How to create a financial forecast for an electronics repair shop?
Developing and maintaining an up-to-date financial forecast for your electronics repair shop 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 electronics repair shop 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 electronics repair shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your electronics repair shop and ensure that it can be financially viable in the years to come.
A financial plan for an electronics repair shop 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 electronics repair shop 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 electronics repair shop'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 electronics repair shop financial forecast?
A electronics repair shop'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 electronics repair shop.
If you are creating (or updating) the forecast of an existing electronics repair shop, 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 electronics repair shop 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 electronics repair shop 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 electronics repair shop's financial forecast.
The sales forecast for an electronics repair shop
The sales forecast, also called topline projection, is normally where you will start when building your electronics repair shop 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 electronics repair shops), and consider the elements below:
- Demand for technology repairs: The demand for technology repairs can greatly affect your business's average price and number of monthly transactions. If there is a high demand for repairs, you may be able to charge higher prices and have more monthly transactions. However, if the demand is low, you may have to lower your prices to attract customers and may see a decrease in monthly transactions.
- Competition: The level of competition in your area can also impact your average price and number of monthly transactions. If there are many other electronics repair shops in the area, you may have to lower your prices to remain competitive and may see a decrease in monthly transactions. On the other hand, if you are the only repair shop in the area, you may be able to charge higher prices and have more monthly transactions.
- Quality of your repairs: The quality of your repairs can greatly affect your business's average price and number of monthly transactions. If you consistently provide high-quality repairs, you may be able to charge higher prices and have more monthly transactions as customers will be willing to pay more for quality work. However, if your repairs are not up to par, you may have to lower your prices and may see a decrease in monthly transactions as customers may choose to go to a more reputable repair shop.
- Technological advancements: Technological advancements can also impact your average price and number of monthly transactions. If there are frequent updates and releases of new electronic devices, there may be a higher demand for repairs which can allow you to charge higher prices and have more monthly transactions. However, if there are no major updates or releases, the demand for repairs may decrease and you may have to lower your prices to attract customers.
- Economic conditions: Economic conditions, such as a recession or an economic boom, can also affect your business's average price and number of monthly transactions. During a recession, people may be more likely to repair their electronics instead of buying new ones, which can increase the demand for repairs and allow you to charge higher prices. On the other hand, during an economic boom, people may be more likely to buy new electronics instead of repairing old ones, which can result in a decrease in demand for repairs and lower prices.
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 electronics repair shop
The next step is to estimate the costs you’ll have to incur to operate your electronics repair shop.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your electronics repair shop's operating expenses should normally include the following items:
- Staff wages and benefits: This includes the salaries, benefits, and any bonuses for your employees who work in the repair shop such as technicians, customer service representatives, and administrative staff.
- Accountancy fees: You may need to hire an accountant to help with managing your finances, preparing tax returns, and providing financial advice.
- Insurance costs: It is important to have insurance coverage for your repair shop in case of any accidents, damages, or lawsuits.
- Software licenses: Your repair shop may require specific software for managing inventory, scheduling appointments, or processing payments.
- Banking fees: You will need to pay fees for maintaining a business bank account, processing credit card transactions, and other banking services.
- Rent or lease: If you do not own the property where your repair shop is located, you will need to pay rent or lease payments.
- Utilities: This includes electricity, water, and internet services for your repair shop.
- Inventory and supplies: You will need to purchase repair parts, tools, and other supplies for your repair shop.
- Marketing and advertising: You may need to spend money on advertising, promotions, and marketing materials to attract customers to your repair shop.
- Training and education: It is important to invest in ongoing training and education for your staff to keep up with new technologies and repair techniques.
- Equipment and machinery maintenance: You will need to budget for regular maintenance and repairs for any equipment or machinery used in your repair shop.
- Professional services: This includes any fees for legal services, marketing consulting, or other professional services that you may require for your repair shop.
- Office supplies: You will need to purchase office supplies such as paper, printer ink, and pens for your repair shop.
- Telephone and internet: You will need to budget for your business phone line and internet service for communication with customers and suppliers.
- Travel expenses: If you need to travel for business purposes, you will need to budget for transportation, lodging, and meals.
This list is not exhaustive by any means, and will need to be tailored to your electronics repair shop's specific circumstances.
What investments are needed to start or grow an electronics repair shop?
Your electronics repair shop 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 electronics repair shop, these could include:
- Repair Equipment: This includes tools and machinery necessary for repairing electronics such as soldering irons, multimeters, screwdrivers, and specialized equipment for repairing specific types of devices.
- Inventory: As an electronics repair shop, you will need to stock up on various electronic components and parts to use for repairs. This can include items such as resistors, capacitors, screens, and batteries.
- Workstations: Your repair technicians will need dedicated workstations to efficiently and safely repair devices. This can include workbenches, anti-static mats, and other equipment to help organize and protect the devices being worked on.
- Computer and Software: In order to keep track of repairs, communicate with customers, and manage finances, you will need a computer and software specifically designed for repair shops. This can include repair tracking software, accounting software, and customer management software.
- Furniture and Fixtures: Your repair shop will also need basic furniture and fixtures such as desks, chairs, shelving, and display cases. These items are necessary for creating a professional and organized workspace for both employees and customers.
Again, this list will need to be adjusted according to the size and ambitions of your electronics repair shop.
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 electronics repair shop
The next step in the creation of your financial forecast for your electronics repair shop 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 electronics repair shop?
Now let's have a look at the main output tables of your electronics repair shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your electronics repair shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an electronics repair shop 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 electronics repair shop'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 forecast
Your electronics repair shop's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the electronics repair shop:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your electronics repair shop's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your electronics repair shop's financial plan - so that banks or investors can assess seasonal variation and ensure your 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 electronics repair shop's financial forecast?
Creating your electronics repair shop'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 electronics repair shop'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 electronics repair shop 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 electronics repair shop's financial forecast?
Creating an accurate and error-free electronics repair shop 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your electronics repair shop.
- 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 electronics repair shop. 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 write an electronics repair shop business plan
- How to create a sales forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
