How to create a financial forecast for an airplane leasing company?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your airplane leasing company.
Putting together an airplane leasing company 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 airplane leasing company.
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 an airplane leasing company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your airplane leasing company and ensure that it can be financially viable in the years to come.
A financial plan for an airplane leasing company enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date airplane leasing company forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your airplane leasing company's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 airplane leasing company financial forecast?
A airplane leasing company'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 airplane leasing company, 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 airplane leasing company 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 airplane leasing company 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 airplane leasing company's financial forecast.
The sales forecast for an airplane leasing company
From experience, it is usually best to start creating your airplane leasing company financial forecast by your sales forecast.
To create an accurate sales forecast for your airplane leasing company, you will have to rely on the data collected in your market research, or if you're running an existing airplane leasing 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:
- Fuel prices: As an airplane leasing company, you will need to consider the impact of fluctuating fuel prices on your average price and number of monthly transactions. Higher fuel prices can increase your operating costs and potentially lead to higher prices for customers, resulting in fewer transactions. On the other hand, lower fuel prices can make your services more attractive and lead to an increase in transactions.
- Economic conditions: The state of the economy can greatly affect the demand for airplane leasing services. During an economic downturn, businesses and individuals may cut back on travel, resulting in a decrease in the number of transactions. However, during periods of economic growth, there may be an increase in business travel and demand for leasing services, leading to higher transaction numbers and potentially higher average prices.
- Competition: The level of competition in the airplane leasing industry can also impact your average price and number of monthly transactions. If there are many competitors offering similar services, you may need to lower your prices to stay competitive and attract customers. This could lead to a decrease in your average price and potentially an increase in the number of transactions. On the other hand, if you have a unique offering or there are few competitors, you may be able to charge higher prices and potentially have fewer but more profitable transactions.
- Regulatory changes: Changes in regulations, such as safety requirements or environmental regulations, can also affect your average price and number of monthly transactions. If these changes require you to make expensive upgrades or modifications to your aircraft, you may need to increase your prices to cover these costs. This could result in a decrease in the number of transactions. On the other hand, if your competitors are also affected by these changes, you may all need to increase prices, resulting in a more stable market.
- Demand for specific aircraft types: The demand for certain types of aircraft can also impact your average price and number of monthly transactions. For example, if there is a higher demand for larger, more luxurious aircraft, you may be able to charge higher prices and have fewer but more profitable transactions. However, if there is a shift towards smaller, more fuel-efficient aircraft, you may need to adjust your prices to remain competitive and maintain the same level of transactions.
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 airplane leasing company
The next step is to estimate the costs you’ll have to incur to operate your airplane leasing company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your airplane leasing company's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and taxes for your employees who will be responsible for managing and maintaining the leased airplanes.
- Accountancy fees: You will need to hire an accountant to help you keep track of your financial records and ensure that you are compliant with tax laws and regulations.
- Insurance costs: It is important to have insurance coverage for your leased airplanes to protect against any potential damages or accidents.
- Software licenses: You may need to purchase software licenses for programs that will help you manage your leasing operations, such as accounting or scheduling software.
- Banking fees: You will have to pay fees for banking services, such as wire transfers and credit card processing, for your leasing transactions.
- Maintenance and repairs: As the lessor, you are responsible for maintaining and repairing the airplanes, which can be a significant expense.
- Fuel costs: You will need to cover the cost of fuel for the airplanes, which can vary depending on the type of aircraft and the distance traveled.
- Hangar fees: If you do not own a hangar, you will need to pay for hangar space to store the airplanes when they are not in use.
- Landing fees: You will have to pay fees to airports for every landing your leased airplanes make.
- Crew expenses: This includes the cost of hiring and training pilots and other crew members for the leased airplanes.
- Marketing and advertising: To attract clients, you may need to allocate funds for marketing and advertising efforts.
- Legal fees: You may need to consult with a lawyer for legal advice or to draft contracts for your leasing agreements.
- Lease payments: As the leasing company, you will need to make lease payments to the owners of the airplanes.
- Taxes: You will be responsible for paying taxes on your leasing business, including income tax and any applicable sales tax.
- Training and development: To ensure your employees are up-to-date on industry regulations and best practices, you may need to allocate funds for training and development programs.
This list is not exhaustive by any means, and will need to be tailored to your airplane leasing company's specific circumstances.
What investments are needed to start or grow an airplane leasing company?
Creating and expanding an airplane leasing company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an airplane leasing company could include elements such as:
- Aircraft Purchases: As an airplane leasing company, you will need to invest in purchasing new aircraft to add to your fleet. These purchases are a significant capital expenditure and should be carefully planned for in your financial forecast.
- Maintenance and Upkeep: In order to keep your aircraft in top condition and ensure the safety of your lessees, you will need to budget for regular maintenance and upkeep expenses. This may include things like engine overhauls, interior refurbishments, and avionics upgrades.
- Hangar and Storage Facilities: As your fleet grows, you will need to have adequate hangar and storage facilities to house your aircraft. These facilities can be expensive to purchase or lease, so it is important to include them in your expenditure forecast.
- Technology and Software: In today's digital age, technology and software play a crucial role in the operation of an airplane leasing company. You may need to invest in systems for tracking maintenance and flight schedules, as well as software for managing leases and financials.
- Training and Development: While not typically considered a fixed asset, investing in training and development for your employees can be a significant capital expenditure. This may include training programs for pilots and maintenance technicians, as well as management and leadership courses for your team.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your airplane leasing 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 airplane leasing company
The next step in the creation of your financial forecast for your airplane leasing 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 an airplane leasing company?
Now let's have a look at the main output tables of your airplane leasing company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your airplane leasing company is likely to be in the years to come.
For your airplane leasing 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 airplane leasing companies, 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 airplane leasing company'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 airplane leasing company. 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 airplane leasing 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 airplane leasing 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 airplane leasing 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 airplane leasing 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 airplane leasing company's financial forecast?
Creating your airplane leasing 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 airplane leasing 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 airplane leasing 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 airplane leasing company's financial forecast?
Creating an accurate and error-free airplane leasing company 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 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
- 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 airplane leasing company 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 airplane leasing company, 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?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
