Putting together a business plan for an animal oils and fats producer can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.
We will explore why writing one is so important in both starting up and growing an existing animal oils and fats producer, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.
Without further ado, let us begin!
Why write a business plan for an animal oils and fats producer?
Having a clear understanding of why you want to write a business plan for your animal oils and fats producer will make it simpler for you to grasp the rationale behind its structure and content. So before delving into the plan's actual details, let's take a moment to remind ourselves of the primary reasons why you'd want to create an animal oils and fats producer business plan.
To have a clear roadmap to grow the business
It's rarely business as usual for small businesses. The economy follows cycles where years of growth are followed by recessions, and the business environment is always changing with new technologies, new regulations, new competitors, and new consumer behaviours appearing all the time...
In this context, running a business without a clear roadmap is like driving blindfolded: it's dangerous at best. That's why writing a business plan for an animal oils and fats producer is essential to create successful and sustainable businesses.
To write an effective business plan, you will need to take stock of where you are (if you are already in business) and where you want the business to go in the next three to five years.
Once you know where you want your animal oils and fats producer to be, you'll have to identify:
- what resources (human, equipment, and capital) are needed to get there,
- at what pace the business needs to progress to get there in time,
- and what risks you'll face along the way.
Going through this process regularly is beneficial, both for startups and existing companies, as it helps make informed decisions about how best to allocate resources to ensure the long-term success of the business.
To maintain visibility on future cash flows
Businesses can go for years without making a profit, but they go bust as soon as they run out of cash. That's why "cash is king", and maintaining visibility on your animal oils and fats producer's future cash flows is critical.
How do I do that? That's simple: you need an up-to-date financial forecast.
The good news is that your animal oils and fats producer business plan already contains a financial forecast (more on that later in this guide), so all you have to do is to keep it up-to-date.
To do this, you need to regularly compare the actual financial performance of your business to what was planned in your financial forecast, and adjust the forecast based on the current trajectory of your business.
Monitoring your animal oils and fats producer's financial health will enable you to identify potential financial problems (such as an unexpected cash shortfall) early and to put in place corrective measures. It will also allow you to detect and capitalize on potential growth opportunities (higher demand from a given segment of customers for example).
To secure financing
A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your animal oils and fats producer.
Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.
At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.
This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your animal oils and fats producer and the terms of the agreement.
Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your animal oils and fats producer's potential for high growth, profitability, and consistent cash flow generation over time.
Now that you recognize the importance of creating a business plan for your animal oils and fats producer, let's explore what information is required to create a compelling plan.
Information needed to create a business plan for an animal oils and fats producer
You need the right data in order to project sales, investments and costs accurately in the financial forecast of your animal oils and fats producer business plan.
Below, we'll cover three key pieces of information you should gather before drafting your business plan.
Carrying out market research for an animal oils and fats producer
Carrying out market research before writing a business plan for an animal oils and fats producer is essential to ensure that the financial projections are accurate and realistic.
Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.
In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.
Your market research may reveal that there is an increasing demand for animal oils and fats for use in plant-based products, such as vegan cheeses and spreads. Additionally, your market research might also show that there could be a potential for animal oils and fats to be used in the cosmetics industry, as a natural alternative to synthetic ingredients.
This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your animal oils and fats producer.
Developing the sales and marketing plan for an animal oils and fats producer
Budgeting sales and marketing expenses is essential before creating an animal oils and fats producer business plan.
A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.
This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.
The staffing and capital expenditure requirements of an animal oils and fats producer
Whether you are starting or expanding an animal oils and fats producer, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.
Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.
The animal oils and fats producer might incur staffing costs such as salaries for production workers, supervisors, and administrative personnel. Additionally, the company might need to purchase equipment such as tanks, mixers, centrifuges, and pumps. Furthermore, the producer might incur utility costs for energy, water, and other services.
In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.).
Once you have all the necessary information to create a business plan for your animal oils and fats producer, it is time to start creating your financial forecast.
What goes into your animal oils and fats producer's financial forecast?
The objective of the financial forecast of your animal oils and fats producer's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.
The four key outputs of a financial forecast for an animal oils and fats producer are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's look at each of these in a bit more detail.
The projected P&L statement
The projected P&L statement for an animal oils and fats producer shows how much revenue and profits your business is expected to generate in the future.
Ideally, your animal oils and fats producer's P&L statement should show:
- Healthy growth - above inflation level
- Improving or stable profit margins
- Positive net profit
Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established animal oils and fats producer. And similarly, an established company should showcase a higher level of profitability than a new venture.
