How to create a financial forecast for an art school?

Creating a financial forecast for your art school, 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 art school 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 an art school?
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 art school becomes handy.
Creating an art school 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 art school.
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 art school 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 art school'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 art school financial forecast?
A art school'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 art school, 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 art school 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 art school 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 art school's financial forecast.
The sales forecast for an art school
From experience, it usually makes sense to start your art school's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your art 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 art 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:
- The current economic climate can impact the average price of your art school's classes. In times of economic downturn, people may be less likely to spend money on non-essential activities, causing your average price to decrease as you may need to offer discounts or lower prices to attract students.
- The reputation of your art school can also affect your average price. If your school is known for producing talented artists and has a strong brand, you may be able to charge a higher price for your classes. On the other hand, if your school has a negative reputation, you may struggle to attract students and may need to lower your prices to remain competitive.
- The popularity of different art forms can impact the number of monthly transactions at your school. For example, if there is a current trend in a specific type of art, such as digital illustration, you may see an increase in the number of students enrolling in related classes. However, if a certain type of art falls out of favor, you may see a decrease in demand for classes in that area.
- The demographic of your target audience can also affect your number of monthly transactions. If your school primarily caters to older individuals, they may have more disposable income and be willing to pay higher prices for classes. On the other hand, if your target audience is younger and still in school, they may have limited funds and be more price-sensitive.
- The location of your art school can also play a role in your average price and number of monthly transactions. If you are located in a high-income area, you may be able to charge higher prices for classes and attract students who are willing to pay for quality instruction. On the other hand, if you are located in a lower-income area, you may need to keep your prices lower to remain accessible to the community and may see lower enrollment numbers as a result.
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.
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 art school
The next step is to estimate the costs you’ll have to incur to operate your art school.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your art school's operating expenses should normally include the following items:
- Staff Costs: This includes salary, benefits, and taxes for all employees, including instructors, administrative staff, and janitorial staff.
- Accountancy Fees: You will need to hire an accountant to manage your financial records, prepare tax returns, and provide financial advice for your art school.
- Insurance Costs: It is important to have insurance to protect your art school from any liabilities, such as accidents, theft, or property damage.
- Software Licences: You will need to purchase software licenses for any programs used in your art school, such as design software, accounting software, or online learning platforms.
- Banking Fees: Your art school will incur fees for banking services, such as wire transfers, monthly account maintenance, and ATM fees.
- Rent: If you do not own the building where your art school is located, you will need to pay rent to the landlord.
- Utilities: You will need to cover the costs of electricity, water, and internet for your art school.
- Supplies: This includes art supplies, office supplies, and cleaning supplies needed to run your art school.
- Marketing and Advertising: It is important to promote your art school through various channels, such as social media, print ads, and events.
- Professional Development: You may need to attend workshops or conferences to improve your skills as an art instructor and stay updated on industry trends.
- Professional Memberships: You may also need to pay for memberships to professional organizations related to the arts, which can provide networking opportunities and resources for your art school.
- Maintenance and Repairs: Your art school may require regular maintenance and occasional repairs, such as fixing equipment or updating classroom spaces.
- Transportation: If you or your employees need to travel for business purposes, you will need to cover the costs of transportation, such as gas, tolls, and parking.
- Taxes: As a business owner, you will need to pay taxes on your art school's income and property.
- Legal Fees: You may need to hire a lawyer for legal advice or to handle any legal matters related to your art school.
This list is not exhaustive by any means, and will need to be tailored to your art school's specific circumstances.
What investments are needed to start or grow an art school?
Creating and expanding an art school also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an art school could include elements such as:
- Classrooms and Studios: This includes the physical spaces where students will receive instruction and create their artwork. This could include things like desks, chairs, easels, and other necessary equipment.
- Art Supplies: Art schools require a wide variety of supplies for students to use in their creative projects. This could include paint, brushes, clay, canvases, and more.
- Computers and Software: In today's digital age, many art schools also need to provide students with access to computers and software for graphic design, animation, and other digital art forms.
- Printing and Copying Equipment: Art schools often need to invest in printing and copying equipment for students to use in producing physical copies of their artwork or for creating portfolios.
- Exhibition Spaces: Many art schools have galleries or exhibition spaces where students can display their work to the public. These spaces may require investments in lighting, display equipment, and other fixtures.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your art 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 art school
The next step in the creation of your financial forecast for your art 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 art school?
Now let's have a look at the main output tables of your art school's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your art school's expected growth and profitability over the next three to five years.

A financially viable P&L statement for an art 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
The projected balance sheet gives an overview of your art school'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 art school. 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 projection
The cash flow forecast of your art 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 art 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 art 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 art 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 art school's financial projections?
Building an art school 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 art school'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 art 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 art school's financial forecast?
Creating an accurate and error-free art school financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 art 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 art 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.

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