How to create a financial forecast for a bakery products wholesaler?
Developing and maintaining an up-to-date financial forecast for your bakery products wholesaler 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 bakery products wholesaler 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 bakery products wholesaler?
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 bakery products wholesaler becomes handy.
Creating a bakery products wholesaler 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 bakery products wholesaler.
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 bakery products wholesaler 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 bakery products wholesaler'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 bakery products wholesaler financial forecast?
A bakery products wholesaler'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 bakery products wholesaler.
If you are creating (or updating) the forecast of an existing bakery products wholesaler, 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 bakery products wholesaler 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 bakery products wholesaler 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 bakery products wholesaler's financial forecast.
The sales forecast for a bakery products wholesaler
From experience, it usually makes sense to start your bakery products wholesaler's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your bakery products wholesaler (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your bakery products wholesaler's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- The availability and cost of raw ingredients, such as flour and sugar, can greatly impact the average price of your bakery products. If ingredient prices rise, you may need to adjust your prices accordingly in order to maintain profitability.
- The overall economic climate can also affect your business's average price and number of monthly transactions. In times of economic downturn, consumers may be more price-sensitive and may purchase less frequently or opt for cheaper alternatives to your bakery products.
- The introduction of new competitors in the market can also drive down your average price and transaction volume. If a new bakery wholesaler enters the market and offers similar products at lower prices, you may need to adjust your pricing strategy to remain competitive.
- The changing dietary trends and preferences of consumers can also impact the demand for your bakery products. For example, if there is a shift towards healthier options, you may need to introduce new products or modify your existing ones to cater to this changing demand.
- The seasonality of certain bakery products can also affect your average price and transaction volume. For instance, during holiday seasons, the demand for festive-themed baked goods may increase, allowing you to charge higher prices and potentially see a spike in transactions.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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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 bakery products wholesaler
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your bakery products wholesaler 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 bakery products wholesaler will include some of the following items:
- Staff Costs: This includes salaries, benefits, and any other expenses related to your employees such as training and recruitment costs.
- Accountancy Fees: As a bakery products wholesaler, you will need to hire an accountant to manage your financial records, taxes, and other financial aspects of your business.
- Insurance Costs: Protect your business from unexpected events by getting insurance for your products, property, and employees.
- Software Licences: In today's digital age, most businesses rely on software for various tasks such as inventory management, accounting, and customer relationship management. Make sure to include the costs of these software licences in your operating expenses.
- Banking Fees: As a wholesaler, you will have to deal with frequent banking transactions such as deposits, withdrawals, and transfers. These transactions may come with fees, so make sure to include them in your forecast.
- Rent: If you operate from a physical location, you will have to pay rent for your warehouse, office, or storefront.
- Utilities: Your bakery products will require refrigeration and other equipment that will consume electricity and water. Make sure to include these expenses in your forecast.
- Transportation Costs: To deliver your products to your customers, you will need to have a transportation plan in place. This may include hiring a delivery service or owning your own vehicles.
- Packaging Materials: As a wholesaler, you will need to package your products in bulk to be delivered to retailers. Include the costs of packaging materials such as boxes, labels, and wrapping paper in your forecast.
- Marketing and Advertising: To attract new customers and retain existing ones, you will need to invest in marketing and advertising efforts such as social media, print ads, and promotions.
- Office Supplies: Running a business requires various office supplies such as paper, pens, and printer ink. Make sure to include these costs in your forecast.
- Legal Fees: As a business owner, you may need legal advice or assistance from time to time. Include the costs of hiring a lawyer or any legal fees in your operating expenses.
- Maintenance and Repairs: Your equipment, vehicles, and property may require regular maintenance and occasional repairs. Make sure to include these costs in your forecast.
- Professional Memberships: Joining industry associations or organizations can provide networking opportunities and resources for your business. However, these memberships may come with fees, so include them in your forecast.
- Training and Development: As your business grows, you may want to invest in training and development programs for your employees to improve their skills and knowledge. Include these costs in your operating expenses.
This list will need to be tailored to the specificities of your bakery products wholesaler, but should offer a good starting point for your budget.
What investments are needed to start or grow a bakery products wholesaler?
Your bakery products wholesaler financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a bakery products wholesaler, these could include:
- Equipment: This includes the purchase or lease of necessary machinery and equipment such as ovens, mixers, refrigerators, and display cases. These are crucial assets for a bakery products wholesaler and can have a significant impact on the quality and efficiency of production.
- Delivery Vehicles: As a wholesaler, you will need reliable vehicles to transport your products to your customers. This may include purchasing or leasing vans or trucks to make timely and efficient deliveries. Keep in mind that these vehicles will also require ongoing maintenance and fuel costs.
- Warehouse Space: To store your inventory and equipment, you will need a suitable warehouse space. This may involve renting a commercial space or purchasing a building. The cost of this capital expenditure will depend on the location, size, and condition of the space.
- Packaging and Labeling Equipment: As a wholesaler, you will need to package and label your products before shipping them to your customers. This may involve investing in equipment such as scales, packaging machines, and label printers. These assets can help streamline your production process and ensure consistency in your packaging and labeling.
- Technology and Software: In today's digital age, technology and software play a crucial role in the success of any business. As a bakery products wholesaler, you may need to invest in software for inventory management, accounting, and customer relationship management. Additionally, you may also need to purchase computers, printers, and other office equipment to support your operations.
Again, this list will need to be adjusted according to the size and ambitions of your bakery products wholesaler.
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 bakery products wholesaler
The next step in the creation of your financial forecast for your bakery products wholesaler 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 bakery products wholesaler?
Now let's have a look at the main output tables of your bakery products wholesaler's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your bakery products wholesaler is likely to be in the years to come.
For your bakery products wholesaler 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 bakery products wholesalers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your bakery products wholesaler'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 projected cash flow statement
A projected cash flow statement for a bakery products wholesaler is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your bakery products wholesaler's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the bakery products wholesaler is appropriately capitalised.
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 bakery products wholesaler's financial forecast?
Creating your bakery products wholesaler's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your bakery products wholesaler's forecast
The modern and easiest way to build a forecast is to use professional financial projection software 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 forecasting 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 bakery products wholesaler 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 bakery products wholesaler's financial forecast?
Creating an accurate and error-free bakery products wholesaler 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 forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own bakery products wholesaler, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- 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.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your bakery products wholesaler future cash flows may look like.
- 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 bakery products wholesaler, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.
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 forecast
- How to create a turnover forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a bakery products wholesaler? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
