How to create a financial forecast for a water skiing company?
Creating a financial forecast for your water skiing 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 water skiing 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 water skiing 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 water skiing company becomes handy.
Creating a water skiing 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 water skiing 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 water skiing 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 water skiing 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 needed to build a water skiing company financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a water skiing company, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the water skiing company on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing water skiing company, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your water skiing company's financial forecast.
The sales forecast for a water skiing company
From experience, it is usually best to start creating your water skiing company financial forecast by your sales forecast.
To create an accurate sales forecast for your water skiing company, you will have to rely on the data collected in your market research, or if you're running an existing water skiing 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:
- Weather conditions: The average price of your water skiing services may be affected by the weather conditions in your area. If you experience a particularly hot and sunny summer, you may see an increase in demand for your services, leading to higher prices. On the other hand, if the summer is rainy or cool, you may see a decrease in demand and need to lower your prices to attract customers.
- Competition: The presence of other water skiing companies in your area can also impact your average price and number of monthly transactions. If you are the only company offering these services, you may be able to charge higher prices and see more transactions. However, if there are many competitors, you may need to lower your prices to stay competitive and maintain your customer base.
- Economic conditions: Economic factors such as a recession or a strong economy can also affect your business. During a recession, people may have less disposable income and be less likely to spend money on recreational activities like water skiing. This could result in a decrease in both your average price and number of transactions. Conversely, during a strong economy, people may have more disposable income and be more willing to spend money on leisure activities, leading to an increase in both your average price and number of transactions.
- Seasonal trends: As a water skiing company, your business may be highly influenced by seasonal trends. During the summer months when the weather is warm, you may see a peak in demand for your services, resulting in higher average prices and more transactions. In contrast, during the colder months, you may see a decrease in demand and need to adjust your prices accordingly.
- Customer demographics: The demographics of your target market can also impact your business. For example, if your target market consists of primarily younger individuals, you may see higher demand during summer breaks and vacations, resulting in higher prices and more transactions. On the other hand, if your target market is older individuals who may have more disposable income, you may see a more consistent demand throughout the year.
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 water skiing company
The next step is to estimate the expenses needed to run your water skiing company 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 water skiing company's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and training costs for your water skiing instructors, boat drivers, and other staff members.
- Equipment maintenance: As a water skiing company, you will need to regularly maintain and repair your equipment, such as skis, ropes, and boats.
- Fuel expenses: Running a water skiing business requires a significant amount of fuel to operate your boats. This can be a major expense for your company.
- Boat insurance: In addition to general liability insurance, you will also need to purchase insurance specifically for your boats to protect against accidents and damages.
- Accountancy fees: It is important to have accurate financial records for your water skiing company, so hiring an accountant or bookkeeper to manage your finances is a necessary expense.
- Marketing and advertising: To attract customers, you will need to invest in marketing and advertising efforts, such as creating a website, printing flyers, and promoting your business on social media.
- Rent or lease: If you do not own the property where your water skiing business operates, you will need to include rent or lease expenses in your operating costs.
- Utilities: This includes electricity, water, and other utility expenses for your business location.
- Insurance costs: In addition to boat insurance, you will also need to purchase general liability insurance to protect against accidents and injuries on your property.
- Software licenses: As a water skiing company, you may need to use specialized software for booking reservations, managing schedules, and keeping track of customer information.
- Banking fees: You will need a business bank account to manage your finances, and there may be fees associated with transactions, wire transfers, and other banking services.
- Permits and licenses: To legally operate your water skiing business, you will need to obtain permits and licenses from your local government. These may come with fees and renewal costs.
- Office supplies: You will need basic office supplies, such as paper, pens, and printer ink, to run your business efficiently.
- Training and certifications: Your staff members may need to attend training and obtain certifications to ensure they have the necessary skills and qualifications to provide quality water skiing services.
- Taxes: As a business owner, you will need to pay various taxes, including income tax, sales tax, and payroll taxes.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small water skiing company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a water skiing company?
Once you have an idea of how much sales you could achieve and what it will cost to run your water skiing company, it is time to look into the equipment required to launch or expand the activity.
For a water skiing company, capital expenditures and initial working capital items could include:
- Boats: As a water skiing company, you will need to have boats in order to provide your customers with the opportunity to go water skiing. These boats can range from basic models to more advanced and expensive ones, depending on your target market and the level of services you want to offer.
- Safety Equipment: Safety should always be a top priority for your water skiing company. This means investing in proper safety equipment such as life jackets, helmets, and first aid kits. These items may seem like small expenses, but they are crucial for the well-being of your customers and your business reputation.
- Jet Skis: In addition to boats, jet skis can also be a popular choice for customers who want a more thrilling water skiing experience. These personal watercrafts can be expensive, but they can also attract a different type of clientele and add diversity to your offerings.
- Dock and Launching Area: You will need a designated area to dock your boats and jet skis, as well as a safe and convenient place for customers to embark and disembark. This may require building a dock and constructing a launching area, which can be a significant capital expenditure for your water skiing company.
- Equipment Maintenance and Repairs: As with any business, maintenance and repairs are inevitable costs. For a water skiing company, this may include regular maintenance for your boats and jet skis, as well as repairs for any damages that may occur during usage. These costs should be factored into your expenditure forecast to ensure that your equipment remains in good condition and your business runs smoothly.
Again, this list will need to be adjusted according to the specificities of your water skiing 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 water skiing company
The next step in the creation of your financial forecast for your water skiing 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 water skiing company?
Now let's have a look at the main output tables of your water skiing company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your water skiing company is likely to be in the years to come.
For your water skiing 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 water skiing companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your water skiing 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 forecast
Your water skiing 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 water skiing 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 water skiing 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 water skiing 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 water skiing company's financial forecast?
Creating your water skiing 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 water skiing company'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional water skiing 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 water skiing 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 water skiing 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 water skiing 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 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
- 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 water skiing 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 water skiing 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 template for a business idea
Know someone who runs or wants to start a water skiing company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
