How to create a financial forecast for an internet cafe?

Creating a financial forecast for your internet cafe, 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 internet cafe 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 internet cafe?

The financial projections for your internet cafe 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 internet cafe'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.

What information is needed to build an internet cafe 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 internet cafe, 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 internet cafe 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 internet cafe, 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 internet cafe's financial forecast.

The sales forecast for an internet cafe

The sales forecast, also called topline projection, is normally where you will start when building your internet cafe 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 internet cafes), and consider the elements below:

After the sales forecast comes the operating expenses budget, which we will now look into in more detail.

The operating expenses for an internet cafe

Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your internet cafe on a daily basis.

Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based. 

Operating expenses for an internet cafe will include some of the following items:

This list will need to be tailored to the specificities of your internet cafe, but should offer a good starting point for your budget.

What investments are needed to start or grow an internet cafe?

Creating and expanding an internet cafe also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for an internet cafe could include elements such as:

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your internet cafe.

The financing plan of your internet cafe

The next step in the creation of your financial forecast for your internet cafe 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 internet cafe?

Now let's have a look at the main output tables of your internet cafe's financial forecast.

The projected profit & loss statement

The projected profit & loss shows how profitable your internet cafe is likely to be in the years to come.

For your internet cafe 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 internet cafes, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.

The projected balance sheet

Your internet cafe'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 projection

The cash flow forecast of your internet cafe will show how much cash the business is expected to generate or consume over the next three to five years.

There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:

• Operating cash flow: how much cash is generated by the internet cafe's operations
• Investing cash flow: what is the business investing to expand or maintain its equipment 
• Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)

Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your internet cafe is adequately funded.

Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your internet cafe's financial plan. 

Which tool should you use to create your internet cafe's financial forecast?

Creating your internet cafe'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 internet cafe'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 internet cafe 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 internet cafe's financial forecast?

Creating an accurate and error-free internet cafe financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.

Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes. 

Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon. 

Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer. 

Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.

Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection software like The Business Plan Shop is built for this.

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 internet cafe, 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 internet cafe

Takeaways

1. 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.
2. Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your internet cafe future cash flows may look like.
3. 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 internet cafe, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.

Also on The Business Plan Shop

• Example of financial forecast
• How to project sales for a business?
• Sample financial forecast for business idea

Know someone who owns or is thinking of starting an internet cafe? Share our forecasting guide with them!