How to create a financial forecast for an interior store?
Developing and maintaining an up-to-date financial forecast for your interior store 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 interior store 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 interior store?
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 interior store becomes handy.
Creating an interior store 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 interior store.
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 interior store 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 interior store'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 needed to build an interior store financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start an interior store, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the interior store on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing interior store, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your interior store's financial forecast.
The sales forecast for an interior store
The sales forecast, also called topline projection, is normally where you will start when building your interior store 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 interior stores), and consider the elements below:
- Trends in interior design: As an interior store owner, you know that trends in interior design can greatly affect the average price of your products. For example, if there is a sudden shift towards minimalistic design, you may see a decrease in the price of ornate and intricate pieces.
- Economic climate: The state of the economy can also have a significant impact on your business's average price. During an economic downturn, consumers may be more cautious with their spending and opt for more affordable options, causing a decrease in your average price.
- Competition: The level of competition in your area can affect the number of monthly transactions for your business. If there are many other interior stores in your vicinity, you may see a decrease in transactions as customers have more options to choose from.
- Customer demographics: The demographics of your target audience can also play a role in your business's sales forecast. For example, if your store is located in an affluent neighborhood, you may be able to charge higher prices for your products, leading to a higher average price.
- Seasonal demand: Just like any retail business, an interior store may experience fluctuations in sales due to seasonal demand. For example, during the holiday season, there may be an increase in demand for home decor, leading to a higher number of transactions and potentially higher average prices.
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 interior store
The next step is to estimate the costs you’ll have to incur to operate your interior store.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your interior store's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees working in your interior store. It also includes any training and development costs for your employees.
- Rent: You will need to pay rent for your store space, whether it is a standalone building or part of a larger shopping complex.
- Utilities: This includes electricity, water, and gas bills for your store. You may also need to consider costs for internet and phone services.
- Inventory: You will need to purchase inventory to stock your store with furniture, decor, and other interior products.
- Marketing and Advertising: This includes costs for promoting your store, such as creating and printing flyers, running social media ads, and hosting events.
- Accountancy Fees: You may need to hire an accountant to help you with bookkeeping, taxes, and other financial tasks related to your store.
- Insurance Costs: It is important to have insurance to protect your store from any potential risks, such as theft, damage, or liability.
- Software Licenses: You may need to purchase software licenses for programs that can help you with inventory management, bookkeeping, and other store operations.
- Banking Fees: There may be fees associated with your store's bank account, such as monthly maintenance fees or transaction fees.
- Repairs and Maintenance: You will need to budget for any repairs or maintenance needed for your store, such as fixing broken displays or replacing light bulbs.
- Professional Services: You may need to hire outside professionals, such as interior designers or consultants, to help with certain aspects of your store.
- Packaging and Shipping: If you offer online sales or delivery services, you will need to budget for packaging materials and shipping costs.
- Taxes and Licenses: You will need to pay taxes on your store's profits, as well as any necessary business licenses or permits.
- Training and Development: This includes costs for any training or development programs for you and your employees to improve skills and knowledge related to your store.
- Office Supplies: You will need to purchase office supplies such as paper, pens, and printer ink for your store's administrative tasks.
This list is not exhaustive by any means, and will need to be tailored to your interior store's specific circumstances.
What investments are needed to start or grow an interior store?
Creating and expanding an interior store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an interior store could include elements such as:
- Store Fixtures and Equipment: This includes items such as shelving, display cases, cash registers, and other equipment needed to set up your store. These are essential for creating an attractive and functional interior for your store.
- Renovation and Remodeling: Depending on the condition of the space you are renting, you may need to make renovations or remodel the interior to fit your store's needs. This could include painting, flooring, lighting, and other improvements to create a welcoming and professional atmosphere.
- Point-of-Sale System: A point-of-sale system is necessary for processing sales and keeping track of inventory. This includes hardware such as a computer, screen, and barcode scanner, as well as software for managing sales and inventory data. A reliable and efficient system is crucial for the success of your store.
- Furniture: Depending on the type of store you are opening, you may need to purchase furniture such as chairs, tables, and sofas for customers to use while browsing or waiting. This is especially important for stores that offer services such as a coffee shop or salon.
- Security System: To protect your store and its inventory, it is important to invest in a security system. This could include cameras, alarms, and other equipment to deter theft and monitor the store's activity.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your interior store.
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 interior store
The next step in the creation of your financial forecast for your interior store 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 interior store?
Now let's have a look at the main output tables of your interior store'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 interior store'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 interior store will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your interior store'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 interior store. 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 interior store 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 interior store'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 interior store 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 interior store's financial projections?
Building an interior store financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your interior store'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional interior store 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 interior store'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 interior store 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 interior store'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 interior store, 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 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 interior store.
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 interior store. 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
- How to project revenues for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start an interior store? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
