How to create a financial forecast for an event catering company?
Creating a financial forecast for your event catering company, 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 event catering company 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 event catering company?
The financial projections for your event catering company 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 event catering company'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 event catering company financial forecast?
A event catering company'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 event catering company, 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 event catering company 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 event catering company 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 event catering company's financial forecast.
The sales forecast for an event catering company
From experience, it is usually best to start creating your event catering company financial forecast by your sales forecast.
To create an accurate sales forecast for your event catering company, you will have to rely on the data collected in your market research, or if you're running an existing event catering company, 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:
- Seasonal Demand: As an event catering company, the demand for your services may fluctuate based on seasons. For example, during the summer months, there may be an increase in demand for outdoor events such as weddings and BBQs, while the demand for holiday parties may increase during the winter months.
- Menu Options: The types of menu options you offer can also affect your average price and number of transactions. For instance, if you specialize in high-end, gourmet cuisine, you may charge a higher price per plate and attract a smaller, more exclusive clientele. On the other hand, if you offer more affordable and casual menu options, you may attract a larger volume of customers but at a lower price point.
- Competition: The level of competition in your area can also impact your average price and number of transactions. If you are the only event catering company in a particular location, you may be able to charge higher prices and have a higher volume of transactions. However, if there are multiple catering companies in the same area, you may need to adjust your prices and offerings to remain competitive.
- Client Base: The type of clients you attract can also influence your sales forecast. For example, if you primarily cater to corporate events, you may have a more consistent stream of business throughout the year compared to catering to one-off events like weddings or private parties. This can affect your average price and number of monthly transactions.
- Economic Factors: Economic factors such as inflation, changes in consumer spending habits, and overall economic stability can also impact your sales forecast. In times of economic downturn, individuals and businesses may cut back on event catering services, resulting in a decrease in your average price and number of transactions. On the other hand, during times of economic growth, you may see an increase in demand and be able to charge higher prices.
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.
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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 event catering company
The next step is to estimate the expenses needed to run your event catering company 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 event catering company's operating expenses should include the following items at a minimum:
- Staff costs: Salaries, wages, and benefits for employees such as chefs, servers, event coordinators, and administrative staff.
- Accountancy fees: Fees for professional accounting services, including tax preparation, bookkeeping, and financial reporting.
- Insurance costs: Insurance premiums for general liability, workers' compensation, and other business insurance policies.
- Food and beverage costs: Expenses for purchasing ingredients, supplies, and beverages for catering events.
- Rent and utilities: Monthly rent for commercial kitchen space and utilities such as electricity, water, and gas.
- Marketing and advertising: Costs for promoting the catering business, including website development, social media advertising, and print materials.
- Equipment rental: Fees for renting equipment such as tables, chairs, linens, and serving dishes for catering events.
- Transportation costs: Expenses for transporting food, equipment, and staff to and from catering events.
- Software licenses: Costs for purchasing and renewing software licenses for accounting, scheduling, and event management.
- Banking fees: Charges for bank account maintenance, transaction fees, and credit card processing fees.
- Cleaning and maintenance: Costs for cleaning and maintaining the commercial kitchen, equipment, and vehicles used for catering events.
- Training and development: Expenses for employee training and professional development to improve skills and stay updated on industry trends.
- Legal fees: Fees for legal advice and services, including contract drafting and review, and obtaining necessary licenses and permits.
- Office supplies: Expenses for purchasing paper, pens, printer ink, and other office supplies used for administrative tasks.
- Miscellaneous expenses: Other operating costs such as office rent, phone and internet bills, and office equipment maintenance.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small event catering company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an event catering company?
Creating and expanding an event catering company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an event catering company could include elements such as:
- Kitchen Equipment: This includes items such as ovens, grills, refrigerators, and other cooking equipment that are essential for preparing and storing food for events. These items can be quite expensive, but they are necessary for a successful catering business.
- Delivery Vehicles: If you plan on offering delivery services for your catering events, you will need to invest in reliable and efficient vehicles to transport food and equipment. This can include vans, trucks, or even bikes depending on the size and scope of your business.
- Tableware and Serving Equipment: This includes items such as plates, cutlery, glassware, serving trays, and other essential items for presenting and serving food at events. These items can add up quickly, especially if you plan on catering to larger events with multiple courses.
- Event Decor: Depending on the type of events you plan on catering, you may need to invest in event decor such as tables, chairs, linens, and centerpieces. These items not only add to the atmosphere of the event but also provide practical seating and dining options for guests.
- Point of Sale System: A modern and efficient point of sale system is crucial for any event catering company. This includes hardware such as cash registers, credit card machines, and software for tracking sales and inventory. It is important to invest in a reliable and user-friendly system to streamline your business operations.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your event catering company.
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 event catering company
The next step in the creation of your financial forecast for your event catering company 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 event catering company?
Now let's have a look at the main output tables of your event catering company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your event catering company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an event catering company 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 event catering company'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 cash flow forecast
Your event catering company'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 event catering company:
- 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 event catering company'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 event catering company'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 event catering company's financial projections?
Building an event catering company 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 event catering company'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 event catering company 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 event catering company's financial forecast?
Creating an accurate and error-free event catering company 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 event catering company, 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 projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your event catering company.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for an event catering company. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to write a catering company business plan
- How to project revenues for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start an event catering company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
