How to create a financial forecast for an ice cream shop?
Developing and maintaining an up-to-date financial forecast for your ice cream 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 ice cream 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 ice cream shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your ice cream shop and ensure that it can be financially viable in the years to come.
A financial plan for an ice cream 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 ice cream 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 ice cream 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 needed to build an ice cream shop financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start an ice cream shop, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the ice cream shop on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing ice cream shop, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your ice cream shop's financial forecast.
The sales forecast for an ice cream shop
From experience, it is usually best to start creating your ice cream shop financial forecast by your sales forecast.
To create an accurate sales forecast for your ice cream shop, you will have to rely on the data collected in your market research, or if you're running an existing ice cream shop, 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:
- Weather conditions: The temperature and weather conditions can greatly affect the demand for ice cream. During hot summer months, your number of monthly transactions may increase due to more people wanting to cool off with a scoop of ice cream.
- Competition: If there are several other ice cream shops in the same area, this may drive down your average price as customers have more options to choose from. On the other hand, if you are the only ice cream shop in the area, you may be able to charge a higher average price.
- Seasonal flavors: Introducing seasonal flavors can drive up the average price as customers may be willing to pay more for limited edition or specialty flavors. This can also drive up the number of monthly transactions as customers may want to try these new flavors before they are gone.
- Tourism: If your ice cream shop is located in a popular tourist destination, you may experience higher average prices as tourists are often willing to spend more on treats while on vacation. This can also lead to an increase in monthly transactions as tourists may want to try local specialties.
- Special events: Hosting or participating in special events, such as local fairs or festivals, can drive up the number of monthly transactions as there may be a higher number of potential customers in the area. You may also be able to charge a higher average price for your ice cream at these events due to the increased demand.
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 ice cream shop
The next step is to estimate the costs you’ll have to incur to operate your ice cream shop.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your ice cream shop's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, and benefits for your employees. As an ice cream shop, you will need to hire scoopers, cashiers, and possibly kitchen staff.
- Cost of goods sold: This includes the cost of ingredients, such as milk, cream, sugar, and flavorings, used to make your ice cream. It also includes the cost of any toppings or cones.
- Rent: You will need to pay rent for your shop space. This can vary depending on the location and size of your shop.
- Utilities: This includes electricity, water, and gas bills for your shop. As an ice cream shop, you will also need to consider the cost of refrigeration for your ice cream.
- Marketing and advertising: You will need to promote your ice cream shop to attract customers. This may include flyers, social media advertising, and other marketing efforts.
- Equipment maintenance: Your ice cream machines and other equipment will need to be regularly maintained and repaired, which can be a significant expense.
- Accountancy fees: You will need to hire an accountant to help you keep track of your expenses and taxes.
- Insurance costs: As a business owner, you will need to have insurance to protect your shop and employees from any potential risks.
- Software licenses: You may need to purchase software for inventory management, employee scheduling, and other business operations.
- Banking fees: You will need to pay fees for bank accounts, credit card processing, and other financial services.
- Packaging and supplies: This includes the cost of cups, spoons, napkins, and other supplies for serving your ice cream.
- Cleaning and sanitation: As an ice cream shop, you will need to maintain a clean and sanitary environment. This may include hiring a cleaning service or purchasing cleaning supplies.
- Licenses and permits: You will need to obtain various licenses and permits to legally operate your ice cream shop.
- Credit card processing fees: If you accept credit card payments, you will need to pay fees to the credit card processing company for each transaction.
- Training and development: To ensure the success of your ice cream shop, you may need to invest in training and development for your employees.
This list is not exhaustive by any means, and will need to be tailored to your ice cream shop's specific circumstances.
What investments are needed to start or grow an ice cream shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your ice cream shop, it is time to look into the equipment required to launch or expand the activity.
For an ice cream shop, capital expenditures and initial working capital items could include:
- Equipment: This includes any machinery or appliances necessary for making and serving ice cream, such as ice cream machines, freezers, and display cases.
- Furniture and fixtures: This category includes tables, chairs, and other furniture as well as any decorative elements like signage or artwork.
- Renovations and construction: If you are starting your ice cream shop from scratch or moving into a new location, you may need to budget for renovations or construction costs to create a suitable space for your business.
- Vehicles: If you plan to offer mobile or catering services, you may need to purchase a vehicle to transport your ice cream and equipment.
- Technology: This can include point-of-sale systems, computers, and other technology necessary for running your ice cream shop efficiently.
Again, this list will need to be adjusted according to the specificities of your ice cream 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 ice cream shop
The next step in the creation of your financial forecast for your ice cream 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 ice cream shop?
Now let's have a look at the main output tables of your ice cream shop's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your ice cream shop is likely to be in the years to come.
For your ice cream shop 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 ice cream shops, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your ice cream 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 ice cream 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 ice cream 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 ice cream 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 ice cream 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 ice cream shop's financial forecast?
Using the right tool or solution will make the creation of your ice cream shop's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your ice cream 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional ice cream shop financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your ice cream shop's financial forecast?
Creating an accurate and error-free ice cream shop 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 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 ice cream shop, 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 ice cream shop
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your ice cream shop future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for an ice cream shop, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to write a business plan for an ice cream shop
- How to project sales for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting an ice cream shop? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
