How to create a financial forecast for an event equipment rental company?
Developing and maintaining an up-to-date financial forecast for your event equipment rental company 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 event equipment rental company 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 event equipment rental company?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your event equipment rental company becomes handy.
Creating an event equipment rental company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your event equipment rental company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for an event equipment rental company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your event equipment rental company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
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 equipment rental company financial forecast?
A event equipment rental 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 equipment rental 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 equipment rental 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 equipment rental 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 equipment rental company's financial forecast.
The sales forecast for an event equipment rental company
From experience, it is usually best to start creating your event equipment rental company financial forecast by your sales forecast.
To create an accurate sales forecast for your event equipment rental company, you will have to rely on the data collected in your market research, or if you're running an existing event equipment rental 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: The time of year can greatly impact the average price and number of monthly transactions for your event equipment rental company. For example, during peak wedding season, you may be able to charge higher prices and have more monthly transactions compared to slower months.
- Economic Conditions: Economic factors such as a recession or economic boom can affect the average price and number of monthly transactions for your event equipment rental company. During a recession, customers may be more budget-conscious and opt for lower-priced equipment, resulting in fewer transactions.
- Competition: The level of competition in your local area can also impact your average price and number of monthly transactions. If there are many other event equipment rental companies in your area, you may need to lower your prices or offer promotions to stay competitive and maintain your number of transactions.
- Technology Changes: Advancements in technology can also affect your business, particularly if you rent out specialized equipment. For example, if a new, more advanced type of speaker system becomes available, customers may be willing to pay a higher price for it, increasing your average price and transactions.
- Weather: Unexpected weather conditions can also impact your business. If there is a sudden heatwave during the summer, you may see an increase in demand for outdoor equipment such as tents and fans, resulting in higher average prices and more transactions.
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 event equipment rental company
The next step is to estimate the expenses needed to run your event equipment rental 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 equipment rental company's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, and benefits for all employees, including event coordinators, delivery and setup staff, and administrative staff.
- Accountancy fees: You will need to hire an accountant or bookkeeper to help you manage your finances, prepare taxes, and keep track of your expenses.
- Insurance costs: It is important to have insurance coverage for your equipment, vehicles, and liability in case of any accidents or damages during events.
- Software licenses: You may need to purchase licenses for software programs such as event management software, accounting software, and customer relationship management software.
- Banking fees: You will need a business bank account to keep track of your income and expenses, and there may be fees associated with maintaining this account.
- Marketing and advertising: You will need to invest in marketing and advertising to reach potential customers and promote your services, such as creating a website, running social media ads, and attending industry events.
- Rent or lease: If you do not own a storage facility or warehouse, you may need to rent or lease a space to store your equipment and vehicles.
- Vehicle expenses: This includes fuel, maintenance, and insurance for any vehicles used to transport equipment to and from events.
- Equipment maintenance and repair: You will need to regularly maintain and repair your equipment to ensure they are in good working condition for events.
- Utilities: This includes electricity, water, and internet for your office and storage space.
- Office supplies: You will need basic office supplies such as paper, printer ink, and pens to operate your business.
- Legal fees: You may need to hire a lawyer to help you with contracts, agreements, and any legal issues that may arise.
- Training and development: To keep up with industry trends and improve your skills, you may need to invest in training and development for yourself and your employees.
- Travel expenses: If you provide services for events in different locations, you may incur travel expenses such as airfare, accommodation, and meals.
- Taxes and licenses: You will need to pay taxes on your business income and obtain any necessary licenses or permits to operate your business.
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 equipment rental 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 equipment rental company?
Once you have an idea of how much sales you could achieve and what it will cost to run your event equipment rental company, it is time to look into the equipment required to launch or expand the activity.
For an event equipment rental company, capital expenditures and initial working capital items could include:
- Event Equipment: This includes all the equipment needed for different types of events, such as tables, chairs, linens, tents, lighting, sound systems, and decorations. These items are essential for an event equipment rental company and must be included in the expenditure forecast.
- Delivery Vehicles: In order to transport the event equipment to different locations, you will need to invest in delivery vehicles. These can include trucks, vans, or trailers. The cost of these vehicles should be factored into your expenditure forecast.
- Storage Space: As an event equipment rental company, you will need a designated space to store all your equipment when it is not in use. This can include a warehouse, storage unit, or garage. The cost of renting or purchasing this space should be included in your expenditure forecast.
- Computer Software: To keep track of your inventory, bookings, and financial records, you will need to invest in event rental software. This can include programs for inventory management, customer relationship management, and accounting. These software expenses should be included in your expenditure forecast.
- Maintenance and Repairs: It's important to regularly maintain and repair your event equipment to ensure it is in good condition for future rentals. This can include costs for cleaning, repairs, and replacements. Make sure to include these expenses in your expenditure forecast to ensure your equipment remains in top condition.
Again, this list will need to be adjusted according to the specificities of your event equipment rental 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 equipment rental company
The next step in the creation of your financial forecast for your event equipment rental 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 equipment rental company?
Now let's have a look at the main output tables of your event equipment rental company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your event equipment rental company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an event equipment rental 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 equipment rental 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 projected cash flow statement
A projected cash flow statement for an event equipment rental company 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 event equipment rental company'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 event equipment rental company 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 equipment rental company's financial forecast?
Creating your event equipment rental company'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 event equipment rental company's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection 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 event equipment rental company 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 event equipment rental company's financial forecast?
Creating an accurate and error-free event equipment rental 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 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 event equipment rental company, 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 event equipment rental company
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 equipment rental 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 equipment rental 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 project sales for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
