How to create a financial forecast for a structural engineering consulting firm?

Developing and maintaining an up-to-date financial forecast for your structural engineering consulting firm 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 structural engineering consulting firm 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 structural engineering consulting firm?

The financial projections for your structural engineering consulting firm 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 structural engineering consulting firm'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 used as input to build a structural engineering consulting firm financial forecast?

A structural engineering consulting firm'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 structural engineering consulting firm, 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 structural engineering consulting firm 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 structural engineering consulting firm 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 structural engineering consulting firm's financial forecast.

The sales forecast for a structural engineering consulting firm

The sales forecast, also called topline projection, is normally where you will start when building your structural engineering consulting firm 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 structural engineering consulting firms), and consider the elements below:

• Project Complexity: Assess the complexity of your structural engineering projects. More intricate and challenging assignments may justify higher service fees, impacting your average price.
• Industry Demand: Stay attuned to the demand for structural engineering services within specific industries. High demand may allow you to negotiate favorable pricing or lead to increased monthly transactions.
• Technology Adoption: Embrace technological advancements in the field of structural engineering. Integrating cutting-edge tools and software can enhance your service offerings and potentially support higher pricing.
• Market Reputation: Cultivate a strong reputation in the market for delivering high-quality structural engineering solutions. A positive reputation can attract more clients, giving you the flexibility to adjust your prices.
• Client Relationships: Foster long-term relationships with clients. Satisfied clients are more likely to engage in repeat business, contributing to a consistent stream of monthly transactions.

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

The operating expenses for a structural engineering consulting firm

Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your structural engineering consulting firm 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 a structural engineering consulting firm will include some of the following items:

• Staff Costs: Cover salaries, wages, and benefits for your structural engineers, drafters, and administrative staff.
• Office Rent: Include the leasing costs for your office space, providing a centralized location for your structural engineering consulting firm.
• Utilities: Account for monthly expenses related to electricity, water, heating, and internet services essential for your office operations.
• Professional Memberships: Allocate funds for memberships in professional organizations and societies relevant to structural engineering to stay connected and updated in your field.
• Insurance Costs: Include premiums for liability insurance, errors and omissions insurance, and other coverage specific to your structural engineering services.
• Accountancy Fees: Budget for the services of accountants to handle financial management, tax preparation, and compliance tailored to your consulting firm.
• Software Licences: Account for the costs associated with licensing and maintaining structural engineering software essential for your design and analysis tasks.
• Training and Development: Allocate funds for ongoing training programs to keep your team updated on the latest advancements in structural engineering practices.
• Marketing Materials: Budget for the creation and distribution of marketing materials, including brochures and digital content highlighting your firm's expertise.
• Travel Expenses: Include costs related to travel for project site visits, client meetings, and attendance at industry conferences.
• Communication Services: Cover expenses for business phones, internet, and other communication tools essential for maintaining smooth operations.
• Legal Fees: Budget for legal services, including contracts review and compliance advice specific to your structural engineering consulting business.
• Office Supplies: Account for costs related to everyday office supplies such as stationery, printer consumables, and other necessities.
• Employee Benefits: Include expenses for employee benefits such as health insurance, retirement plans, and other perks you offer to attract and retain top talent.
• Banking Fees: Cover charges for various banking services, including transaction fees and account maintenance specific to your business transactions.

This list will need to be tailored to the specificities of your structural engineering consulting firm, but should offer a good starting point for your budget.

What investments are needed to start or grow a structural engineering consulting firm?

Creating and expanding a structural engineering consulting firm also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for a structural engineering consulting firm could include elements such as:

• High-Performance Computing Systems: Invest in advanced computing systems tailored for structural analysis and simulations, enhancing the efficiency and accuracy of your engineering projects.
• Specialized Structural Software: Acquire and upgrade specialized software tools designed for structural engineering tasks, ensuring your firm stays at the forefront of industry technology.
• Geotechnical Testing Equipment: Purchase equipment for geotechnical testing, such as soil sample collection tools and laboratory testing devices, enabling comprehensive site analysis for your projects.
• 3D Scanning and Modeling Tools: Invest in cutting-edge 3D scanning devices and modeling software to enhance your firm's capabilities in creating detailed and accurate structural models.
• Structural Testing Facilities: Establish an in-house testing facility equipped with tools for structural component testing, allowing for comprehensive quality control and research capabilities.

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your structural engineering consulting firm.

The financing plan of your structural engineering consulting firm

The next step in the creation of your financial forecast for your structural engineering consulting firm 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 structural engineering consulting firm?

Now let's have a look at the main output tables of your structural engineering consulting firm's financial forecast.

The projected profit & loss statement

The projected profit & loss shows how profitable your structural engineering consulting firm is likely to be in the years to come.

For your structural engineering consulting firm 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 structural engineering consulting firms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.

The projected balance sheet

The projected balance sheet gives an overview of your structural engineering consulting firm's financial structure at the end of the financial year.

It is composed of three categories of items: assets, liabilities and equity:

• Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
• Liabilities: are the debts of your structural engineering consulting firm. They include accounts payable (money owed to suppliers), taxes due and bank loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 structural engineering consulting firm'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 structural engineering consulting firm:

• 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 structural engineering consulting firm'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 structural engineering consulting firm's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.

Which tool should you use to create your structural engineering consulting firm's financial projections?

Building a structural engineering consulting firm 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 forecasting software to build your structural engineering consulting firm'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.

Hiring a financial consultant or chartered accountant

Hiring a consultant or chartered accountant is also an efficient way to get a professional structural engineering consulting firm 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 structural engineering consulting firm's financial forecast?

Creating an accurate and error-free structural engineering consulting firm 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 structural engineering consulting firm, 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 structural engineering consulting firm

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 structural engineering consulting firm 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 a structural engineering consulting firm, 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 create a sales forecast for a business?
• Sample financial forecast for business idea

Know someone who owns or is thinking of starting a structural engineering consulting firm? Share our forecasting guide with them!