How to create a financial forecast for an engraving and etching studio?
Developing and maintaining an up-to-date financial forecast for your engraving and etching studio 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 engraving and etching studio 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 engraving and etching studio?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your engraving and etching studio and ensure that it can be financially viable in the years to come.
A financial plan for an engraving and etching studio 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 engraving and etching studio 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 engraving and etching studio'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 engraving and etching studio financial forecast?
A engraving and etching studio'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 engraving and etching studio, 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 engraving and etching studio 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 engraving and etching studio 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 engraving and etching studio's financial forecast.
The sales forecast for an engraving and etching studio
From experience, it usually makes sense to start your engraving and etching studio's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your engraving and etching studio (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 engraving and etching studio'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: Depending on the time of year, there may be an increase or decrease in demand for engraving and etching services. For example, during the holiday season, there may be a higher demand for personalized gifts, leading to an increase in average price and number of transactions.
- Economic conditions: A strong economy may lead to an increase in disposable income, resulting in customers being more willing to spend on personalized items such as engravings and etchings. On the other hand, a weak economy may lead to a decrease in demand and a decrease in average price.
- Trends and fads: The popularity of certain designs or styles may affect the average price and number of transactions for an engraving and etching studio. For example, if a particular design or style becomes a trend, there may be an increase in demand and average price for engravings and etchings featuring that design.
- Competition: The presence of other engraving and etching studios in the area can affect the average price and number of transactions for your business. If there is stiff competition, you may need to lower your prices to remain competitive and attract customers.
- Technology advancements: The availability of new technology and equipment in the engraving and etching industry can impact the average price and number of transactions for your business. If there are advancements in technology that allow for faster and more precise engravings and etchings, it may lead to an increase in average price and demand for your services.
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 engraving and etching studio
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your engraving and etching studio 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 engraving and etching studio will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for your employees who will be working in the engraving and etching studio. This may also include any bonuses or commissions paid to them.
- Accountancy Fees: You may need to hire an accountant to help you with bookkeeping, tax preparation, and other financial matters related to your studio. Their fees will be an operating expense for your business.
- Insurance Costs: It is important to have insurance coverage for your studio to protect against any potential risks or damages. This may include general liability insurance, property insurance, and workers' compensation insurance.
- Software Licences: To run your studio efficiently, you may need to purchase software licences for design and printing programs, as well as accounting and inventory management software.
- Banking Fees: You will need a business bank account to manage your finances. This may include fees for transactions, overdrafts, and monthly maintenance.
- Rent: If you are leasing a space for your studio, rent will be a major operating expense. This may also include utilities such as electricity, water, and internet.
- Supplies: You will need to purchase supplies such as engraving and etching tools, printing materials, and other consumables to run your studio.
- Marketing and Advertising: To attract customers, you may need to invest in marketing and advertising efforts. This may include printing materials, online ads, and social media promotions.
- Professional Memberships: Joining professional associations and organizations related to engraving and etching can help you network and stay updated on industry trends. However, membership fees will be an operating expense for your business.
- Travel Expenses: If you plan on attending trade shows or conferences, travel expenses such as transportation, lodging, and meals will need to be included in your operating expenses.
- Maintenance and Repairs: Engraving and etching equipment may require regular maintenance and occasional repairs, which should be budgeted for as an operating expense.
- Professional Services: Depending on your business needs, you may need to hire outside professionals such as lawyers, consultants, or designers. Their fees will be considered as an operating expense.
- Taxes and Licences: Your business will be subject to various taxes and may also require specific licences to operate. These costs should be included in your operating expenses.
- Office Supplies: You will need to purchase office supplies such as paper, ink, and stationery for your studio. These costs should be factored into your operating expenses.
- Training and Development: To keep your skills and knowledge up-to-date, you may need to invest in training and development programs. This will be an operating expense for your business.
This list will need to be tailored to the specificities of your engraving and etching studio, but should offer a good starting point for your budget.
What investments are needed to start or grow an engraving and etching studio?
Creating and expanding an engraving and etching studio also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an engraving and etching studio could include elements such as:
- Engraving and Etching Equipment: This includes the necessary machinery and tools such as laser engravers, sandblasters, etching presses, and rotary engravers. These are essential for the production of engravings and etchings and are considered fixed assets.
- Studio Furniture and Fixtures: This includes items such as workbenches, lighting fixtures, storage cabinets, and display cases. These items are necessary for the operation of the studio and should be included in the expenditure forecast.
- Computer and Software: In today's digital age, having a computer and appropriate software is crucial for running an engraving and etching studio. This may include graphic design software for creating digital designs and a computer for storing and organizing customer orders and designs.
- Inventory and Supplies: This category includes all the materials and supplies needed for the production of engravings and etchings, such as metal sheets, engraving tools, and etching chemicals. It is important to accurately forecast the cost of these items to ensure smooth production and customer satisfaction.
- Studio Renovations/Improvements: Depending on the condition of your studio space, you may need to make some renovations or improvements to create a suitable environment for your engraving and etching work. This may include installing ventilation systems, upgrading electrical wiring, or adding insulation for temperature control.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your engraving and etching studio.
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 engraving and etching studio
The next step in the creation of your financial forecast for your engraving and etching studio 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 engraving and etching studio?
Now let's have a look at the main output tables of your engraving and etching studio's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your engraving and etching studio is likely to be in the years to come.
For your engraving and etching studio to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established engraving and etching studios, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your engraving and etching studio'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 engraving and etching studio 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 engraving and etching studio'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 engraving and etching studio 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 engraving and etching studio's financial forecast?
Creating your engraving and etching studio'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 engraving and etching studio'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 engraving and etching studio 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 engraving and etching studio's financial forecast?
Creating an accurate and error-free engraving and etching studio 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your engraving and etching studio.
- 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 engraving and etching studio. 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
- Financial forecast for a business idea
- How to project revenues for a business?
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Founder & CEO at The Business Plan Shop Ltd
