How to create a financial forecast for an outdoor advertising agency?
Developing and maintaining an up-to-date financial forecast for your outdoor advertising agency 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 outdoor advertising agency 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 outdoor advertising agency?
The financial projections for your outdoor advertising 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 outdoor advertising 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 outdoor advertising agency financial forecast?
A outdoor advertising agency'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 outdoor advertising agency, 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 outdoor advertising agency 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 outdoor advertising agency 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 outdoor advertising agency's financial forecast.
The sales forecast for an outdoor advertising agency
The sales forecast, also called topline projection, is normally where you will start when building your outdoor advertising 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 outdoor advertising agencies), and consider the elements below:
- Your agency's location: The location of your agency can greatly impact your average price and number of monthly transactions. If you are located in a highly populated and busy city, you may be able to charge higher prices for your outdoor advertising space due to higher demand. On the other hand, if you are located in a smaller or less busy area, you may have to lower your prices to attract clients and increase your number of transactions.
- Seasonal trends: The time of year can also affect your average price and number of monthly transactions. For example, during the summer months when more people are out and about, you may see an increase in demand for outdoor advertising, leading to higher prices and more transactions. On the other hand, during the winter months when people tend to stay indoors, you may see a decrease in demand and therefore lower prices and fewer transactions.
- Competition: The level of competition in your area can also impact your average price and number of monthly transactions. If you are the only outdoor advertising agency in your area, you may be able to charge higher prices and have more transactions. However, if there are several other agencies competing for the same clients, you may need to lower your prices and work harder to attract customers.
- Technology advancements: With the constant advancements in technology, your agency may need to adapt and invest in new equipment or software to offer more innovative and eye-catching advertising options. This can increase your average price, as clients may be willing to pay more for these advanced services. Additionally, these advancements may also attract more clients and increase your number of monthly transactions.
- Economic climate: The overall economic climate can also affect your agency's average price and number of monthly transactions. During a recession, businesses may be more cautious with their advertising budgets, leading to lower prices and fewer transactions. In a strong economy, businesses may be more willing to invest in outdoor advertising, leading to higher prices and more transactions for your agency.
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 outdoor advertising agency
The next step is to estimate the expenses needed to run your outdoor advertising 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 outdoor advertising agency's operating expenses should include the following items at a minimum:
- Staff Costs: Salaries, wages, benefits, and training for all employees including account executives, creative directors, graphic designers, and production staff.
- Accountancy Fees: Fees paid to external accountants for tax preparation, financial reporting, and other accounting services.
- Insurance Costs: General liability insurance, professional liability insurance, and workers' compensation insurance to protect your agency from potential risks and liabilities.
- Software Licenses: Subscription fees for software used in managing and creating advertising campaigns, such as project management software, design software, and social media management tools.
- Banking Fees: Transaction fees, wire transfer fees, and other charges associated with managing your agency's finances.
- Marketing Costs: Expenses for promoting your agency, such as website development, print materials, and digital advertising.
- Rent and Utilities: Monthly rent for office space, as well as utility bills for electricity, water, and internet service.
- Office Supplies: Expenses for office supplies, such as paper, ink, and other materials used in day-to-day operations.
- Travel Expenses: Costs for business-related travel, including airfare, hotel accommodations, and meals.
- Professional Memberships: Fees for joining professional organizations and associations, which can provide networking opportunities and resources for your agency.
- Training and Development: Costs for attending conferences, workshops, and other professional development opportunities to enhance your skills and knowledge.
- Office Equipment Maintenance: Expenses for maintaining and repairing office equipment, such as computers, printers, and copiers.
- Legal Fees: Costs for legal services, such as drafting and reviewing contracts and agreements.
- Taxes: Federal, state, and local taxes that your agency is responsible for paying.
- Employee Benefits: Costs for providing benefits to your employees, such as health insurance, retirement plans, and paid time off.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small outdoor advertising agency might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an outdoor advertising agency?
Your outdoor advertising 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 outdoor advertising agency, these could include:
- Billboards: These are large, fixed advertisements that are typically placed on the side of highways or busy streets. They require a significant initial investment to purchase or lease the space, as well as ongoing maintenance and upkeep costs.
- Digital Displays: These are electronic billboards that can display multiple advertisements in a rotation. They require a large capital investment to purchase and install, as well as ongoing costs for electricity and maintenance.
- Vehicles: Outdoor advertising agencies often use vehicles such as trucks or buses to display advertisements on their sides. These vehicles require a significant investment to purchase or lease, as well as ongoing maintenance and fuel costs.
- Printing Equipment: In order to create and print advertisements, an outdoor advertising agency may need to invest in printing equipment such as large format printers or vinyl cutters. These can be expensive to purchase and require ongoing maintenance and supply costs.
- Installation Equipment: To install and maintain billboards and other outdoor advertisements, an agency may need to invest in specialized equipment such as cranes, ladders, and safety gear. These can be costly to purchase and require ongoing maintenance and replacement costs.
Again, this list will need to be adjusted according to the size and ambitions of your outdoor advertising 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 outdoor advertising agency
The next step in the creation of your financial forecast for your outdoor advertising 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 outdoor advertising agency?
Now let's have a look at the main output tables of your outdoor advertising agency's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your outdoor advertising agency's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an outdoor advertising agency 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 outdoor advertising agency'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 outdoor advertising agency 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 outdoor advertising agency'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 outdoor advertising agency 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 outdoor advertising agency's financial plan.
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 outdoor advertising agency's financial forecast?
Creating your outdoor advertising 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 outdoor advertising 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
Outsourcing the creation of your outdoor advertising agency 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 outdoor advertising agency's financial forecast?
Creating an accurate and error-free outdoor advertising agency 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 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 outdoor advertising agency, 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 outdoor advertising agency
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 outdoor advertising agency.
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 outdoor advertising agency. 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 create a sales forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start an outdoor advertising agency? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
