How to create a detailed restaurant financial forecast

To create a detailed restaurant financial forecast, you need to build a spreadsheet that projects all your income and expenses for at least the first two years of trading. This isn't just a guess; it's the most critical tool for your business plan, essential for securing a loan, and your guide to making smart financial decisions. We’ll break this down into three core components: your one-off startup costs, your ongoing monthly costs, and your projected sales revenue.

Step 1: Calculate Your Startup Costs

These are all the one-off costs you’ll face before you even open your doors. Your goal is to work out the total amount of cash you need to get to day one. Be thorough, as underestimating this is a common reason new businesses fail. It’s wise to add a 10-15% contingency fund on top of your final figure for any unexpected surprises.

Your main startup costs will include:

• Property Costs: The deposit for your lease (often 3-6 months' rent) and any solicitor's fees for reviewing the contract.
• Premises Fit-Out: This is often the biggest expense. It includes all building work, plumbing, electrics, ventilation, flooring, and decoration needed to turn an empty shell into a working restaurant.
• Kitchen Equipment: The cost of all your commercial-grade ovens, hobs, fridges, freezers, extraction fans, prep tables, and dishwashers.
• Front-of-House Items: All your tables, chairs, lighting, crockery, cutlery, glassware, and your till or Point of Sale (POS) system.
• Initial Stock: The first big order of all the food, drink, and disposable items (like napkins and cleaning supplies) needed to operate for the first week.
• Licences and Fees: The cost of applying for your Premises Licence to sell alcohol, planning permissions, and any professional fees for architects or consultants.
• Pre-Launch Marketing: Costs for 'opening soon' signage, initial social media ads, and your launch event.

Step 2: List Your Ongoing Monthly Costs

Next, list every single cost you expect to pay each month once you are open. It’s helpful to split these into two categories: fixed and variable.

Fixed Costs

These are the bills that stay roughly the same every month, regardless of how busy you are.

• Rent & Business Rates: Your monthly payment to the landlord and the local council.
• Loan Repayments: If you took out a loan to start the business.
• Salaries: The wages for your permanent, salaried staff (e.g., Restaurant Manager, Head Chef).
• Insurance: Public liability, product liability, and employers' liability insurance.
• Software Subscriptions: Monthly fees for your accounting software, booking system, and POS system.
• Waste Collection: Your commercial waste contract.
• Pest Control: Your regular contract.

Variable Costs

These costs go up or down depending on how many customers you serve.

• Cost of Goods Sold (COGS): This is what you spend on food and drink ingredients. It's usually calculated as a percentage of your sales revenue. A typical target for a restaurant is 25-35%.
• Hourly Staff Wages: The pay for your part-time waiting staff and kitchen porters, which will vary depending on your rota.
• Utilities: Your gas, electricity, and water bills will be higher in busier months.
• Marketing: Your monthly budget for social media, advertising, and promotions.
• Sundries & Consumables: Things like cleaning supplies, napkins, and till rolls that you need to replenish more often when busy.

Step 3: Forecast Your Sales Revenue

This is the most difficult part to predict, so it’s vital to be realistic and base your figures on logical assumptions, not just hope. A simple way to build your forecast is with a clear formula.

(Number of Seats) x (Average Spend per Head) x (Number of Times a Table is Used per Service) x (Number of Services per Day)

For example:

A 40-seat restaurant is open for lunch and dinner, 6 days a week.

• Average spend at lunch is £15. The tables are used 1.5 times on average.
• Average spend at dinner is £35. The tables are used 2 times on average.

Lunch Revenue: 40 seats x £15 x 1.5 turns = £900 per day

Dinner Revenue: 40 seats x £35 x 2 turns = £2,800 per day

Total Daily Revenue: £3,700

Total Weekly Revenue: £3,700 x 6 days = £22,200

When forecasting, be conservative. You won't be full from day one. You might project operating at 40% capacity for the first three months, rising to 65% by month six, and so on. Remember to account for seasonality – December will likely be far busier than a quiet January.

Step 4: Create the Cash Flow Forecast

Finally, bring all this information together in a monthly cash flow forecast spreadsheet. This tracks the actual money moving in and out of your bank account.

For each month (for at least 24 months), your spreadsheet should have:

1. Opening Bank Balance
2. Money In: Your total projected sales revenue.
3. Money Out: List and total up all your fixed and variable costs for the month.
4. Closing Bank Balance: (Opening Balance + Money In) - Money Out.

This document is crucial. It shows you exactly when you might face cash shortages, allowing you to plan ahead. It proves to a bank that you understand your finances and have a clear plan for profitability and, most importantly, for maintaining a healthy cash balance in your account.