How to create a financial forecast for an office equipment rental company?
Developing and maintaining an up-to-date financial forecast for your office equipment rental company 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 office equipment rental company 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 office equipment rental company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your office equipment rental company and ensure that it can be financially viable in the years to come.
A financial plan for an office equipment rental 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 office equipment rental 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 office equipment rental 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 office equipment rental company financial forecast?
A office equipment rental company'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 office equipment rental company.
If you are creating (or updating) the forecast of an existing office equipment rental company, 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 office equipment rental company 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 office equipment rental company 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 office equipment rental company's financial forecast.
The sales forecast for an office equipment rental company
The sales forecast, also called topline projection, is normally where you will start when building your office equipment rental 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 office equipment rental companies), and consider the elements below:
- Economic conditions: Changes in the overall economy can impact the demand for office equipment rentals. For example, during a recession, businesses may be more likely to rent equipment instead of purchasing it, which could increase your average price as demand rises.
- Industry trends: Keep an eye on emerging trends in the office equipment industry, such as the shift towards cloud-based solutions or the increasing popularity of remote work. These trends can affect the types of equipment your customers are looking for and therefore impact your average price and number of monthly transactions.
- Competition: The presence of competitors in your market can affect your average price and number of monthly transactions. If you are facing stiff competition, you may need to lower your prices to remain competitive, which could decrease your average price. On the other hand, if your competitors are struggling, you may be able to increase your prices and attract more customers.
- Technology advancements: As technology continues to evolve, newer and more advanced equipment may become available, which could impact your average price. If your customers are looking for the latest and greatest equipment, you may need to adjust your prices accordingly.
- Customer demographics: Your target market can also affect your average price and number of monthly transactions. For example, if you cater to small businesses, you may need to offer more affordable rental options, whereas if your target market is larger corporations, you may be able to charge higher prices.
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 office equipment rental company
The next step is to estimate the costs you’ll have to incur to operate your office equipment rental company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your office equipment rental company's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, benefits, and payroll taxes for your employees who handle equipment rentals, maintenance, and customer service.
- Accountancy Fees: You may need to hire an accountant or bookkeeper to handle financial records and taxes for your office equipment rental company.
- Insurance Costs: You will need to purchase insurance policies to protect your office equipment from damage, theft, and liability.
- Software Licences: You may need to purchase software licences for your rental management system and other business tools.
- Banking Fees: This includes charges for bank accounts, credit card processing, and other financial services.
- Rent or Lease Payments: If you do not own your office space, you will need to pay rent or lease payments.
- Utilities: This includes electricity, water, and internet services for your office space.
- Marketing and Advertising: You will need to budget for marketing and advertising expenses to promote your office equipment rental services.
- Office Supplies: This includes items such as paper, ink, and other supplies needed to operate your office.
- Maintenance and Repairs: You will need to budget for regular maintenance and repairs for your office equipment to keep it in good working condition.
- Vehicle Expenses: If your company uses vehicles for deliveries or maintenance, you will need to budget for gas, maintenance, and insurance costs.
- Legal Fees: You may need to consult with a lawyer for contracts, lease agreements, or other legal matters related to your office equipment rental company.
- Taxes: You will need to budget for income taxes and any other taxes related to your business.
- Training and Development: You may need to invest in training and development programs for your staff to improve their skills and knowledge.
- Travel Expenses: If your company operates in multiple locations, you will need to budget for travel expenses for your employees.
This list is not exhaustive by any means, and will need to be tailored to your office equipment rental company's specific circumstances.
What investments are needed to start or grow an office equipment rental company?
Once you have an idea of how much sales you could achieve and what it will cost to run your office equipment rental company, it is time to look into the equipment required to launch or expand the activity.
For an office equipment rental company, capital expenditures and initial working capital items could include:
- Office Equipment: This includes items such as computers, printers, copiers, and other necessary equipment for your office rental company. These are essential for day-to-day operations and will likely be a major capital expenditure for your business.
- Furniture and Fixtures: As an office equipment rental company, you will need to invest in furniture and fixtures such as desks, chairs, and shelving units for your office space. These items are considered fixed assets and will be included in your expenditure forecast.
- Vehicles: If your office equipment rental company offers delivery or pickup services, you may need to purchase or lease vehicles for transportation. These vehicles will be considered capital expenditures and should be included in your forecast.
- Storage and Warehousing: Depending on the size of your business, you may need to invest in storage and warehousing facilities to store your office equipment when it is not being rented out. These facilities will also be considered fixed assets and should be included in your forecast.
- Security and Surveillance Systems: To protect your valuable office equipment, you may need to invest in security and surveillance systems. These can include cameras, alarm systems, and access control devices, and will be considered capital expenditures for your company.
Again, this list will need to be adjusted according to the specificities of your office equipment rental 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 office equipment rental company
The next step in the creation of your financial forecast for your office equipment rental 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 office equipment rental company?
Now let's have a look at the main output tables of your office equipment rental company'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 office equipment rental company'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 office equipment rental company will look different than for a startup.
The projected balance sheet
Your office equipment rental company'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 cash flow forecast
Your office equipment rental 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 office equipment rental 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 office equipment rental 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 office equipment rental 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 office equipment rental company's financial forecast?
Creating your office equipment rental company'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 office equipment rental company'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 office equipment rental company 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 office equipment rental company's financial forecast?
Creating an accurate and error-free office equipment rental company financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
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 office equipment rental 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 office equipment rental 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 project revenues for a business?
- Example of financial forecast for business idea
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