How to create a financial forecast for an RV rental company?
Developing and maintaining an up-to-date financial forecast for your RV 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 RV 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 RV rental company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your RV rental company and ensure that it can be financially viable in the years to come.
A financial plan for an RV 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 RV 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 RV 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 RV rental company financial forecast?
A RV 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 RV rental company.
If you are creating (or updating) the forecast of an existing RV 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 RV 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 RV 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 RV rental company's financial forecast.
The sales forecast for an RV rental company
The sales forecast, also called topline projection, is normally where you will start when building your RV 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 RV rental companies), and consider the elements below:
- Seasonal Demand: As a rental company, your average price and number of monthly transactions are likely to be affected by seasonal demand. During peak vacation months, such as summer and holidays, you may see an increase in demand for RV rentals, leading to higher prices and more transactions. On the other hand, off-peak months may result in lower prices and fewer transactions.
- Economic Conditions: Economic conditions can also impact your business's average price and number of monthly transactions. In times of economic downturn, people may be less likely to spend money on luxury items such as RV rentals, leading to lower prices and fewer transactions. Conversely, during times of economic growth, you may see an increase in demand and higher prices.
- Competition: The level of competition in your market can also affect your average price and number of monthly transactions. If there are many other RV rental companies in your area, you may need to lower your prices to remain competitive, resulting in more transactions. However, if you are the only rental company in a popular vacation destination, you may be able to charge higher prices and still attract a steady stream of customers.
- Fuel Prices: The cost of fuel can also impact your business's average price and number of monthly transactions. If fuel prices are high, customers may be less likely to rent RVs, leading to lower prices and fewer transactions. On the other hand, if fuel prices are low, you may be able to charge higher prices and attract more customers who are looking for a cost-effective vacation option.
- Vehicle Maintenance Costs: The cost of maintaining your fleet of RVs can also affect your average price and number of monthly transactions. If maintenance costs are high, you may need to increase your prices to cover these expenses, resulting in fewer transactions. However, if you are able to keep your maintenance costs low, you may be able to offer lower prices and attract more customers.
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 RV rental company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your RV rental company 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 RV rental company will include some of the following items:
- Staff costs: This includes salaries, benefits, and training for your employees who will be responsible for managing and maintaining the RVs, as well as customer service and administrative tasks.
- Accountancy fees: You will need to hire an accountant or bookkeeper to help you with managing your finances, tax filing, and other financial tasks related to your RV rental business.
- Insurance costs: You will need to purchase insurance policies to protect your RVs, your business, and your customers in case of accidents, damages, or other unforeseen events.
- Software licenses: You will need to invest in software programs and tools to help you manage your reservations, bookings, and other business operations efficiently.
- Banking fees: You will incur fees for bank transactions, such as deposits, withdrawals, and transfers, as well as for credit card processing if you accept credit card payments from your customers.
- Vehicle maintenance and repairs: As an RV rental company, you will need to regularly maintain and repair your vehicles to ensure they are safe and in good working condition for your customers.
- Fuel costs: You will need to budget for fuel expenses to keep your vehicles running and to deliver them to different rental locations.
- Cleaning supplies: You will need to purchase cleaning supplies to keep your RVs clean and sanitized for each new rental.
- Marketing and advertising: You will need to promote your RV rental business through various marketing and advertising channels, such as social media, online listings, and print materials.
- Permits and licenses: You may need to obtain permits and licenses to operate your RV rental business legally in your area.
- Office supplies and equipment: You will need to purchase office supplies, such as paper, ink, and pens, as well as equipment like computers and printers, to run your business.
- Utilities: You will need to pay for utilities, such as electricity, water, and internet, to operate your office and maintain your RVs.
- Taxes: You will need to set aside funds to pay for income taxes, property taxes, and other taxes related to your RV rental business.
- Customer service expenses: You may need to budget for expenses related to providing excellent customer service, such as customer service training, phone service fees, and customer satisfaction surveys.
- Depreciation: As your RVs age and wear out over time, you will need to account for the depreciation of your assets in your operating expenses.
This list will need to be tailored to the specificities of your RV rental company, but should offer a good starting point for your budget.
What investments are needed to start or grow an RV rental company?
Creating and expanding an RV rental company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an RV rental company could include elements such as:
- RVs: As an RV rental company, one of your main capital expenditures will be purchasing and maintaining your fleet of RVs. This includes not only the initial purchase of the vehicles, but also ongoing maintenance and repairs to keep them in good working condition.
- Office and Storage Space: In addition to your RVs, you will also need a physical space to operate your business. This may include an office for administrative tasks, as well as storage space for your RVs when they are not in use.
- Equipment and Supplies: As part of your RV rental business, you will also need to purchase and maintain equipment and supplies such as camping gear, kitchen utensils, and cleaning supplies for your RVs. These items will need to be replaced or updated regularly to ensure a positive customer experience.
- Technology: In today's digital age, having the right technology is crucial for any business. As an RV rental company, you may need to invest in software for reservations and inventory management, as well as hardware such as computers and tablets for managing your business operations.
- Vehicle Insurance: While not a tangible asset, vehicle insurance is a necessary expense for any RV rental company. This includes not only liability insurance, but also comprehensive coverage for your fleet of vehicles.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your RV 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 RV rental company
The next step in the creation of your financial forecast for your RV 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 RV rental company?
Now let's have a look at the main output tables of your RV 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 RV 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 RV rental company will look different than for a startup.
The projected balance sheet
Your RV 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 projected cash flow statement
A projected cash flow statement for an RV rental company 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 RV rental company'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 RV rental company 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 RV rental company's financial forecast?
Creating your RV 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 RV rental company'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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your RV rental company 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 RV rental company'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 RV rental company 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 RV rental company'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 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 RV rental company, 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 RV rental company
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your RV rental company.
- 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 RV rental company. 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 create a sales forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
