How to create a financial forecast for an african restaurant?
Developing and maintaining an up-to-date financial forecast for your african restaurant is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together an african restaurant 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 an african restaurant?
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 african restaurant becomes handy.
Creating an african restaurant 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 african restaurant.
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 an african restaurant 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 african restaurant'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 an african restaurant financial forecast?
A african restaurant'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 african restaurant, 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 an african restaurant 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 african restaurant 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 african restaurant's financial forecast.
The sales forecast for an african restaurant
From experience, it is usually best to start creating your african restaurant financial forecast by your sales forecast.
To create an accurate sales forecast for your african restaurant, you will have to rely on the data collected in your market research, or if you're running an existing african restaurant, 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:
- The local economy and consumer spending habits can greatly impact your average price and number of monthly transactions. If the economy is struggling, people may have less disposable income to spend on dining out, causing them to opt for lower-priced menu items or visit your restaurant less frequently.
- The availability and cost of ingredients can also affect your average price. For example, if certain ingredients used in traditional African dishes are not readily available in your area, you may have to pay a premium to source them, which may drive up your menu prices.
- The seasonality of certain ingredients can also impact your average price and number of monthly transactions. For example, if a key ingredient for one of your popular dishes is only available during a certain time of year, you may need to adjust your menu and potentially raise prices during that season.
- The competition in your local area can also play a role in your average price and number of monthly transactions. If there are many other African restaurants nearby, you may need to adjust your prices or offer promotions to stay competitive and attract customers.
- The demographic of your customer base can also affect your average price and number of monthly transactions. For instance, if your restaurant is located in an area with a high population of students or young professionals, you may need to offer more affordable options to cater to their budget and dining preferences.
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 an african restaurant
The next step is to estimate the expenses needed to run your african restaurant 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 african restaurant's operating expenses should include the following items at a minimum:
- Staff Costs: This includes the salaries and wages of your employees, as well as any benefits or bonuses you may offer. In an african restaurant, you may also need to budget for specialized staff such as a chef who is knowledgeable in African cuisine.
- Food and Beverage Costs: This includes the cost of ingredients and supplies needed to prepare the dishes on your menu. In an african restaurant, this may include specialty spices, meats, and produce that are not commonly used in other cuisines.
- Rent and Utilities: This includes the cost of your restaurant's physical space, as well as utilities such as electricity, water, and gas. In an African restaurant, you may also need to factor in the cost of specialized equipment, such as traditional cooking methods.
- Marketing and Advertising: This includes the cost of promoting your restaurant and attracting customers. In an african restaurant, you may need to focus on targeting specific demographics or communities to reach your target audience.
- Accountancy Fees: As a business owner, you will need to keep track of your finances and may require the assistance of an accountant. This expense may include bookkeeping, tax preparation, and other financial services.
- Insurance Costs: It is important to protect your business and employees with insurance. This may include property insurance, liability insurance, and worker's compensation.
- Software Licenses: In today's digital age, many restaurants rely on software for point of sale systems, inventory management, and online ordering. These licenses may come at a cost.
- Kitchen and Dining Supplies: This includes the cost of plates, utensils, cookware, and other essential items for your kitchen and dining area. In an african restaurant, you may also need to budget for specialty serving dishes and utensils.
- Cleaning and Maintenance: To ensure a safe and hygienic environment for your customers and employees, you will need to budget for regular cleaning and maintenance services.
- Banking Fees: As a business, you may have to pay fees for transactions, account maintenance, and other banking services.
- Licensing and Permits: In order to legally operate your restaurant, you may need to obtain various licenses and permits from local and state authorities. These may come at a cost.
- Training and Development: To ensure the success of your restaurant, you may need to invest in training and development for your staff. This could include food safety training, customer service training, and management development.
- Music and Entertainment: If your restaurant offers live music or other forms of entertainment, you will need to budget for the cost of musicians or performers.
- Waste Management: Proper waste management is important for both the environment and your business. You may need to budget for waste removal services or composting supplies.
- Legal Fees: In the event of any legal issues or disputes, you may need to budget for legal fees and services.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small african restaurant might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an african restaurant?
Once you have an idea of how much sales you could achieve and what it will cost to run your african restaurant, it is time to look into the equipment required to launch or expand the activity.
For an african restaurant, capital expenditures and initial working capital items could include:
- Restaurant Furniture and Decor: This includes items such as tables, chairs, booths, and other decorative elements that will give your restaurant an authentic African feel. You may also need to purchase African-inspired artwork, wall hangings, and other decorations to enhance the atmosphere.
- Kitchen Equipment: As an African restaurant, you will need specialized equipment to prepare traditional dishes. This may include items such as a clay oven, a tandoor, or other equipment specific to the type of cuisine you will be serving. You may also need to purchase specialized cookware and utensils.
- Inventory and Ingredients: To run a successful African restaurant, you will need to keep a well-stocked inventory of ingredients and spices. This includes items such as grains, meats, vegetables, and spices that are essential to creating authentic African dishes. You may also need to factor in the cost of importing certain ingredients if they are not readily available in your local area.
- POS System: A point of sale (POS) system is an essential tool for any restaurant, including an African restaurant. This system will allow you to track sales, manage inventory, and process payments. It may also include additional features such as table management and online ordering.
- Restaurant Renovations: Depending on the location of your restaurant, you may need to make renovations or updates to the space to create a suitable dining environment. This may include items such as painting, flooring, lighting, and other improvements to ensure your restaurant is visually appealing to customers.
Again, this list will need to be adjusted according to the specificities of your african restaurant.
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 african restaurant
The next step in the creation of your financial forecast for your african restaurant 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 an african restaurant?
Now let's have a look at the main output tables of your african restaurant's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your african restaurant is likely to be in the years to come.
For your african restaurant 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 african restaurants, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your african restaurant'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 african restaurant'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 african restaurant:
- 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 african restaurant'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 african restaurant'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 african restaurant's financial projections?
Building an african restaurant 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 forecasting software to build your african restaurant'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 african restaurant 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 african restaurant's financial forecast?
Creating an accurate and error-free african restaurant 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 forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own african restaurant, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
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 african restaurant 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 an african restaurant, 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 sales for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
