How to create a financial forecast for a badian farm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your badian farm.
Putting together a badian farm financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your badian farm.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a badian farm?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your badian farm becomes handy.
Creating a badian farm financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your badian farm.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a badian farm is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your badian farm's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is used as input to build a badian farm financial forecast?
A badian farm's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing badian farm.
If you are creating (or updating) the forecast of an existing badian farm, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new badian farm startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the badian farm to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your badian farm's financial forecast.
The sales forecast for a badian farm
From experience, it is usually best to start creating your badian farm financial forecast by your sales forecast.
To create an accurate sales forecast for your badian farm, you will have to rely on the data collected in your market research, or if you're running an existing badian farm, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Weather conditions: The weather can greatly impact the quality and productivity of your badian farm. Extreme weather events such as droughts or heavy rains can cause damage to your crops, leading to a decrease in supply and potentially driving up prices. On the other hand, favorable weather conditions can result in a larger harvest, increasing your supply and potentially lowering prices.
- Competition: Keep an eye on other badian farms in your area. If a new competitor enters the market, they may offer lower prices or better quality products, affecting your sales and average price. Additionally, changes in consumer preferences towards other similar fruits could also impact your sales and prices.
- Government regulations: Pay attention to any changes in government regulations that may affect your badian farm. For example, if there are new restrictions on the use of pesticides or fertilizers, this could impact your production costs and potentially lead to an increase in prices. On the other hand, government subsidies or incentives for organic farming could lower your costs and potentially lead to a decrease in prices.
- Transportation costs: The cost of transporting your badian products to market can also affect your prices. Changes in fuel prices or transportation regulations can impact your transportation costs and potentially lead to an increase or decrease in prices. Additionally, if you are located in a remote area with limited access to transportation, this could also impact your sales and prices.
- Customer demand: Keep track of consumer trends and demand for badian products. If there is a sudden increase in demand for badian, you may be able to sell your products at a higher price. On the other hand, if demand decreases, you may need to lower your prices to maintain sales. Additionally, changes in consumer preferences, such as a shift towards organic or locally grown fruits, could also impact your sales and prices.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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 badian farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your badian farm 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 badian farm will include some of the following items:
- Staff costs: This includes wages, salaries, and any benefits for your employees. As a badian farm, you may have workers who help with planting, harvesting, and processing the badian fruit.
- Accountancy fees: It's important to keep accurate financial records for your badian farm. You may need to hire an accountant to help you with bookkeeping, tax preparation, and other financial tasks.
- Insurance costs: As with any business, there are risks associated with running a badian farm. You may need to purchase insurance to protect your farm against potential damages or losses.
- Software licenses: In today's digital age, many businesses rely on software to streamline their operations. You may need to purchase licenses for software programs that help you manage your farm, such as inventory management, accounting, or customer relationship management (CRM) software.
- Banking fees: As a business owner, you will likely have a business bank account to manage your finances. This may come with fees for services such as wire transfers, ATM usage, or overdraft protection.
- Supplies: To run a successful badian farm, you will need various supplies such as seeds, fertilizer, pesticides, and harvesting equipment. These costs may vary depending on the size of your farm and the amount of badian fruit you produce.
- Transportation: If you sell your badian fruit to other businesses or markets, you may need to transport it using trucks or other vehicles. This may incur costs such as fuel, maintenance, and insurance.
- Marketing and advertising: To attract customers and increase sales, you may need to invest in marketing and advertising efforts. This could include creating a website, printing promotional materials, or attending trade shows.
- Rent or land lease: If you do not own the land where your badian farm is located, you will need to pay rent or a land lease. This cost may vary depending on the location and size of your farm.
- Utilities: Running a badian farm requires water, electricity, and other utilities. You will need to factor in these costs when creating your operating expenses forecast.
- Legal fees: As a business owner, you may encounter legal matters that require the assistance of a lawyer. This could include contracts, permits, or any disputes that may arise.
- Packaging materials: If you sell your badian fruit to consumers, you will need to package it in containers or bags. These costs may vary depending on the type and quantity of packaging materials you use.
- Training and development: To maintain the quality of your badian fruit and improve your farming techniques, you may need to invest in training and development programs for yourself and your employees.
- Maintenance and repairs: Farm equipment and structures may require regular maintenance and repairs. You will need to factor in these costs to ensure that your farm operations run smoothly.
- Taxes and licenses: As a business owner, you will need to pay taxes and obtain any necessary licenses for your badian farm. These costs may vary depending on your location and the size of your farm.
This list will need to be tailored to the specificities of your badian farm, but should offer a good starting point for your budget.
What investments are needed to start or grow a badian farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your badian farm, it is time to look into the equipment required to launch or expand the activity.
For a badian farm, capital expenditures and initial working capital items could include:
- Tractor: This is a necessary piece of equipment for a badian farm, as it is used for plowing, tilling, and harvesting crops. It is a fixed asset that will likely last for several years and is essential for the operation of the farm.
- Greenhouse: Many badian farms use greenhouses to grow their crops, as it provides a controlled environment and protects the plants from harsh weather conditions. Greenhouses can be expensive to build and maintain, but they are a vital capital expenditure for the farm.
- Irrigation system: Badian farms require a reliable water source for their crops to thrive. Installing an irrigation system is a significant capital expenditure, but it is necessary for the success of the farm and will save you time and effort in the long run.
- Storage facilities: A badian farm will need storage facilities for their harvested crops and equipment. This could include a barn, shed, or silo, depending on the size of the farm and the type of crops being grown. These structures are essential for protecting the assets of the farm and ensuring efficient operations.
- Fencing: Fencing is necessary for keeping animals out of the farm and protecting the crops. It is a fixed asset that will last for several years and is a crucial capital expenditure for the protection and security of the farm.
Again, this list will need to be adjusted according to the specificities of your badian farm.
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 badian farm
The next step in the creation of your financial forecast for your badian farm 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 badian farm?
Now let's have a look at the main output tables of your badian farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your badian farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a badian farm 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 badian farm's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- 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 cash flow projection
The cash flow forecast of your badian farm will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the badian farm's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your badian farm is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your badian farm's financial plan.
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 badian farm's financial forecast?
Creating your badian farm's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your badian farm'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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your badian farm financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your badian farm's financial forecast?
Creating an accurate and error-free badian farm 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.
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 badian farm, 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 badian farm
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 badian farm.
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 badian farm. 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 project revenues for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a badian farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
