How to create a financial forecast for an Indian restaurant?
Developing and maintaining an up-to-date financial forecast for your Indian restaurant 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 Indian restaurant 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 Indian restaurant?
The financial projections for your Indian restaurant act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your Indian restaurant's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 Indian restaurant financial forecast?
A Indian restaurant'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 Indian restaurant, 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 Indian restaurant 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 Indian restaurant 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 Indian restaurant's financial forecast.
The sales forecast for an Indian restaurant
The sales forecast, also called topline projection, is normally where you will start when building your Indian restaurant 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 Indian restaurants), and consider the elements below:
- Your menu offerings: The type and variety of dishes you offer can greatly impact the average price of your restaurant. For example, if you introduce more premium dishes or add ingredients that are more expensive, it may lead to an increase in the average price of your menu items and ultimately affect your sales forecast.
- Seasonal fluctuations: The demand for Indian food may vary depending on the season. For instance, during the summer months, people tend to prefer lighter and more refreshing meals, while in the colder months, they may lean towards heartier and spicier dishes. This can affect the average price and number of transactions in your restaurant.
- Competition: The presence of other Indian restaurants in the area can also impact your sales forecast. If there are multiple restaurants offering similar cuisine and prices, it may be challenging to stand out and attract customers. On the other hand, if you are the only Indian restaurant in the vicinity, you may have a competitive advantage and see an increase in sales.
- Ingredients and supply chain: The availability and cost of ingredients can also affect your average price and number of transactions. If there is a shortage of a particular ingredient, it may increase the cost of preparing dishes, leading to a higher average price. Similarly, if you source your ingredients from a local supplier, their prices and availability may impact your business.
- Events and promotions: Special events and promotions can also influence your sales forecast. For example, if you offer a discount or host a special event, it may attract more customers and increase your number of transactions. On the other hand, if there are no upcoming events or promotions, it may lead to a dip in sales.
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 Indian restaurant
The next step is to estimate the expenses needed to run your Indian restaurant 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 Indian restaurant's operating expenses should include the following items at a minimum:
- Staff Costs: This includes the salaries and wages of your kitchen staff, servers, and other employees. You may also need to budget for overtime pay, bonuses, and benefits such as health insurance and retirement plans.
- Food Costs: This includes the cost of ingredients and supplies needed to make your dishes. For an Indian restaurant, this may include spices, rice, lentils, and other specialty items.
- Rent: The cost of renting your restaurant space. This may include utilities such as electricity, water, and gas.
- Marketing and Advertising: To attract customers to your restaurant, you may need to budget for advertising costs such as flyers, online ads, and promotions.
- Insurance Costs: This includes insurance for your restaurant, employees, and equipment. You may also need to budget for liability insurance in case of any accidents or lawsuits.
- Accountancy Fees: To keep track of your finances and taxes, you may need to hire an accountant or use accounting software.
- Software Licences: If you use any software for your restaurant operations, such as point of sale systems or reservation systems, you will need to budget for the cost of software licences.
- Inventory: To keep your kitchen stocked with ingredients and supplies, you will need to budget for inventory costs.
- Cleaning and Maintenance: To keep your restaurant clean and in good condition, you will need to budget for cleaning supplies, equipment maintenance, and repairs.
- Banking Fees: This includes fees for credit card processing, bank account maintenance, and loan payments.
- Training and Development: To ensure your staff is knowledgeable and skilled, you may need to budget for training and development programs.
- Utilities: In addition to rent, you may need to budget for other utilities such as internet and phone services.
- Licences and Permits: To operate your restaurant, you will need to obtain various licences and permits, which may come with fees.
- Repairs and Maintenance: In addition to regular cleaning and maintenance, you will also need to budget for unexpected repairs and equipment replacements.
- Taxes: As a business owner, you will need to pay various taxes, including income tax, sales tax, and employment taxes.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small Indian restaurant might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an Indian restaurant?
Once you have an idea of how much sales you could achieve and what it will cost to run your Indian restaurant, it is time to look into the equipment required to launch or expand the activity.
For an Indian restaurant, capital expenditures and initial working capital items could include:
- Kitchen Equipment: As an Indian restaurant owner, you will need to invest in specialized kitchen equipment such as tandoors, grills, and pressure cookers to prepare traditional Indian dishes. These items are essential for your restaurant's operations and are considered fixed assets.
- Furniture and Decor: Creating an authentic Indian dining experience for your customers will require investing in furniture and decor that reflects the culture and aesthetic of India. This may include purchasing traditional dining tables and chairs, as well as decorations such as tapestries, wall hangings, and artwork.
- POS System: A modern and efficient Point-of-Sale (POS) system is crucial for any restaurant, including Indian restaurants. This system will help you manage orders, track inventory, and process payments. Investing in a quality POS system will save you time and money in the long run.
- Outdoor Seating Area: Many Indian restaurants offer outdoor seating options for their customers, especially during the warmer months. If you have the space, investing in outdoor furniture, umbrellas, and heaters will allow you to accommodate more customers and increase your revenue potential.
- Delivery Vehicles: If you plan on offering delivery services for your Indian restaurant, you may need to invest in delivery vehicles to transport food to your customers. This can be a significant capital expenditure, but it will also provide a convenient and efficient way to expand your customer base.
Again, this list will need to be adjusted according to the specificities of your Indian restaurant.
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 Indian restaurant
The next step in the creation of your financial forecast for your Indian restaurant 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 Indian restaurant?
Now let's have a look at the main output tables of your Indian restaurant's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your Indian restaurant is likely to be in the years to come.
For your Indian restaurant 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 Indian restaurants, 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 Indian restaurant'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 Indian restaurant. 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 Indian restaurant 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 Indian restaurant'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 Indian restaurant 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 Indian restaurant's financial forecast?
Using the right tool or solution will make the creation of your Indian restaurant's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your Indian restaurant'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 Indian restaurant 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 Indian restaurant'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 Indian restaurant 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 Indian restaurant'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 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 Indian restaurant, 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your Indian restaurant.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for an Indian restaurant. Don't hesitate to contact us if you 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
- Financial forecast example
- How to project sales for a business?
- Sample financial forecast for business idea
Know someone who runs an Indian restaurant? Share our business guide with them!
Founder & CEO at The Business Plan Shop Ltd
