How to create a financial forecast for an editing and proofreading agency?
Developing and maintaining an up-to-date financial forecast for your editing and proofreading agency 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 editing and proofreading agency 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 editing and proofreading agency?
The financial projections for your editing and proofreading agency 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 editing and proofreading agency'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 used as input to build an editing and proofreading agency financial forecast?
A editing and proofreading agency's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing editing and proofreading agency.
If you are creating (or updating) the forecast of an existing editing and proofreading agency, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new editing and proofreading agency startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the editing and proofreading agency to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your editing and proofreading agency's financial forecast.
The sales forecast for an editing and proofreading agency
From experience, it is usually best to start creating your editing and proofreading agency financial forecast by your sales forecast.
To create an accurate sales forecast for your editing and proofreading agency, you will have to rely on the data collected in your market research, or if you're running an existing editing and proofreading agency, 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:
- Fluctuations in demand for editing and proofreading services: This can be influenced by factors such as changes in the economy, shifts in the publishing industry, and academic calendar cycles. As a result, your agency's average price and number of monthly transactions may vary from month to month.
- Competition in the editing and proofreading market: The presence of other agencies offering similar services can affect your average price and number of monthly transactions. If there is intense competition, you may need to adjust your prices to remain competitive and attract more clients.
- Changes in technology: With the constant evolution of technology, your agency may need to invest in new tools and software to keep up with the latest editing and proofreading trends. This can impact your average price and number of monthly transactions, as you may need to adjust your prices to cover the costs of new technology.
- Demand for specialized editing and proofreading services: Depending on the current market trends, there may be a higher demand for specific types of editing and proofreading services, such as academic editing or technical editing. This can affect your average price, as specialized services may command higher rates, and also impact your number of monthly transactions as you may attract more clients seeking these services.
- Availability of skilled editors and proofreaders: The supply of qualified and experienced editors and proofreaders can impact your agency's average price and number of monthly transactions. If there is a shortage of skilled professionals, you may need to pay higher salaries to attract and retain top talent, which can affect your prices. On the other hand, if there is an abundance of skilled professionals, you may be able to offer lower prices to attract more clients.
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 editing and proofreading agency
The next step is to estimate the costs you’ll have to incur to operate your editing and proofreading agency.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your editing and proofreading agency's operating expenses should normally include the following items:
- Staff Costs: Includes salaries, benefits, and any other expenses related to your employees, such as training and development.
- Accountancy Fees: Covers the cost of hiring an accountant to handle your financial records, taxes, and other financial matters.
- Insurance Costs: Includes the cost of general liability insurance, professional liability insurance, and any other insurance policies necessary to protect your business.
- Software Licenses: Covers the cost of purchasing licenses for editing and proofreading software, as well as any other software necessary to run your business.
- Banking Fees: Includes the cost of maintaining a business bank account, as well as any fees associated with transactions and processing payments.
- Office Rent: Covers the cost of renting office space for your agency.
- Utilities: Includes expenses for electricity, water, and internet services for your office.
- Marketing and Advertising: Covers the cost of promoting your agency and acquiring new clients through various marketing and advertising channels.
- Equipment and Supplies: Includes the cost of purchasing and maintaining equipment and supplies necessary for editing and proofreading, such as computers, printers, and stationary.
- Professional Memberships: Covers the cost of joining professional organizations and associations related to editing and proofreading.
- Travel Expenses: Includes the cost of business travel, such as attending conferences or meeting with clients.
- Professional Development: Covers the cost of attending workshops, courses, and other professional development opportunities to improve your editing and proofreading skills.
- Legal Fees: Includes the cost of hiring a lawyer for any legal matters related to your business.
- Office Supplies: Covers the cost of everyday supplies for your office, such as paper, ink, and other stationery items.
- Telecommunications: Includes expenses for phone and internet services for your office, as well as any other communication tools necessary for your business.
This list is not exhaustive by any means, and will need to be tailored to your editing and proofreading agency's specific circumstances.
What investments are needed to start or grow an editing and proofreading agency?
Creating and expanding an editing and proofreading agency also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an editing and proofreading agency could include elements such as:
- Computer equipment: This includes desktops, laptops, and other hardware necessary for the editing and proofreading process. These are essential fixed assets for your agency.
- Software licenses: In addition to computer equipment, you will also need to invest in software licenses for editing and proofreading programs. This will ensure that your team has access to the necessary tools to provide high-quality services.
- Office furniture and supplies: As an editing and proofreading agency, you will need to create a comfortable and functional workspace for your team. This may include desks, chairs, filing cabinets, and other office supplies.
- Printing and binding equipment: Depending on the types of projects you take on, you may need to invest in printing and binding equipment to produce physical copies of documents for clients. This can include printers, binding machines, and paper supplies.
- Professional development courses: While not a traditional fixed asset, investing in professional development courses for your team can be considered a capital expenditure. This will help improve the skills and knowledge of your employees, leading to better services for your clients.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your editing and proofreading agency.
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 editing and proofreading agency
The next step in the creation of your financial forecast for your editing and proofreading agency 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 editing and proofreading agency?
Now let's have a look at the main output tables of your editing and proofreading agency's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your editing and proofreading agency's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an editing and proofreading agency 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 editing and proofreading agency'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 projected cash flow statement
A projected cash flow statement for an editing and proofreading agency 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 editing and proofreading agency'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 editing and proofreading agency 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 editing and proofreading agency's financial projections?
Building an editing and proofreading agency 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 editing and proofreading agency'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
Outsourcing the creation of your editing and proofreading agency 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 editing and proofreading agency's financial forecast?
Creating an accurate and error-free editing and proofreading agency 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 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 editing and proofreading agency, 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your editing and proofreading agency.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for an editing and proofreading agency. Don't hesitate to contact us if you 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
- Financial forecast example
- How to project sales for a business?
- Example of financial forecast for business idea
Know someone who runs an editing and proofreading agency? Share our business guide with them!
Founder & CEO at The Business Plan Shop Ltd
