How to create a financial forecast for an industrial cleaning company?
Creating a financial forecast for your industrial cleaning company, 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 industrial cleaning company 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 industrial cleaning company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your industrial cleaning company and ensure that it can be financially viable in the years to come.
A financial plan for an industrial cleaning company 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 industrial cleaning company 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 industrial cleaning company'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 industrial cleaning company financial forecast?
A industrial cleaning company'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 industrial cleaning company, 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 industrial cleaning company 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 industrial cleaning company 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 industrial cleaning company's financial forecast.
The sales forecast for an industrial cleaning company
The sales forecast, also called topline projection, is normally where you will start when building your industrial cleaning company 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 industrial cleaning companies), and consider the elements below:
- The state of the economy can greatly impact your average price and number of monthly transactions. During an economic downturn, businesses may cut back on their cleaning services to save money, resulting in a decrease in both your average price and number of monthly transactions.
- The level of competition in your local market can also affect your average price and number of monthly transactions. If there are many other industrial cleaning companies in your area, you may need to lower your prices or offer special deals to stay competitive, which can impact your average price. Additionally, if your competitors are offering better services or promotions, you may see a decrease in your number of monthly transactions.
- The demand for your services can also impact your average price and number of monthly transactions. If there is a high demand for industrial cleaning services in your area, you may be able to charge higher prices and have more transactions. However, if the demand is low, you may need to lower your prices to attract more customers, which can decrease your average price.
- The size and type of businesses you target can also affect your average price and number of monthly transactions. For example, if you primarily target small businesses, you may have lower average prices and higher transaction numbers compared to targeting larger corporations, which may have higher budgets and require less frequent cleaning services.
- The cost of supplies and equipment can also impact your average price and number of monthly transactions. If the cost of cleaning supplies and equipment increases, you may need to raise your prices to maintain your profit margins, which can result in a decrease in your number of monthly transactions. Alternatively, if you find more cost-effective supplies and equipment, you may be able to lower your prices and potentially attract more customers, increasing your number of monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for an industrial cleaning company
The next step is to estimate the costs you’ll have to incur to operate your industrial cleaning company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your industrial cleaning company's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other expenses related to your employees, such as training and uniforms.
- Accountancy Fees: You will need to hire an accountant to help you manage your financial records, prepare tax returns, and provide other financial services.
- Insurance Costs: As an industrial cleaning company, you will need to have insurance to protect your business and employees from any potential accidents or damages.
- Software Licences: In order to manage your business operations and keep track of your clients and projects, you will need to invest in software licenses for accounting, scheduling, and other business management tools.
- Banking Fees: You will need to open a business bank account and pay fees for services such as check processing, wire transfers, and credit card processing.
- Cleaning Supplies: This includes all the necessary supplies and equipment needed for industrial cleaning, such as cleaning chemicals, mops, rags, and other tools.
- Vehicle Expenses: Since your business involves traveling to different job sites, you will need to cover expenses such as gas, maintenance, and insurance for your company vehicles.
- Advertising and Marketing: In order to attract new clients, you will need to invest in marketing efforts such as online advertising, print materials, and networking events.
- Rent/Lease Expenses: If you do not own your business premises, you will need to pay rent or lease fees for your office and storage space.
- Utilities: This includes expenses for electricity, water, internet, and phone services for your office and equipment.
- Training and Certifications: In order to maintain high standards and keep up with industry regulations, you may need to invest in training and certifications for yourself and your employees.
- Legal Fees: You may need to hire a lawyer for advice on contracts, employment laws, and any potential legal issues that may arise in your business.
- Travel Expenses: If you need to travel for business purposes, you will need to cover expenses such as airfare, hotel accommodations, and meals.
- Office Supplies: This includes expenses for basic office supplies such as paper, printer ink, and pens.
- Uniforms and Protective Gear: As an industrial cleaning company, you will need to provide your employees with appropriate uniforms and safety gear.
This list is not exhaustive by any means, and will need to be tailored to your industrial cleaning company's specific circumstances.
What investments are needed to start or grow an industrial cleaning company?
Creating and expanding an industrial cleaning company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an industrial cleaning company could include elements such as:
- Industrial Cleaning Equipment: This includes items such as pressure washers, floor scrubbers, and vacuum cleaners specifically designed for industrial use. These are essential for effectively cleaning large, commercial spaces.
- Vehicles: As an industrial cleaning company, you will need reliable vehicles to transport your equipment and employees to various job sites. This could include vans, trucks, or even specialized vehicles like water trucks for outdoor cleaning projects.
- Safety Gear and Supplies: In order to comply with safety regulations and protect your employees, you will need to invest in high-quality safety gear and supplies. This may include items such as protective clothing, gloves, goggles, and respirators.
- Storage and Inventory Management Systems: To efficiently manage your equipment and supplies, you may need to invest in storage solutions such as shelving units, cabinets, and inventory management software. This will help keep your equipment organized and easily accessible.
- Maintenance and Repair Tools: As with any business, it's important to have the necessary tools to maintain and repair your equipment. This could include items like tool sets, spare parts, and specialized cleaning equipment repair tools.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your industrial cleaning company.
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 industrial cleaning company
The next step in the creation of your financial forecast for your industrial cleaning company 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 industrial cleaning company?
Now let's have a look at the main output tables of your industrial cleaning company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your industrial cleaning company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an industrial cleaning company 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 industrial cleaning company'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 industrial cleaning company'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 industrial cleaning company:
- 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 industrial cleaning company'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 industrial cleaning company'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 industrial cleaning company's financial forecast?
Using the right tool or solution will make the creation of your industrial cleaning company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your industrial cleaning company'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
Outsourcing the creation of your industrial cleaning company 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 industrial cleaning company'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 industrial cleaning company 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 industrial cleaning company'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 industrial cleaning company, 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 industrial cleaning company
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 industrial cleaning company 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 industrial cleaning company, 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 create a turnover forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
