How to create a financial forecast for a wine store?
Developing and maintaining an up-to-date financial forecast for your wine store 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 wine store 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 wine store?
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 wine store becomes handy.
Creating a wine store 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 wine store.
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 wine store 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 wine store'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 wine store financial forecast?
A wine store'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 wine store, 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 wine store 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 wine store 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 wine store's financial forecast.
The sales forecast for a wine store
From experience, it is usually best to start creating your wine store financial forecast by your sales forecast.
To create an accurate sales forecast for your wine store, you will have to rely on the data collected in your market research, or if you're running an existing wine store, 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:
- Seasonal Demand: As a wine store owner, you are well aware that demand for certain types of wine can vary depending on the season. For example, rosé wines are more popular during the summer months, while red wines are often preferred during colder weather. This can affect your average price and number of monthly transactions as you may need to adjust your inventory accordingly.
- Economic Conditions: Economic factors, such as inflation and unemployment rates, can also impact your wine store's sales forecast. During times of economic downturn, consumers may be more price-conscious and opt for cheaper wines, which can lower your average price. On the other hand, during times of economic growth, consumers may be more willing to splurge on higher-priced wines, increasing your average price and number of monthly transactions.
- Wine Trends: Wine trends can also play a role in your sales forecast. For instance, if there is a growing interest in organic or biodynamic wines, you may need to stock these types of wines to meet consumer demand. This can affect your average price as these wines tend to be more expensive, but it may also attract new customers and increase your number of monthly transactions.
- Competition: The presence of other wine stores in your area can also impact your sales forecast. If there are many competitors offering similar products at lower prices, you may need to adjust your prices to stay competitive. This can affect your average price and potentially decrease your number of monthly transactions. On the other hand, if you are the only wine store in the area, you may have more flexibility in setting your prices and potentially increase your average price and number of monthly transactions.
- Wine Ratings and Reviews: Wine ratings and reviews from reputable sources can also influence your sales forecast. Positive ratings and reviews can increase consumer interest and potentially lead to higher sales, while negative reviews can have the opposite effect. This can affect your average price if highly rated wines sell out quickly and you need to restock at a higher price, and it can also impact your number of monthly transactions as consumers may be more likely to purchase wines that have received positive reviews.
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 wine store
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your wine store 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 wine store will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and training costs for all employees working at the wine store.
- Rent: The cost of leasing or renting the physical space for the wine store.
- Utilities: This includes electricity, gas, water, and other utility bills for running the store.
- Inventory: The cost of purchasing and maintaining a stock of wine for sale.
- Marketing and Advertising: Expenses for promoting the wine store through advertisements, social media, and other marketing efforts.
- Accountancy Fees: The cost of hiring an accountant to handle financial tasks such as bookkeeping, tax preparation, and payroll.
- Insurance Costs: This includes insurance premiums for property, liability, and workers' compensation.
- Software Licenses: The cost of purchasing and renewing software licenses for point-of-sale systems, inventory management software, and other necessary programs.
- Banking Fees: Charges for services such as credit card processing, ATM fees, and bank account maintenance.
- Wine Tasting Events: Expenses for hosting wine tasting events to attract customers and promote wine sales.
- Packaging and Shipping: Costs associated with packaging and shipping wine to customers who purchase online or through delivery services.
- Wine Accessories: The cost of purchasing wine glasses, corkscrews, decanters, and other accessories for sale in the store.
- Maintenance and Repairs: Expenses for maintaining and repairing equipment, furniture, and fixtures in the wine store.
- Waste Disposal: The cost of disposing of waste, such as empty wine bottles and packaging materials.
- Professional Memberships: Fees for joining industry associations or organizations that provide resources and networking opportunities for wine store owners.
This list will need to be tailored to the specificities of your wine store, but should offer a good starting point for your budget.
What investments are needed to start or grow a wine store?
Creating and expanding a wine store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a wine store could include elements such as:
- Wine inventory: As a wine store owner, you will need to purchase wine inventory to stock your store. This can include a variety of wines from different regions and price points to appeal to a wide range of customers.
- Wine storage equipment: Properly storing and preserving wine is essential for maintaining its quality. This may include investing in a wine cooler or cellar, as well as shelving or racks to organize and display your inventory.
- POS system: A point-of-sale (POS) system is an important investment for any retail business, including a wine store. This system will help you track sales, manage inventory, and process transactions efficiently.
- Furniture and fixtures: In order to create an inviting and functional space for your customers, you may need to purchase furniture and fixtures such as tables, chairs, display shelves, and lighting.
- Wine glasses and accessories: To enhance the customer experience, you may want to invest in high-quality wine glasses and other accessories such as decanters or corkscrews. These items can also be sold as additional revenue streams.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your wine store.
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 wine store
The next step in the creation of your financial forecast for your wine store 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 wine store?
Now let's have a look at the main output tables of your wine store'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 wine store'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 wine store will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your wine store'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 wine store. 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 wine store'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 wine store:
- 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 wine store'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 wine store'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 wine store's financial projections?
Building a wine store financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial projection software to build your wine store'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 wine store 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 wine store'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 wine store 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 wine store'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 wine store, 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 wine store
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 wine store 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 wine store, 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 write a business plan for a wine store
- How to project sales for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a wine store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
