How to create a financial forecast for an ice skate manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your ice skate manufacturing business.
Putting together an ice skate manufacturing business financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your ice skate manufacturing business.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for an ice skate manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your ice skate manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for an ice skate manufacturing business 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 skate manufacturing business 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 skate manufacturing business'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 ice skate manufacturing business financial forecast?
A ice skate manufacturing business'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 ice skate manufacturing business, 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 ice skate manufacturing business 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 ice skate manufacturing business 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 ice skate manufacturing business's financial forecast.
The sales forecast for an ice skate manufacturing business
From experience, it is usually best to start creating your ice skate manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your ice skate manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing ice skate manufacturing business, 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 ice skate manufacturing business, your sales may be heavily influenced by the seasonal demand for ice skating. During the winter months, when outdoor and indoor ice skating rinks are open, your average price may increase due to higher demand for your skates. Similarly, during the warmer months, your average monthly transactions may decrease as there is less demand for ice skates.
- Economic Conditions: The general economic conditions can also impact your business's sales forecast. During times of economic downturn, consumers may be less likely to spend money on non-essential items like ice skates, resulting in a decrease in both average price and monthly transactions.
- Competition: Your business's sales forecast may also be affected by the level of competition in the market. If there are many other ice skate manufacturers in your area, you may have to lower your average price in order to stay competitive and attract customers. This could also lead to a decrease in monthly transactions as customers may opt for cheaper options.
- Technology: Advancements in technology can also affect your business's sales forecast. If there are new and innovative ice skate designs or materials being introduced by your competitors, you may need to adjust your average price to remain competitive. Additionally, if your business invests in new technology to improve the quality or efficiency of your skates, this could also impact your average price.
- Popularity of Ice Skating: The popularity of ice skating as a recreational activity can also impact your business's sales. If the sport becomes more popular, there may be an increase in demand for your skates, resulting in an increase in both average price and monthly transactions. Conversely, if ice skating becomes less popular, your sales may decrease.
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 skate manufacturing business
The next step is to estimate the expenses needed to run your ice skate manufacturing business 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 ice skate manufacturing business's operating expenses should include the following items at a minimum:
- Raw Materials: This includes the cost of materials used to manufacture the ice skates, such as steel for blades, leather for boots, and laces.
- Labor Costs: This includes the wages and benefits for your production team, as well as any specialized labor for assembling or finishing the skates.
- Rent/Lease: If you do not own your manufacturing facility, you will need to budget for monthly rent or lease payments.
- Utilities: You will need to cover the cost of electricity, water, and other utilities used in the manufacturing process.
- Equipment Maintenance: This includes the cost of regular maintenance and repairs for machinery used in the production of ice skates.
- Packaging and Shipping: Once your skates are manufactured, you will need to budget for packaging materials and shipping costs to get them to retailers or customers.
- Accounting and Bookkeeping: It is important to keep accurate financial records for your business, so you may need to hire an accountant or bookkeeper to help with this task.
- Marketing and Advertising: To promote your brand and products, you may need to budget for marketing and advertising expenses, such as creating a website, printing brochures, or attending trade shows.
- Insurance: It is important to have insurance coverage for your business, including liability insurance and coverage for your manufacturing facility and equipment.
- Software Licenses: You may need to purchase software licenses for programs used in the design, manufacturing, or business management aspects of your ice skate production.
- Banking Fees: As a business owner, you will likely have to pay fees for maintaining a business bank account, processing credit card payments, and other banking services.
- Professional Services: Depending on your business needs, you may need to hire outside professionals such as lawyers, consultants, or designers, who will charge fees for their services.
- Taxes and Licenses: You will need to budget for various taxes and licenses related to your business, such as business taxes, sales tax, and any required permits or licenses.
- Office Supplies: Even if you do not have a separate office space, you will likely need to purchase basic supplies such as paper, ink, and stationery for your business.
- Employee Benefits: In addition to wages, you may also need to budget for employee benefits such as health insurance, retirement plans, and paid time off.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small ice skate manufacturing business might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an ice skate manufacturing business?
Creating and expanding an ice skate manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an ice skate manufacturing business could include elements such as:
- Machinery and Equipment: This includes the cost of purchasing or leasing manufacturing equipment such as cutting machines, sewing machines, and heat molding machines.
- Inventory: As an ice skate manufacturing business, you will need to invest in raw materials such as leather, steel blades, and plastic for the boot frames. Additionally, you may need to purchase pre-made parts such as laces and buckles.
- Facility Renovations: If you are starting your business from scratch, you may need to invest in renovating a space to serve as your manufacturing facility. This could include costs for plumbing, electrical work, and insulation.
- Packaging and Shipping Supplies: In order to get your ice skates to customers, you will need to purchase packaging materials such as boxes, tape, and labels. You may also need to invest in a shipping scale and printer for shipping labels.
- Furniture and Fixtures: This includes any necessary furniture for your manufacturing facility such as workbenches, chairs, and storage racks. You may also need to purchase fixtures like lighting and shelving.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your ice skate manufacturing 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.
The financing plan of your ice skate manufacturing business
The next step in the creation of your financial forecast for your ice skate 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 ice skate manufacturing business?
Now let's have a look at the main output tables of your ice skate manufacturing business's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy ice skate manufacturing business's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established ice skate manufacturing business will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your ice skate 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 ice skate 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 ice skate 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 ice skate 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 ice skate manufacturing 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 skate manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your ice skate manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your ice skate 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional ice skate manufacturing business 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 skate manufacturing business's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free ice skate manufacturing business financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your ice skate manufacturing business's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 skate manufacturing business, 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 skate manufacturing business
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 skate manufacturing business 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 skate manufacturing business, 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 project sales for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
