How to create a financial forecast for an influencer marketing agency?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your influencer marketing agency.
Putting together an influencer marketing agency 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 influencer marketing agency.
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 influencer marketing agency?
The financial projections for your influencer marketing agency 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 influencer marketing agency'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 influencer marketing agency financial forecast?
A influencer marketing agency's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing influencer marketing agency.
If you are creating (or updating) the forecast of an existing influencer marketing agency, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new influencer marketing agency startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the influencer marketing agency to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your influencer marketing agency's financial forecast.
The sales forecast for an influencer marketing agency
The sales forecast, also called topline projection, is normally where you will start when building your influencer marketing agency 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 influencer marketing agencies), and consider the elements below:
- Changes in social media algorithms: As social media platforms continue to update their algorithms, the reach and engagement of influencer posts may be affected, potentially impacting the demand for influencer marketing services and the average price of campaigns.
- Emergence of new social media platforms: The rise of new social media platforms, such as TikTok or Clubhouse, may lead to a shift in the market and create new opportunities for influencer marketing. This could affect the average price of campaigns and the number of monthly transactions as agencies adapt to these new platforms.
- Changes in influencer trends and preferences: Influencers' preferences and behaviors may change over time, affecting the types of campaigns and collaborations they are willing to participate in. This could impact the average price of campaigns and the number of transactions as agencies adjust their strategies to accommodate these changes.
- Economic conditions: Economic downturns or fluctuations could affect the budgets of brands and businesses, leading to a decrease in demand for influencer marketing services and potentially impacting the average price of campaigns.
- Competition in the market: The growing popularity of influencer marketing has led to an increase in competition among agencies. This could drive down prices and potentially lead to a decrease in the number of monthly transactions as agencies compete for clients.
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 influencer marketing agency
The next step is to estimate the expenses needed to run your influencer marketing agency 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 influencer marketing agency's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, training, and other expenses related to your employees. As an influencer marketing agency, you will need a team of professionals to manage influencer relationships, create content, and track campaign performance.
- Accountancy Fees: You will need to hire an accountant or use accounting software to manage your finances. This will include bookkeeping, tax preparation, and other financial services.
- Insurance Costs: It is important to have insurance to protect your business from potential risks and liabilities. This may include general liability insurance, professional liability insurance, and cyber liability insurance.
- Software Licenses: To effectively manage influencer relationships and track campaign performance, you will need to invest in influencer management software, social media analytics tools, and other software licenses.
- Banking Fees: This includes fees for business bank accounts, credit card processing, and other financial services.
- Office Rent: You will need to have a physical office space to operate your influencer marketing agency. This will include rent, utilities, and other office-related expenses.
- Marketing and Advertising Costs: As a marketing agency, you will need to invest in marketing and advertising to promote your services. This may include social media ads, influencer partnerships, and other promotional activities.
- Travel Expenses: You may need to travel for client meetings, influencer events, or other business purposes. This will include expenses for flights, accommodations, and meals.
- Legal Fees: It is important to have legal support to protect your business and ensure compliance with laws and regulations. This may include fees for contracts, trademarks, and other legal services.
- Professional Memberships: As an influencer marketing agency, it is beneficial to be part of professional organizations and attend industry events. This will include membership fees and event registrations.
- Office Supplies: This includes expenses for office supplies, such as stationery, printer ink, and other essential items.
- Internet and Phone Bills: You will need internet and phone services to communicate with clients, influencers, and other stakeholders. This will include monthly bills and potential installation fees.
- Training and Development: To stay current with industry trends and improve your skills, it is important to invest in training and development for yourself and your team.
- Utilities: This includes expenses for electricity, water, and other utilities needed to run your office.
- Office Maintenance: You may need to cover expenses for office maintenance and repairs, such as cleaning services, equipment maintenance, and building repairs.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small influencer marketing agency might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an influencer marketing agency?
Your influencer marketing agency financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For an influencer marketing agency, these could include:
- Equipment: This includes items such as cameras, lighting equipment, and microphones used for creating high-quality content for your influencer marketing campaigns.
- Studio/Office Space: As your agency grows, you may need to invest in a dedicated space for your team to work and collaborate on projects. This could include rent, furniture, and equipment for the space.
- Technology: This includes expenses for software, hardware, and other technology tools that are essential for managing and tracking influencer campaigns, as well as for creating and editing content.
- Website Development and Maintenance: A professional and user-friendly website is crucial for any business, including an influencer marketing agency. This may include the cost of hiring a web developer, purchasing a domain, and maintaining the website.
- Travel: As an influencer marketing agency, you may need to attend events, conferences, and meetings with clients or influencers. Travel expenses such as airfare, lodging, and transportation should be factored into your expenditure forecast.
Again, this list will need to be adjusted according to the size and ambitions of your influencer marketing agency.
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 influencer marketing agency
The next step in the creation of your financial forecast for your influencer marketing agency 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 influencer marketing agency?
Now let's have a look at the main output tables of your influencer marketing agency'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 influencer marketing agency'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 influencer marketing agency will look different than for a startup.
The projected balance sheet
Your influencer marketing agency's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 projected cash flow statement
A projected cash flow statement for an influencer marketing agency 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 influencer marketing agency'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 influencer marketing agency 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 influencer marketing agency's financial forecast?
Creating your influencer marketing agency's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your influencer marketing agency'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.
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 influencer marketing agency 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 influencer marketing agency'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 influencer marketing agency 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 influencer marketing agency'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 influencer marketing agency, 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 influencer marketing agency.
- 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 influencer marketing agency. 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?
- Financial forecast template for a business idea
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