How to create a financial forecast for an electrical appliances store?
Developing and maintaining an up-to-date financial forecast for your electrical appliances store 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 electrical appliances store 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 electrical appliances store?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your electrical appliances store and ensure that it can be financially viable in the years to come.
A financial plan for an electrical appliances store 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 electrical appliances store 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 electrical appliances store'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 electrical appliances store financial forecast?
A electrical appliances store'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 electrical appliances store, 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 electrical appliances store 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 electrical appliances store 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 electrical appliances store's financial forecast.
The sales forecast for an electrical appliances store
From experience, it usually makes sense to start your electrical appliances store's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your electrical appliances store (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 electrical appliances store'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:
- Seasonal Demand: As an electrical appliances store owner, you know that certain times of the year, such as the holiday season or back-to-school season, may see an increase in demand for certain products. This can affect your average price and number of monthly transactions as customers may be willing to pay more during these peak times.
- Competition: The presence of competitors in the market can greatly impact your sales forecast. If there are other electrical appliances stores in your area, you may need to adjust your prices or offer promotions to stay competitive, which can affect your average price and number of monthly transactions.
- Technological Advancements: With the constant advancements in technology, new and improved electrical appliances are constantly being introduced to the market. This can affect your average price as customers may be willing to pay more for the latest and greatest products. It can also affect your number of monthly transactions as customers may be more likely to make a purchase if they see the value in the product.
- Economic Conditions: The state of the economy can have a significant impact on your sales forecast. During times of economic downturn, customers may be more price-sensitive and less likely to make big purchases, which can affect your average price and number of monthly transactions. On the other hand, a booming economy may lead to increased consumer confidence and willingness to spend, positively affecting your sales forecast.
- Product Availability: Availability of certain products can also affect your sales forecast. If you are consistently out of stock on popular items, this can lead to lost sales and a decrease in average price and number of monthly transactions. On the other hand, having a wide range of products readily available can attract more customers and potentially increase your average price and number of monthly transactions.
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 electrical appliances store
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your electrical appliances store on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for an electrical appliances store will include some of the following items:
- Staff costs: This includes salaries, wages, benefits, and bonuses for all employees working in your electrical appliances store.
- Rent: You will need to pay rent for your store location, whether you own the property or lease it.
- Utilities: This includes electricity, water, and gas bills for your store.
- Inventory costs: You will need to purchase inventory to stock your store with electrical appliances to sell to customers.
- Marketing and advertising: It is important to promote your store and products to attract customers, which may include expenses for advertising, promotions, and marketing materials.
- Accountancy fees: Hiring an accountant to manage your store's finances and taxes can help ensure accuracy and compliance.
- Insurance costs: You will need to have insurance coverage to protect your store from potential risks and liabilities.
- Software licenses: You may need to purchase software licenses for programs that help you manage your store, such as point of sale systems or inventory management software.
- Banking fees: This includes fees for using a business bank account, such as transaction fees, monthly maintenance fees, and overdraft fees.
- Maintenance and repairs: Your store may require regular maintenance and repairs to keep it in good condition, which can include expenses for equipment, supplies, and labor.
- Taxes: As a business owner, you will need to pay taxes on your store's profits and may also need to collect and remit sales tax on customer purchases.
- Professional fees: You may need to hire outside professionals for services such as legal advice, marketing consulting, or HR support.
- Office supplies: This includes expenses for paper, pens, printer ink, and other supplies needed to run your store's administrative tasks.
- Training and development: Investing in your employees' training and development can help improve their skills and performance, which can benefit your store in the long run.
- Credit card processing fees: If you accept credit card payments from customers, you will need to pay processing fees to the credit card companies.
This list will need to be tailored to the specificities of your electrical appliances store, but should offer a good starting point for your budget.
What investments are needed to start or grow an electrical appliances store?
Once you have an idea of how much sales you could achieve and what it will cost to run your electrical appliances store, it is time to look into the equipment required to launch or expand the activity.
For an electrical appliances store, capital expenditures and initial working capital items could include:
- Store Renovation: This includes any major renovations or improvements to your store, such as updating the layout, installing new flooring, or adding new fixtures and displays. These renovations can attract more customers and create a better shopping experience.
- Inventory Purchases: As an electrical appliances store, you will need to regularly purchase new inventory to keep up with customer demand. This includes purchasing new products, restocking popular items, and replacing outdated or damaged inventory.
- Equipment and Machinery: In order to run your store efficiently, you will need to invest in equipment and machinery such as cash registers, computers, and inventory management systems. These are essential tools for managing your business and serving your customers.
- Store Maintenance: It's important to keep your store in good condition to ensure a positive shopping experience for your customers. This includes regular maintenance tasks such as cleaning, painting, and repairing any damages to the store.
- Vehicle Purchases: If your store offers delivery or installation services, you may need to purchase vehicles to transport appliances to customers' homes. These vehicles can also be used for conducting business operations, such as picking up inventory from suppliers.
Again, this list will need to be adjusted according to the specificities of your electrical appliances store.
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 electrical appliances store
The next step in the creation of your financial forecast for your electrical appliances store 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 electrical appliances store?
Now let's have a look at the main output tables of your electrical appliances store'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 electrical appliances store'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 electrical appliances store will look different than for a startup.
The projected balance sheet
Your electrical appliances store'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 electrical appliances store 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 electrical appliances store'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 electrical appliances store 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 electrical appliances store'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 electrical appliances store's financial forecast?
Creating your electrical appliances store'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 electrical appliances store'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 electrical appliances store 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 electrical appliances store's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free electrical appliances store financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your electrical appliances store's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own electrical appliances store, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your electrical appliances store
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 electrical appliances store 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 electrical appliances store, 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?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting an electrical appliances store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
