How to create a financial forecast for an image consulting firm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your image consulting firm.
Putting together an image consulting firm 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 image consulting firm.
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 image consulting firm?
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 image consulting firm becomes handy.
Creating an image consulting firm 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 image consulting firm.
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 image consulting firm 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 image consulting firm'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 image consulting firm financial forecast?
A image consulting firm'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 image consulting firm, 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 image consulting firm 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 image consulting firm 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 image consulting firm's financial forecast.
The sales forecast for an image consulting firm
The sales forecast, also called topline projection, is normally where you will start when building your image consulting firm 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 image consulting firm), and consider the elements below:
- Target market preferences: The preferences and needs of your target market can greatly affect your average price and number of monthly transactions. For example, if your target market is primarily made up of high-end clients, you may be able to charge higher prices for your services and have fewer transactions per month. On the other hand, if your target market is more budget-conscious, you may need to offer lower prices and have a higher volume of transactions.
- Industry trends: Keeping up with current trends in the image consulting industry can also impact your pricing and number of transactions. For instance, if there is a growing demand for eco-friendly and sustainable fashion, you may need to adjust your prices to accommodate for more expensive, ethically-made clothing. Additionally, if there is a surge in popularity for certain services such as personal shopping or virtual styling, you may see an increase in the number of monthly transactions for those specific services.
- Competition: The level of competition in your local market can also play a role in your sales forecast. If there are several other image consulting firms in your area offering similar services at lower prices, you may need to adjust your prices or offer promotions in order to stay competitive and attract more clients. However, if you are the only image consulting firm in your area or have a unique niche, you may be able to charge higher prices and have a lower volume of transactions.
- Economic conditions: Changes in the economy can also impact your business's average price and number of transactions. During times of economic downturn, clients may be more budget-conscious and less likely to spend money on image consulting services. On the other hand, during times of economic prosperity, clients may be more willing to invest in their appearance and you may be able to increase your prices and see an increase in the number of monthly transactions.
- Seasonal fluctuations: The time of year can also affect your business's sales forecast. For example, during the holiday season when people are attending parties and events, there may be a higher demand for your services and you may be able to charge higher prices. However, during slower months such as summer when people are on vacation, you may see a decrease in the number of monthly transactions and need to adjust your pricing accordingly.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 image consulting firm
The next step is to estimate the expenses needed to run your image consulting firm 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 image consulting firm's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, and any other expenses related to your employees. As an image consulting firm, you may have a team of stylists, makeup artists, and other personnel who are essential to your business.
- Accountancy Fees: You will need to hire an accountant to help you with bookkeeping, tax preparation, and financial reporting. These fees may vary depending on the size and complexity of your business.
- Insurance Costs: As an image consulting firm, you will need to have insurance coverage to protect your business from any potential risks, such as liability claims or damage to your equipment.
- Software Licenses: You will need to invest in software programs that are specific to your industry, such as customer relationship management (CRM) software, design programs, and scheduling tools.
- Banking Fees: You will incur fees for maintaining a business bank account and making transactions, such as wire transfers or online payments.
- Rent: If you have a physical office space, you will need to pay rent or lease payments. This expense may also include utilities and maintenance fees.
- Marketing Expenses: In order to attract clients, you will need to invest in marketing and advertising strategies, such as creating a website, printing marketing materials, and attending industry events.
- Professional Development: As an image consultant, it is important to continuously update your skills and knowledge. This may include attending conferences, workshops, and training programs.
- Travel Expenses: If you offer services to clients outside of your local area, you may need to cover travel expenses, such as airfare, accommodations, and transportation.
- Office Supplies: You will need to purchase basic office supplies, such as stationery, printer ink, and postage, to keep your business running smoothly.
- Telephone and Internet: You will need to have a reliable phone and internet connection for communicating with clients, conducting research, and managing your online presence.
- Legal Fees: You may need to seek legal advice for contracts, trademark registration, and other legal matters related to your business.
- Continuing Education: In addition to professional development, you may also want to invest in further education, such as obtaining a certification or pursuing a degree, to enhance your expertise.
- Office Equipment: This includes any equipment or furniture that you need for your office, such as computers, printers, and desks.
- Business Insurance: In addition to general liability insurance, you may also need to consider business insurance to protect your assets, such as property and equipment.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small image consulting firm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an image consulting firm?
Once you have an idea of how much sales you could achieve and what it will cost to run your image consulting firm, it is time to look into the equipment required to launch or expand the activity.
For an image consulting firm, capital expenditures and initial working capital items could include:
- Office Space: This includes the cost of renting or purchasing an office space for your image consulting firm. You will also need to factor in expenses such as utilities, furniture, and equipment needed to set up your office.
- Technology: In today's digital age, having the right technology is crucial for an image consulting firm. This includes computers, software, printers, and other necessary equipment. You may also need to invest in a website and social media presence.
- Branding Materials: As an image consulting firm, you will need to invest in branding materials such as business cards, brochures, and logo design. These materials will help establish your brand and make a good impression on potential clients.
- Image Consulting Tools: This category includes any tools or equipment needed to provide image consulting services to your clients. This may include clothing racks, mirrors, body shape analysis tools, and other items that will be used during consultations.
- Training and Certification: In order to be a successful image consultant, you may need to invest in training and certification programs. This will not only enhance your skills and knowledge but also add credibility to your services.
Again, this list will need to be adjusted according to the specificities of your image consulting firm.
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 image consulting firm
The next step in the creation of your financial forecast for your image consulting firm 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 image consulting firm?
Now let's have a look at the main output tables of your image consulting firm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your image consulting firm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an image consulting firm 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 image consulting firm'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 image consulting firm'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 image consulting firm:
- 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 image consulting firm'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 image consulting firm'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 image consulting firm's financial forecast?
Using the right tool or solution will make the creation of your image consulting firm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your image consulting firm'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 image consulting firm 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 image consulting firm's financial forecast?
Creating an accurate and error-free image consulting firm 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 image consulting firm, 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 image consulting firm
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 image consulting firm.
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 image consulting firm. 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
- Financial forecast template for a business idea
- How to project sales for a business?
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Founder & CEO at The Business Plan Shop Ltd
