, or liability claims from customers.
- Software licenses: You will need software to help you manage your inventory, sales, and customer information. This can include point-of-sale systems, accounting software, and customer relationship management tools.
- Banking fees: Your shop will need a business bank account to manage your finances, and there may be fees associated with transactions, wire transfers, and other banking services.
- Rent: If you are not operating your shop from your home, you will need to rent a commercial space. This can be a significant expense, depending on the location and size of your shop.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your shop running. This can include heating and cooling costs, as well as internet and phone services.
- Advertising and marketing: To attract customers to your shop, you may need to invest in advertising and marketing efforts. This can include online ads, flyers, and promotions.
- Supplies and equipment: Your shop will need tools, equipment, and supplies to repair watches and jewellery. This can include polishing machines, pliers, and replacement parts.
- Inventory: You will need to purchase watches, jewellery, and other accessories to sell in your shop. It is important to keep track of your inventory and reorder when necessary to ensure you have enough stock for your customers.
- Professional memberships and certifications: To stay up-to-date with industry trends and best practices, you may need to join professional associations and obtain certifications. These may come with annual fees.
- Cleaning and maintenance: Your shop will need to be cleaned regularly to maintain a professional and welcoming environment for your customers. You may also need to invest in maintenance for your equipment and tools.
- Waste disposal: You will need to properly dispose of any waste, such as packaging materials and old watch batteries. This may require paying for waste removal services.
- Taxes: As a business owner, you will need to pay taxes on your shop's income. This can include income tax, sales tax, and property tax, depending on your location and business structure.
- Legal fees: It is important to have a lawyer to help you with legal contracts, leases, and any other legal matters that may arise in the course of running your shop.
This list will need to be tailored to the specificities of your watch and jewellery repair shop, but should offer a good starting point for your budget.
What investments are needed to start or grow a watch and jewellery repair shop?
Creating and expanding a watch and jewellery repair shop also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a watch and jewellery repair shop could include elements such as:
- Repair Equipment: As a watch and jewellery repair shop, you will need to invest in high-quality repair equipment such as cleaning machines, polishing tools, and precision instruments. These will be essential for repairing and restoring watches and jewellery to their original condition.
- Display Cases: Display cases are an important part of any retail business, including a watch and jewellery repair shop. You will need to invest in high-quality display cases to showcase your repaired watches and jewellery. These cases should be secure, attractive, and well-lit to attract customers and protect your valuable items.
- Security System: As a business dealing with valuable items, it is crucial to invest in a good security system to protect your inventory and your customers' items. This may include security cameras, alarm systems, and strong locks for your doors and display cases.
- Workstations: In order to efficiently repair watches and jewellery, you will need to have designated workstations for each task. This may include a workbench, a cleaning station, and a polishing station. These workstations should be well-equipped with the necessary tools and equipment for each task.
- Inventory Software: To keep track of your inventory, sales, and repairs, it is important to invest in a good inventory management software. This will help you to monitor your stock levels, track sales, and keep records of repairs for each customer. It will also assist in managing your finances and forecasting future sales and expenses.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your watch and jewellery repair shop.
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 watch and jewellery repair shop
The next step in the creation of your financial forecast for your watch and jewellery repair shop 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 watch and jewellery repair shop?
Now let's have a look at the main output tables of your watch and jewellery repair shop's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your watch and jewellery repair shop is likely to be in the years to come.
For your watch and jewellery repair shop 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 watch and jewellery repair shops, 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 watch and jewellery repair shop'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 watch and jewellery repair shop. 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 projection
The cash flow forecast of your watch and jewellery repair shop 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 watch and jewellery repair shop'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 watch and jewellery repair shop 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 watch and jewellery repair shop'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 watch and jewellery repair shop's financial forecast?
Using the right tool or solution will make the creation of your watch and jewellery repair shop's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your watch and jewellery repair shop'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
Outsourcing the creation of your watch and jewellery repair shop 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 watch and jewellery repair shop'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 watch and jewellery repair shop 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 watch and jewellery repair shop'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 watch and jewellery repair shop, 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 watch and jewellery repair shop
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your watch and jewellery repair shop.
- 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 watch and jewellery repair shop. 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
- Financial forecast for a business idea
- How to project sales for a business?
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Founder & CEO at The Business Plan Shop Ltd
