How to create a financial forecast for a lifting and handling gear maker?
Developing and maintaining an up-to-date financial forecast for your lifting and handling gear manufacturing business is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a lifting and handling gear manufacturing business 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 a lifting and handling gear manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your lifting and handling gear manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business'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 a lifting and handling gear manufacturing business financial forecast?
A lifting and handling gear manufacturing business'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 lifting and handling gear manufacturing business, 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 a lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business's financial forecast.
The sales forecast for a lifting and handling gear manufacturing business
From experience, it usually makes sense to start your lifting and handling gear manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your lifting and handling gear manufacturing business (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your lifting and handling gear manufacturing business's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Seasonal Demand: The demand for lifting and handling gear may vary throughout the year depending on the season. For example, construction projects tend to slow down during the winter months, leading to a decrease in demand for gear such as cranes and forklifts. This can affect your average price and number of monthly transactions as you may need to adjust pricing and production accordingly.
- Economic Conditions: Economic factors such as inflation, interest rates, and unemployment can impact the average price and number of monthly transactions for a lifting and handling gear manufacturing business. During an economic downturn, businesses may be more cautious with their spending, leading to a decrease in demand for your products and potentially lowering your average price.
- Competition: The level of competition in the lifting and handling gear industry can affect your business's average price and number of monthly transactions. If there are many competitors offering similar products, you may need to adjust your prices to stay competitive. Additionally, if a new competitor enters the market, it may impact your market share and overall sales.
- Technological Advancements: The constant evolution of technology can impact the demand and pricing for lifting and handling gear. For example, the development of new, more advanced equipment may make older models less desirable, leading to a decrease in sales and potentially affecting your average price.
- Government Regulations: Changes in government regulations, such as safety standards or environmental regulations, can affect the production and pricing of lifting and handling gear. Compliance with these regulations may require additional costs, which could impact your average price. Additionally, changes in regulations may also affect the demand for certain types of gear, which can impact your number of monthly transactions.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 a lifting and handling gear manufacturing business
The next step is to estimate the costs you’ll have to incur to operate your lifting and handling gear manufacturing business.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your lifting and handling gear manufacturing business's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, benefits, and training costs for your employees who will be involved in the manufacturing, assembly, and maintenance of lifting and handling gear.
- Accountancy fees: You may need to hire an accountant to manage your financial records, tax filings, and other financial matters related to your business.
- Insurance costs: As a lifting and handling gear manufacturing business, you will need to have insurance coverage for your equipment, property, and liability to protect your business from potential risks and accidents.
- Software licenses: To run your business efficiently, you may need to purchase software licenses for inventory management, accounting, project management, and other business operations.
- Banking fees: You will need to maintain a business bank account to manage your finances, and there may be fees associated with transactions, wire transfers, and other banking services.
- Rent/lease costs: You may need to rent or lease a manufacturing facility, warehouse, or office space to operate your business.
- Utilities: This includes the cost of electricity, water, and other utilities needed to run your business operations.
- Raw materials: Your business will need to purchase raw materials such as steel, aluminum, and other metals to manufacture lifting and handling gear.
- Equipment maintenance: To ensure the smooth operation of your manufacturing equipment, you will need to budget for regular maintenance and repairs.
- Marketing and advertising: You will need to promote your business and products to attract customers, which may include costs for advertising, trade shows, and other marketing activities.
- Shipping and logistics: If you sell your products to customers outside of your local area, you will need to budget for shipping and logistics costs to deliver your products.
- Training and development: As technology and industry standards evolve, you will need to invest in training and development for your employees to keep their skills up to date.
- Legal fees: To protect your business and intellectual property, you may need to hire a lawyer for legal advice and services.
- Taxes and licenses: Your business will be subject to various taxes and fees, such as business licenses and permits, which may vary depending on your location.
- Office supplies: This includes the cost of basic office supplies such as paper, ink, and pens needed for day-to-day operations.
This list is not exhaustive by any means, and will need to be tailored to your lifting and handling gear manufacturing business's specific circumstances.
What investments are needed to start or grow a lifting and handling gear manufacturing business?
Once you have an idea of how much sales you could achieve and what it will cost to run your lifting and handling gear manufacturing business, it is time to look into the equipment required to launch or expand the activity.
For a lifting and handling gear manufacturing business, capital expenditures and initial working capital items could include:
- Machinery and Equipment: This includes the purchase of equipment such as cranes, forklifts, and hoists, which are essential for lifting and handling heavy materials in a manufacturing business.
- Facility Improvements: This can include the construction or renovation of a manufacturing facility to accommodate the specialized needs of a lifting and handling gear business, such as installing overhead cranes or reinforcing floors to support heavy equipment.
- Transportation and Delivery Vehicles: As a lifting and handling gear manufacturing business, you may need to invest in trucks or vans to transport your products to customers or to deliver raw materials to your facility.
- Computer Systems and Software: In today's digital age, having the right computer systems and software is crucial for managing inventory, tracking production, and maintaining financial records in a manufacturing business.
- Tooling and Tooling Maintenance: This includes the purchase and maintenance of specialized tools and equipment needed for the production of lifting and handling gear, such as molds, dies, and jigs.
Again, this list will need to be adjusted according to the specificities of your lifting and handling gear manufacturing 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.
The financing plan of your lifting and handling gear manufacturing business
The next step in the creation of your financial forecast for your lifting and handling gear manufacturing business 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 a lifting and handling gear manufacturing business?
Now let's have a look at the main output tables of your lifting and handling gear manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your lifting and handling gear manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business'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 a lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business'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 lifting and handling gear manufacturing 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 lifting and handling gear manufacturing business's financial projections?
Building a lifting and handling gear manufacturing business 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 projection software to build your lifting and handling gear manufacturing business's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business'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 lifting and handling gear manufacturing business 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 lifting and handling gear manufacturing business'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 lifting and handling gear manufacturing business, 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 lifting and handling gear manufacturing business
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 lifting and handling gear manufacturing business.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a lifting and handling gear manufacturing business. 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 a lifting and handling gear manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
