How to create a financial forecast for a watches and jewellery wholesaler?
Developing and maintaining an up-to-date financial forecast for your watches and jewellery wholesaler 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 watches and jewellery wholesaler 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 watches and jewellery wholesaler?
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 watches and jewellery wholesaler becomes handy.
Creating a watches and jewellery wholesaler 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 watches and jewellery wholesaler.
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 watches and jewellery wholesaler 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 watches and jewellery wholesaler'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 watches and jewellery wholesaler financial forecast?
A watches and jewellery wholesaler'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 watches and jewellery wholesaler.
If you are creating (or updating) the forecast of an existing watches and jewellery wholesaler, 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 watches and jewellery wholesaler 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 watches and jewellery wholesaler 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 watches and jewellery wholesaler's financial forecast.
The sales forecast for a watches and jewellery wholesaler
From experience, it usually makes sense to start your watches and jewellery wholesaler's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your watches and jewellery wholesaler (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your watches and jewellery wholesaler's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Product Selection: The types of watches and jewellery that you choose to offer can greatly impact your average price and number of monthly transactions. For example, if you focus on high-end luxury watches and jewellery, you may have a higher average price but a lower number of transactions compared to if you offer a mix of both high-end and more affordable options.
- Economic Conditions: The state of the economy can also influence your average price and number of transactions. In a strong economy, people may be more willing to spend money on luxury items, resulting in a higher average price and more transactions. However, in a weak economy, people may be more cautious with their spending, leading to a lower average price and fewer transactions.
- Competition: The level of competition in your market can also impact your sales forecast. If there are many other wholesalers offering similar products, you may need to lower your prices to stay competitive, resulting in a lower average price. On the other hand, if there is less competition, you may be able to charge higher prices and have a higher average price.
- Consumer Trends: Changes in consumer preferences and trends can also affect your sales forecast. For example, if there is a growing demand for sustainable and ethical products, you may need to adjust your product selection and pricing to cater to this trend. This could result in a higher average price if your products meet these demands, but it may also impact the number of monthly transactions.
- Seasonal Demand: The seasonality of the watch and jewellery industry can also play a role in your sales forecast. During certain times of the year, such as the holiday season or Valentine's Day, there may be a higher demand for these products, resulting in a higher number of transactions and potentially a higher average price. However, in slower seasons, you may need to adjust your pricing and promotions to maintain sales.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 watches and jewellery wholesaler
The next step is to estimate the expenses needed to run your watches and jewellery wholesaler on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your watches and jewellery wholesaler's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, benefits, and training costs for your employees. As a watches and jewellery wholesaler, you will likely need a team of salespeople, warehouse staff, and administrative staff to run your business effectively.
- Accountancy fees: You will need to hire an accountant to help you manage your financial records, file taxes, and ensure compliance with regulations. They may charge a monthly or annual fee for their services.
- Insurance costs: It's important to protect your business and inventory with insurance. This can include property insurance, liability insurance, and worker's compensation insurance.
- Software licenses: As a wholesaler, you will likely need software to manage your inventory, sales, and finances. This can include accounting software, inventory management software, and customer relationship management (CRM) software.
- Banking fees: You will need to open a business bank account to handle your finances. This may include fees for transactions, wire transfers, and monthly account maintenance.
- Rent or lease: If you don't own your own warehouse or office space, you will need to budget for rent or lease payments. This can be a significant expense, so consider your location and space needs carefully.
- Utilities: You will need to pay for utilities such as electricity, water, and internet for your warehouse or office space. These costs can add up, so it's important to budget for them.
- Marketing and advertising: To attract customers and grow your business, you will need to invest in marketing and advertising. This can include social media advertising, print ads, and attending trade shows.
- Travel expenses: If you plan on attending trade shows or meeting with suppliers, you will need to budget for travel expenses such as airfare, hotel stays, and meals.
- Inventory costs: As a wholesaler, your inventory will be a significant expense. You will need to purchase products from manufacturers and suppliers, store them, and ship them to customers.
- Office supplies: You will need basic office supplies such as paper, pens, and printer ink to run your business. These costs may seem small, but they can add up over time.
- Legal fees: As a business owner, you may need to consult with a lawyer for contracts, legal advice, and other business matters. They may charge hourly or flat fees for their services.
- Maintenance and repairs: If you own your warehouse or office space, you will need to budget for maintenance and repairs. This can include things like HVAC systems, plumbing, and general upkeep.
- Taxes: As a business, you will need to pay taxes on your profits. This can include income tax, sales tax, and payroll taxes.
- Professional development: As a watches and jewellery wholesaler, it's important to stay up-to-date on industry trends and developments. You may need to attend conferences or workshops, which can be an expense to consider.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small watches and jewellery wholesaler might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a watches and jewellery wholesaler?
Your watches and jewellery wholesaler 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 watches and jewellery wholesaler, these could include:
- Inventory: This includes the initial purchase of watches and jewellery to stock your store or warehouse. You may also need to periodically replenish your inventory to keep up with demand and stay competitive in the market.
- Equipment: As a watches and jewellery wholesaler, you will need specialized equipment to handle and display your products, such as display cases, jewelry trays, and cleaning tools.
- Warehouse or store space: This is a major capital expenditure for a watches and jewellery wholesaler, as you will need a physical space to store and display your products. The size and location of your space will depend on the scale of your business and your target market.
- Transportation: In order to deliver your products to customers or transport them to and from your warehouse or store, you may need to invest in vehicles or contract with a shipping company.
- Security systems: As watches and jewellery are valuable and high-risk items, it is important to invest in security systems to protect your inventory and store. This may include surveillance cameras, alarms, and security personnel.
Again, this list will need to be adjusted according to the size and ambitions of your watches and jewellery wholesaler.
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 watches and jewellery wholesaler
The next step in the creation of your financial forecast for your watches and jewellery wholesaler 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 watches and jewellery wholesaler?
Now let's have a look at the main output tables of your watches and jewellery wholesaler's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your watches and jewellery wholesaler is likely to be in the years to come.
For your watches and jewellery wholesaler 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 watches and jewellery wholesalers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your watches and jewellery wholesaler's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 forecast
Your watches and jewellery wholesaler'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 watches and jewellery wholesaler:
- 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 watches and jewellery wholesaler'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 watches and jewellery wholesaler'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 watches and jewellery wholesaler's financial forecast?
Creating your watches and jewellery wholesaler'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 watches and jewellery wholesaler'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 watches and jewellery wholesaler 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 watches and jewellery wholesaler's financial forecast?
Creating an accurate and error-free watches and jewellery wholesaler 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 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 watches and jewellery wholesaler, 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 watches and jewellery wholesaler
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 watches and jewellery wholesaler 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 watches and jewellery wholesaler, 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 project revenues for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
