How to create a financial forecast for an eyewear manufacturer?

Creating a financial forecast for your eyewear manufacturing business, 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 eyewear manufacturing business 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 eyewear manufacturing business?

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 eyewear manufacturing business becomes handy.

Creating an eyewear manufacturing business 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 eyewear manufacturing business.

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 eyewear manufacturing business 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 eyewear manufacturing business'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.

What information is used as input to build an eyewear manufacturing business financial forecast?

A eyewear manufacturing business'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 eyewear manufacturing business.

If you are creating (or updating) the forecast of an existing eyewear manufacturing business, 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 eyewear manufacturing business 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 eyewear manufacturing business 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 eyewear manufacturing business's financial forecast.

The sales forecast for an eyewear manufacturing business

The sales forecast, also called topline projection, is normally where you will start when building your eyewear manufacturing business 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 eyewear manufacturers), and consider the elements below:

After the sales forecast comes the operating expenses budget, which we will now look into in more detail.

The operating expenses for an eyewear manufacturing business

The next step is to estimate the costs you’ll have to incur to operate your eyewear manufacturing business.

These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.). 

But your eyewear manufacturing business's operating expenses should normally include the following items:

This list is not exhaustive by any means, and will need to be tailored to your eyewear manufacturing business's specific circumstances.

What investments are needed to start or grow an eyewear manufacturing business?

Once you have an idea of how much sales you could achieve and what it will cost to run your eyewear manufacturing business, it is time to look into the equipment required to launch or expand the activity.

For an eyewear manufacturing business, capital expenditures and initial working capital items could include:

Again, this list will need to be adjusted according to the specificities of your eyewear manufacturing business.

The financing plan of your eyewear manufacturing business

The next step in the creation of your financial forecast for your eyewear manufacturing business 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 eyewear manufacturing business?

Now let's have a look at the main output tables of your eyewear manufacturing business's financial forecast.

The projected profit & loss statement

The projected profit & loss shows how profitable your eyewear manufacturing business is likely to be in the years to come.

For your eyewear manufacturing business 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 eyewear manufacturers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.

The projected balance sheet

The projected balance sheet gives an overview of your eyewear manufacturing business's financial structure at the end of the financial year.

It is composed of three categories of items: assets, liabilities and equity:

• Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
• Liabilities: are the debts of your eyewear manufacturing business. They include accounts payable (money owed to suppliers), taxes due and bank loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 eyewear manufacturing business 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 eyewear manufacturing business'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 eyewear manufacturing business is appropriately capitalised.

Which tool should you use to create your eyewear manufacturing business's financial projections?

Building an eyewear manufacturing business 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 eyewear manufacturing business'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 eyewear manufacturing business 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 eyewear manufacturing business's financial forecast?

Creating an accurate and error-free eyewear manufacturing business 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.

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 eyewear manufacturing business, 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

1. A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
2. Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
3. Using financial forecasting software makes it easy to create and maintain up-to-date projections for your eyewear manufacturing business.

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 eyewear manufacturing business. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!

Also on The Business Plan Shop

• Example of financial projections
• How to create a sales forecast for a business?
• Financial forecast template for a business idea

Know someone who runs or wants to start an eyewear manufacturing business? Share our financial projection guide with them!