How to create a financial forecast for an ATV car manufacturer?
Creating a financial forecast for your ATV car manufacturing business, 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 ATV car manufacturing business 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 ATV car manufacturing business?
The financial projections for your ATV car manufacturing business 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 ATV car manufacturing business'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.
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What information is needed to build an ATV car manufacturing business 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 ATV car manufacturing business, 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 ATV car manufacturing business 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 ATV car manufacturing business, 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 ATV car manufacturing business's financial forecast.
The sales forecast for an ATV car manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your ATV car manufacturing business financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing ATV car manufacturers), and consider the elements below:
- Competition: The level of competition in the ATV car manufacturing industry can greatly affect your average price and number of monthly transactions. If there are many competitors offering similar products at lower prices, you may need to lower your prices to remain competitive and attract customers. This can also lead to a decrease in your number of monthly transactions as customers may choose to purchase from your competitors instead.
- Economic conditions: The state of the economy can also have a significant impact on your sales forecast. During times of economic downturn, consumers may be more hesitant to make large purchases such as an ATV car. This can lead to a decrease in both your average price and number of monthly transactions. On the other hand, during times of economic growth, consumers may have more disposable income and may be more likely to purchase an ATV car, resulting in an increase in both your average price and number of monthly transactions.
- Product innovation: The introduction of new and innovative products in the market can also affect your sales forecast. If your competitors are continuously launching new and improved ATV cars, it may be necessary for you to invest in research and development to keep up with the latest trends and stay ahead of the competition. This can lead to an increase in your average price as the cost of development and production may increase. However, it can also result in an increase in your number of monthly transactions as customers may be attracted to the new and improved features of your product.
- Seasonal demand: The demand for ATV cars may also vary depending on the season. For example, during the summer months, when outdoor activities are more popular, the demand for ATV cars may increase, resulting in an increase in your number of monthly transactions. However, during the winter months, when outdoor activities are limited, the demand may decrease, leading to a decrease in your number of monthly transactions. This can also affect your average price, as you may need to offer seasonal discounts to attract customers during slower months.
- Consumer preferences: Changes in consumer preferences and trends can also impact your sales forecast. For instance, if there is a shift towards more eco-friendly and sustainable products, customers may be less likely to purchase traditional ATV cars that use gas. This can lead to a decrease in your average price and number of monthly transactions. To adapt to changing consumer preferences, you may need to invest in new technology and offer more environmentally friendly options, which can affect your average price and potentially increase your number of monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for an ATV car manufacturing business
The next step is to estimate the expenses needed to run your ATV car manufacturing business 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 ATV car manufacturing business's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, and bonuses for your employees, such as engineers, technicians, and assembly line workers.
- Raw Material Costs: This covers the cost of purchasing materials needed for production, such as metal, plastic, and rubber for the ATV car.
- Equipment Maintenance: As an ATV car manufacturing business, you will need to regularly maintain and service your production equipment to ensure smooth operations.
- Rent or Lease: If you do not own your production facility, you will need to account for rent or lease payments in your operating expenses.
- Utilities: This includes expenses for electricity, water, and gas used in your production facility.
- Marketing and Advertising: You will need to promote your ATV cars to potential customers, which may include expenses for advertising, trade shows, and PR campaigns.
- Accountancy Fees: As a business owner, you will need to hire an accountant to manage your finances and taxes.
- Insurance Costs: In order to protect your business, you will need to pay for various insurance policies, such as liability insurance and property insurance.
- Software Licenses: You may need to purchase software licenses for programs used in your business, such as CAD software for designing ATV car models.
- Banking Fees: This includes expenses for bank account maintenance, wire transfers, and credit card processing fees.
- Shipping and Freight: If you sell your ATV cars to customers outside of your production facility, you will need to account for shipping and freight expenses.
- Legal Fees: As a business owner, you may need to hire a lawyer for various legal matters, such as drafting contracts and protecting your intellectual property.
- Inventory Storage: You will need to store your finished ATV cars and spare parts, which may include expenses for warehouse space and storage units.
- Training and Development: In order to keep your employees up-to-date with the latest technology and techniques, you may need to allocate funds for training and development programs.
- Taxes: As a business owner, you will need to pay various taxes, such as income tax, property tax, and sales tax.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small ATV car manufacturing business might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an ATV car manufacturing business?
Your ATV car manufacturing business financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For an ATV car manufacturing business, these could include:
- Factory equipment and machinery: This includes the cost of purchasing and installing equipment and machinery necessary for the production of ATV cars, such as welding machines, paint booths, and assembly line equipment.
- Tooling and molds: These are essential for creating and manufacturing the various components of an ATV car, such as the frame, engine, and body. Tooling and molds can be costly, but they are necessary for maintaining quality and efficiency in production.
- Facility renovations: If you are purchasing an existing facility or planning to expand your current facility to accommodate the production of ATV cars, you will need to include the cost of renovations in your expenditure forecast. This may include building additional space, upgrading utilities, or installing new flooring and lighting.
- Research and development: As an ATV car manufacturer, it is crucial to constantly innovate and improve your products. This may require investing in research and development, such as testing new materials or designing new features for your ATV cars.
- Inventory: Finally, you will need to include the cost of purchasing initial inventory in your expenditure forecast. This may include raw materials, components, and finished ATV cars that will be used for production or sold to customers.
Again, this list will need to be adjusted according to the size and ambitions of your ATV car manufacturing 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.
The financing plan of your ATV car manufacturing business
The next step in the creation of your financial forecast for your ATV car manufacturing business 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 ATV car manufacturing business?
Now let's have a look at the main output tables of your ATV car manufacturing business'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 ATV car manufacturing business'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 ATV car manufacturing business will look different than for a startup.
The projected balance sheet
Your ATV car manufacturing business's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 projected cash flow statement
A projected cash flow statement for an ATV car manufacturing business is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your ATV car manufacturing business's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the ATV car manufacturing 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 ATV car manufacturing business's financial projections?
Building an ATV car manufacturing business 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 ATV car manufacturing business'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
Outsourcing the creation of your ATV car manufacturing business financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your ATV car manufacturing business's financial forecast?
Creating an accurate and error-free ATV car manufacturing business 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 ATV car manufacturing business, 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 ATV car manufacturing business 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 ATV car manufacturing business, 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 revenues for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting an ATV car manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
