How to create a financial forecast for an architectural school?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your architectural school.
Putting together an architectural school 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 architectural school.
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 architectural school?
The financial projections for your architectural school act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your architectural school's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 an architectural school 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 an architectural school, 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 architectural school 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 architectural school, 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 architectural school's financial forecast.
The sales forecast for an architectural school
From experience, it usually makes sense to start your architectural school's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your architectural school (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 architectural school'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:
- Student Demand: As the demand for architectural education continues to increase, your school may see an increase in the number of students enrolling and paying for your courses, leading to a potential increase in average price.
- Economic Conditions: In a booming economy, individuals may have more disposable income to invest in their education, potentially leading to higher enrollment and average price for your school.
- Industry Reputation: A strong reputation in the architectural industry can attract more students to your school and potentially allow you to charge a premium for your courses.
- Location: If your school is located in a desirable or convenient location, it may be able to charge a higher average price for its courses, as students may be willing to pay more for the convenience.
- Faculty Quality: The quality and reputation of your school's faculty can also impact the average price of your courses. A highly qualified and experienced faculty may justify a higher price for your school's courses.
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.
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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 architectural school
The next step is to estimate the expenses needed to run your architectural school 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 architectural school's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, and taxes for all faculty and staff members, including professors, administrators, and support staff.
- Accountancy Fees: You will need to hire an accountant to handle your school's financial records, tax filings, and other financial matters.
- Insurance Costs: It is important to have insurance coverage for your school, including property insurance, liability insurance, and workers' compensation insurance.
- Software Licences: To effectively run an architectural school, you will need to invest in software licences for design and drafting programs, as well as project management and accounting software.
- Banking Fees: Your school will have expenses related to banking, such as transaction fees, wire transfer fees, and account maintenance fees.
- Office Supplies: You will need to purchase office supplies for your school, such as paper, printer ink, pens, and other necessary items.
- Marketing and Advertising: To attract students to your school, you will need to invest in marketing and advertising efforts, such as creating a website, printing brochures, and attending college fairs.
- Building Maintenance: Your school's building will require regular maintenance and repairs, including cleaning services, HVAC maintenance, and general upkeep.
- Utilities: You will need to pay for utilities, such as electricity, water, and internet, to keep your school running.
- Professional Memberships and Subscriptions: As an architectural school, it is important to stay updated on industry trends and advancements. This may require paying for professional memberships and subscriptions to architectural journals and organizations.
- Travel Expenses: Your faculty and staff may need to travel for conferences, workshops, and other professional development opportunities related to architecture. These travel expenses should be included in your operating expenses.
- Student Services: Your school will have expenses related to student services, such as career counseling, academic advising, and student organizations.
- Library Resources: Your school's library will need to purchase books, journals, and other resources related to architecture to support your students' education.
- Equipment Maintenance: Your school will have equipment, such as computers, printers, and drafting tools, that will require regular maintenance and repairs.
- Seminars and Workshops: Your school may host seminars and workshops for students and faculty to enhance their skills and knowledge. These events will have associated costs, such as venue rental and speaker fees.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small architectural school might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an architectural school?
Once you have an idea of how much sales you could achieve and what it will cost to run your architectural school, it is time to look into the equipment required to launch or expand the activity.
For an architectural school, capital expenditures and initial working capital items could include:
- Your architectural school building, including construction costs, renovation expenses, and any necessary upgrades or repairs.
- The equipment and supplies needed for classrooms and studio spaces, such as drafting tables, computers, projectors, and other specialized tools.
- The library resources for students, including books, journals, and online subscriptions for architectural research and reference materials.
- The technology infrastructure necessary for a modern architectural school, including servers, software licenses, and network equipment.
- The furniture and fixtures for common areas and administrative offices, such as desks, chairs, and storage units.
Again, this list will need to be adjusted according to the specificities of your architectural school.
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 architectural school
The next step in the creation of your financial forecast for your architectural school 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 architectural school?
Now let's have a look at the main output tables of your architectural school's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your architectural school's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an architectural school should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your architectural school'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 projection
The cash flow forecast of your architectural school will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the architectural school's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your architectural school is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your architectural school's financial plan.
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 architectural school's financial forecast?
Using the right tool or solution will make the creation of your architectural school's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your architectural school'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 architectural school 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 architectural school's financial forecast?
Creating an accurate and error-free architectural school 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 architectural school 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 architectural school, 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 create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting an architectural school? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
