Has anyone had to do a projection for their business?

[Baygirl]

We are going to try and refinance our place and the bank is asking for 2 years projections. I'm not sure how to go about this.
Has anyone done it before and if so can you share with me how to do it? Thanks

 

[Innkeeper To Go]

Just think of the projections as two years of your budgeted revenue forecast. What do you think your revenue will be next year and the following year?
And then be ready to have some supporting information. What was your occupancy rate/revenue over the last few years? Percentage of change? Do you project the same level next year or a slower increase? Tell them why, whatever you're forecasting.
You can cite figures from major studies, from your local tourism bureau, chamber of commerce, or from your own business if you have a history of accurate forecasts yourself.
Just like with your own budget, the projections shouldn't be a guess but should be based on realistic facts. That's what they're looking for: how realistic is your projection and can you do what you say you'll do. Simple as that.

 

[Baygirl]

Simple...not so sure...unfortunately our numbers were down about 10% last year off an exceptional 2008. How can we predict what the industry is going to do for 2010 and 2011? Average off the last two years and go from there? These types of things frazzle me....

 

[Innkeeper To Go]

Simple...not so sure...unfortunately our numbers were down about 10% last year off an exceptional 2008. How can we predict what the industry is going to do for 2010 and 2011? Average off the last two years and go from there? These types of things frazzle me.....

Smith Travel has a new 2010 forecast out. That's a good place to start.
It's a forecast that doesn't project growth but that's okay. They're looking for realism in your projection.
If you want some more studies/forecasts that talk about the percentage drop last year, drop me an email and I can send some to you. A 10% drop after a great year the year before is actually very good compared to the industry as a whole. So use that to your advantage. Your projections can be explained as above average and the banks like that.
Has that drop settled for your inn? If not, what are you doing to stop it? Tell them about new marketing plans or whatever approach you're taking to contain the damage of the economic fallout that's hurting everyone.
Are all of your numbers down 10%? Give them detailed occupancy, ADR, RevPAR numbers and if you forecast those to level off this year, say that. And be ready to show them how you can live within those figures, ie, that your expenses will be going down, too. Show them how.

 

[JBloggs]

We had to do this when we applied for a business license, just go off what you did the past couple years and work on an average. That seems as accurate a forecast as you can get. Have you been in business a few years to be able to do this? I think they will be fine with that.

 

[swirt]

If you think the loan is a sure thing, average the past few years then lop off 30%. If you think the loan is going to be a close call, then only lop off 6%.
Of course that won't work if you have added rooms or decreased rooms or something like that. If you took a lot of time off one year and so had rooms out of service a lot, you can document that as potential. "See I only worked 200 nights last year. If the year is bad I can easilly bump that up to 280 nights" or something like that.

 

[Don Draper]

If you do a Google search for "Bed and breakfast pro forma sheets" you can get some examples of what the projections should look like, just to give you a format to work with. Don't worry, if they need something more specific the bank will not hesitate to ask you for it!

 

[Barliman]

One thing we have noticed is that expenses are actually down more than revenue. Ours is a different business but I'll bet its true for B&B's, too.

 

[Morticia]

One thing we have noticed is that expenses are actually down more than revenue. Ours is a different business but I'll bet its true for B&B's, too..

One thing we have noticed is that expenses are actually down more than revenue. Ours is a different business but I'll bet its true for B&B's, too.

Not here. I just did a recert on my 'Green Certification' which includes taking a snapshot of utilities expenditures. Outlay for utilities, school tax and other expenses has not dropped at all. The only thing that I could say has dropped is food expenses, but those do not drop linearly with revenue. If there's one room, I still have to buy a whole gallon of juice, etc.

 

[gillumhouse]

One thing we have noticed is that expenses are actually down more than revenue. Ours is a different business but I'll bet its true for B&B's, too..

I had fewer guests but ALL my utulities except water/sewer were higher - a lot higher for 2009 than 2008. My advertising expenses stay the same - or go up a bit - each year. Insurance climbs no matter what.
As for the gas & electric, just so you know, I huddle in my small room all winter (we turn the thermostat down to 55 at night and up to 63 during the day this year - age and bad circulation are getting to DH) and we rarely need A/C here. We did a couple improvements - so the real estate taxes went up as a reward! Gasoline went down and that helped.
Overall, my expenses did not go down. You are fortunate that yours did.