The forecasted balance sheet of your animal oils and fats producer
The projected balance sheet of your animal oils and fats producer will enable the reader of your business plan to assess the overall financial health of your business.
It shows three elements: assets, liabilities and equity:
- Assets: are productive resources owned by the business, such as equipment, cash, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors, lenders, and other entities, such as accounts payable (money owed to suppliers).
- Equity: includes the sums invested by the shareholders or business owners and the profits and losses accumulated by the business to date (which are called retained earnings). It is a proxy for the value of the owner's stake in the business.
Analysing your animal oils and fats producer projected balance sheet provides an understanding of your animal oils and fats producer's working capital structure, investment and financing policies.
In particular, the readers of your plan can compare the level of financial debt on the balance sheet to the equity value to measure the level of financial risk (equity doesn't need to be reimbursed, while financial debt must be repaid, making it riskier).
They can also use your balance sheet to assess your animal oils and fats producer's liquidity and solvency:
- A liquidity analysis: focuses on whether or not your business has sufficient cash and short-term assets to cover its liabilities due in the next 12 months.
- A solvency analysis: takes and longer view to assess whether or not your business has the capacity to repay its debts over the medium-term.
The cash flow forecast
As we've seen earlier in this guide, monitoring future cash flows is the key to success and the only way of ensuring that your animal oils and fats producer has enough cash to operate.
As you can expect showing future cash flows is the main role of the cash flow forecast in your animal oils and fats producer business plan.
It is best practice to organise the cash flow statement by nature in order to show the cash impact of the following areas:
- Cash flow generated from operations: the operating cash flow shows how much cash is generated or consumed by the business's commercial activities
- Cash flow from investing activities: the investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.) either to maintain the business's equipment or to expand its capabilities
- Cash flow from financing activities: the financing cash flow shows how much cash is raised or distributed to financiers
Looking at the cash flow forecast helps you to make sure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.
Your animal oils and fats producer business plan will normally include both yearly and monthly cash flow forecasts so that the readers can view the impact of seasonality on your business cash position and generation.
The initial financing plan
The initial financing plan, also known as a sources and uses table, is a valuable resource to have in your business plan when starting your animal oils and fats producer as it reveals the origins of the money needed to establish the business (sources) and how it will be allocated (uses).
Having this table helps show what costs are involved in setting up your animal oils and fats producer, how risks are shared between founders, investors and lenders, and what the starting cash position will be. This cash position needs to be sufficient to sustain operations until the business reaches a break-even point.
Now that you have a clear understanding of what goes into the financial forecast of your animal oils and fats producer business plan, let's shift our focus to the written part of the plan.
The written part of an animal oils and fats producer business plan
The written part of an animal oils and fats producer business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.
The written part of an animal oils and fats producer business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Let's go through the content of each section in more detail!
1. The executive summary
The executive summary, the first section of your animal oils and fats producer's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.
To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.
Subsequently, provide an overview of your animal oils and fats producer's addressable market, highlighting current trends and potential growth opportunities.
Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Lastly, address any funding needs in the "ask" section of your executive summary.
2. The presentation of the company
In your animal oils and fats producer business plan, the second section should focus on the structure and ownership, location, and management team of your company.
In the structure and ownership part, you'll provide an overview of the business's legal structure, details about the owners, and their respective investments and ownership shares. This clarity is crucial, especially if you're seeking financing, as it helps the reader understand which legal entity will receive the funds and who controls the business.
Moving on to the location part, you'll offer an overview of the company's premises and their surroundings. Explain why this particular location is of interest, highlighting factors like catchment area, accessibility, and nearby amenities.
When describing the location of your animal oils and fats producer, you may want to emphasize its access to a large consumer population. It could be located near a major metropolitan area, where there is a growing demand for animal-based products. Additionally, you could mention its proximity to transportation hubs that could facilitate distribution of your products. The area may also have a highly-qualified workforce with the necessary skillset to help you grow your business. Finally, you might highlight the local government's commitment to fostering business growth, with incentives and resources to help your business grow.
Finally, you should introduce your management team. Describe each member's role, background, and experience.
Don't forget to emphasize any past successes achieved by the management team and how long they've been working together. Demonstrating their track record and teamwork will help potential lenders or investors gain confidence in their leadership and ability to execute the business plan.
3. The products and services section
The products and services section of your business plan should include a detailed description of what your company offers, who are the target customers, and what distribution channels are part of your go-to-market.
