How to create a financial forecast for a bean farm?
Creating a financial forecast for your bean farm, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your bean farm is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a bean 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 bean farm becomes handy.
Creating a bean 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 bean 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 bean 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 bean 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 bean farm financial forecast?
A bean farm's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing bean farm, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a bean farm startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the bean farm running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your bean farm's financial forecast.
The sales forecast for a bean farm
From experience, it usually makes sense to start your bean farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your bean farm (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 bean farm'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:
- Weather conditions: Weather can greatly impact the average price and number of monthly transactions for a bean farm. Extreme weather events, such as drought or heavy rains, can affect the quality and quantity of the beans produced, which can lead to fluctuations in price and sales.
- Competition: The presence of other bean farms in the area can also impact your business's average price and number of monthly transactions. If there are many competitors, you may need to adjust your prices to stay competitive, or find ways to differentiate your beans from others in the market.
- Crop diseases and pests: Diseases and pests can have a devastating effect on bean crops, leading to lower yields and potentially higher prices. It's important to regularly monitor and manage any potential threats to your crop to minimize their impact on your business.
- Consumer preferences: Changes in consumer preferences for certain types of beans or methods of production can also affect your business's sales and prices. Keep an eye on market trends and adapt your offerings accordingly to stay relevant and meet customer demand.
- Government policies and regulations: Government policies and regulations related to agriculture and farming can also impact your bean farm's average price and number of monthly transactions. Stay informed about any changes or updates in laws and regulations that may affect your business and plan accordingly.
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.
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 bean farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your bean 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 bean farm will include some of the following items:
- Seed and Fertilizer: As a bean farmer, you will need to purchase seed and fertilizer to grow your crops. This expense will vary depending on the size of your farm and the type of beans you are growing.
- Labor Costs: You will need to pay for labor to help with planting, harvesting, and other tasks on your bean farm. This could include hiring seasonal workers or paying a salary to full-time employees.
- Irrigation and Water Costs: Beans require a consistent supply of water to grow, so you will need to budget for the cost of irrigation systems and water usage.
- Equipment Maintenance: To keep your farm running smoothly, you will need to regularly maintain and repair your equipment, such as tractors and harvesters.
- Pest Control: Pests can damage your bean crops, so you may need to invest in pest control measures, such as pesticides or hiring a pest control service.
- Fuel and Energy: Running your farm will require fuel for your equipment and energy for irrigation and other operations. This can be a significant expense for a bean farm.
- Storage and Transportation: Once your beans are harvested, you will need a place to store them and transportation to get them to market. This could include renting storage space and hiring a trucking company.
- Accountancy Fees: As a business owner, you will need to keep track of your finances and file taxes. You may choose to hire an accountant to help with these tasks, which will be an additional expense.
- Insurance Costs: It is important to protect your farm and its assets with insurance. This could include property insurance, liability insurance, and crop insurance.
- Software Licenses: To manage your farm more efficiently, you may choose to invest in software for record-keeping, inventory management, or other tasks. This will require purchasing licenses and paying for updates or subscriptions.
- Banking Fees: You will likely have a business bank account to manage your finances, and this may come with fees for transactions, wire transfers, or other services.
- Marketing and Advertising: In order to sell your beans, you may need to invest in marketing and advertising expenses, such as creating a website, attending trade shows, or printing marketing materials.
- Rent or Land Cost: If you do not own the land you are farming on, you will need to budget for rent or lease payments for your farm land.
- Legal Fees: As a business owner, you may encounter legal issues or need to seek legal advice. This could result in legal fees for services such as contract drafting or dispute resolution.
- Taxes and Permits: You will need to budget for taxes and permits related to your bean farm, such as property taxes, sales tax, and any necessary permits for operating your business.
This list will need to be tailored to the specificities of your bean farm, but should offer a good starting point for your budget.
What investments are needed to start or grow a bean farm?
Creating and expanding a bean farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a bean farm could include elements such as:
- Land: As a bean farmer, one of your biggest capital expenditures will be purchasing or leasing land to grow your crops. This can include the cost of buying the land, renting it, or even improving the land to make it suitable for bean farming.
- Equipment: In order to successfully farm beans, you will need certain equipment such as tractors, seeders, harvesters, and irrigation systems. These can be major capital expenditures, but they are essential for the operation of your farm.
- Storage facilities: After harvesting your beans, you will need a place to store them until they are ready to be sold. This can include building or purchasing storage facilities such as warehouses or silos.
- Processing equipment: If you plan on processing your beans before selling them, you will need capital expenditures for equipment such as roasters, grinders, and packaging machines.
- Transportation vehicles: In order to transport your beans to market or processing facilities, you will need vehicles such as trucks or trailers. These can be significant capital expenditures, especially if you have a large operation.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your bean 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 bean farm
The next step in the creation of your financial forecast for your bean 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 bean farm?
Now let's have a look at the main output tables of your bean farm's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy bean farm's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established bean farm will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your bean farm's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your bean farm. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 bean 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 bean 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 bean 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 bean 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 bean farm's financial forecast?
Using the right tool or solution will make the creation of your bean farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your bean farm's projections
The modern and easiest way is to use professional online financial forecasting 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.
Calling in a financial consultant or chartered accountant
Enlisting the help of a consultant or accountant is also a good way to obtain a professional bean farm financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your bean farm's financial forecast?
Creating an accurate and error-free bean 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 bean 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 bean 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 bean 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 bean 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 create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a bean farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