For example, your animal oils and fats producer might offer lard or tallow as rendered fats to customers looking for a traditional cooking fat or for industrial applications in soap-making or lubricants. They may also offer processed, refined oils to customers who require a more consistent, neutral-flavored oil for food production. Additionally, they could offer fractionation services that allow customers to separate and isolate specific components of the oil and fat, such as unsaturated fatty acids, for further research and development.
4. The market analysis
When you present your market analysis in your animal oils and fats producer business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.
The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.
Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your animal oils and fats producer, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.
Next, focus on your target market, zooming in on the specific customer segments your animal oils and fats producer aims to serve and explaining how your products and services fulfil their distinct needs.
For example, your target market might include pet owners who feed their pets a raw or home cooked diet. These consumers would need to purchase animal-based oils and fats to ensure their pet's diet is nutritionally balanced. They would be willing to pay a premium for the highest quality ingredients for their pet's health.
Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.
Finally, conclude your market analysis with an overview of the key regulations applicable to your animal oils and fats producer.
5. The strategy section
When writing the strategy section of a business plan for your animal oils and fats producer, it is essential to include information about your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
The competitive edge subsection should explain what sets your company apart from its competitors. This part is especially key if you are writing the business plan of a startup, as you have to make a name for yourself in the marketplace against established players.
The pricing strategy subsection should demonstrate how you intend to remain profitable while still offering competitive prices to your customers.
The sales & marketing plan should outline how you intend to reach out and acquire new customers, as well as retain existing ones with loyalty programs or special offers.
The milestones subsection should outline what your company has achieved to date, and its main objectives for the years to come - along with dates so that everyone involved has clear expectations of when progress can be expected.
The risks and mitigants subsection should list the main risks that jeopardize the execution of your plan and explain what measures you have taken to minimize these. This is essential in order for investors or lenders to feel secure in investing in your venture.
Your animal oils and fats producer faces a variety of risks. For example, they may be exposed to price fluctuations in the market. Animal oils and fats are commodities and, as such, are subject to the forces of supply and demand. Fluctuations in prices could have a negative impact on the business. Another risk your animal oils and fats producer may face is a disruption in their supply chain. Animal oils and fats are sourced from a variety of suppliers, and any disruption in the supply chain could mean a disruption in the production process. This could lead to a loss of revenue and customer dissatisfaction.
6. The operations section
In your business plan, it's also essential to provide a detailed overview of the operations of your animal oils and fats producer.
Start by covering your team, highlighting key roles and your recruitment plan to support the expected growth. Outline the qualifications and experience required for each role and your intended recruitment methods, whether through job boards, referrals, or headhunters.
Next, clearly state your animal oils and fats producer's operating hours, allowing the reader to assess staffing levels adequately. Additionally, mention any plans for varying opening times during peak seasons and how you'll handle customer queries outside normal operating hours.
Then, shift your focus to the key assets and intellectual property (IP) necessary for your business. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, make sure to include them in this section.
You, as an animal oils and fats producer, could have key assets such as specialized machinery and a dedicated workforce. Additionally, you may have intellectual property such as unique recipes and production techniques that could set you apart from the competition. All of these assets and IP could be used to create a competitive advantage and help you to achieve success in the market.
Lastly, include a list of suppliers you plan to work with, detailing their services and main commercial terms, such as price, payment terms, and contract duration. Investors are interested in understanding why you've chosen specific suppliers, which may be due to higher-quality products or established relationships from previous ventures.
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we talked about earlier in this guide.
Now that you have a clear idea of the content of an animal oils and fats producer business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my animal oils and fats producer's business plan?
In this section, we will be reviewing the two main options for writing an animal oils and fats producer business plan efficiently:
- Using specialized software,
- Outsourcing the drafting to the business plan writer.
Using an online business plan software for your animal oils and fats producer's business plan
Using online business planning software is the most efficient and modern way to create an animal oils and fats producer business plan.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- 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
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your animal oils and fats producer's business plan
Outsourcing your animal oils and fats producer business plan to a business plan writer can also be a viable option.
Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.
However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.
From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).
You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.
The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.
For these reasons, outsourcing the animal oils and fats producer business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.
Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their business plan using online software.
Why not create your animal oils and fats producer's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write an animal oils and fats producer business plan is a terrible idea.
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my animal oils and fats producer business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
Overall, while Word or Excel may be viable options for creating an animal oils and fats producer business plan for some entrepreneurs, it is by far not the best or most efficient solution.
- A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
- Having an up-to-date business plan is the only way to keep visibility on your animal oils and fats producer's future cash flows.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this practical guide gave you insights on how to write the business plan for your animal oils and fats producer. Do not hesitate to get in touch with our team if you still have questions.
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