How to create a financial forecast for a canned soup manufacturer?
Developing and maintaining an up-to-date financial forecast for your canned soup manufacturing business 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 canned soup manufacturing business 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 canned soup manufacturing business?
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 canned soup manufacturing business becomes handy.
Creating a canned soup manufacturing business 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 canned soup manufacturing business.
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 canned soup manufacturing business 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 canned soup manufacturing business'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 canned soup manufacturing business financial forecast?
A canned soup manufacturing business'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 canned soup manufacturing business.
If you are creating (or updating) the forecast of an existing canned soup manufacturing business, 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 canned soup manufacturing business 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 canned soup manufacturing business 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 canned soup manufacturing business's financial forecast.
The sales forecast for a canned soup manufacturing business
From experience, it usually makes sense to start your canned soup manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your canned soup manufacturing business (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 canned soup manufacturing business'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:
- Seasonal demand: The average price and number of monthly transactions for your canned soup business may be affected by seasonal demand. During the colder months, the demand for warm and comforting canned soups may increase, leading to higher prices and more transactions. On the other hand, during the warmer months, demand may decrease, resulting in lower prices and fewer transactions.
- Raw material costs: The cost of raw materials such as vegetables, meat, and spices can have a significant impact on your average price and number of monthly transactions. If the cost of these materials increases, you may need to raise the price of your canned soups, resulting in a decrease in transactions. On the other hand, if the cost of raw materials decreases, you may be able to offer lower prices and attract more customers.
- Competition: The presence of competitors in the market can also affect your average price and number of monthly transactions. If there is intense competition in the canned soup industry, you may need to lower your prices to remain competitive, resulting in more transactions. However, if there are few or no competitors, you may be able to charge higher prices and have fewer transactions.
- Health trends: Changes in health trends and consumer preferences can also impact your business's average price and monthly transactions. For example, if there is a growing demand for healthier and more natural food options, you may need to adjust your recipes and ingredients, which could result in higher prices and a decrease in transactions. On the other hand, if there is a trend towards convenience and ready-to-eat meals, your canned soups may become more popular, leading to higher prices and more transactions.
- Economic conditions: The state of the economy can also influence your average price and number of monthly transactions. During times of economic downturn, consumers may be more price-sensitive and opt for cheaper canned soup options, resulting in lower prices and more transactions. Conversely, during times of economic stability or growth, consumers may be willing to spend more on premium canned soups, leading to higher prices and fewer 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 operating expenses for a canned soup manufacturing business
The next step is to estimate the expenses needed to run your canned soup manufacturing business on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your canned soup manufacturing business's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, benefits, and payroll taxes for all employees involved in the manufacturing process, such as production workers, quality control staff, and administrative support.
- Raw Materials: This expense includes the cost of all ingredients and packaging materials used in the production of canned soup, such as vegetables, broth, cans, labels, and packaging materials.
- Utilities: You will need to pay for electricity, water, gas, and other utilities to power the manufacturing equipment and keep the facility running.
- Rent or Mortgage: If you do not own the building where your manufacturing facility is located, you will need to pay rent. If you own the building, you will need to pay a mortgage.
- Equipment Maintenance: This includes the cost of maintaining and repairing the manufacturing equipment, such as boilers, canning machines, and packaging equipment.
- Transportation and Delivery: This expense covers the cost of delivering raw materials to your facility and shipping finished products to customers.
- Marketing and Advertising: You will need to allocate funds for marketing and advertising efforts to promote your canned soup brand and reach potential customers.
- Accountancy Fees: You will need to hire an accountant or accounting firm to manage your financial records, prepare tax returns, and provide financial advice.
- Insurance Costs: This includes property insurance to protect your manufacturing facility, product liability insurance to cover any potential lawsuits, and workers' compensation insurance for your employees.
- Software Licenses: You may need to purchase software licenses for accounting, inventory management, and other business operations.
- Banking Fees: This expense includes fees for maintaining a business bank account, wire transfers, and credit card processing.
- Training and Development: You may need to invest in training and development programs for your employees to ensure they have the necessary skills to produce high-quality canned soup.
- Legal Fees: You may need to hire a lawyer to help with legal matters related to your business, such as drafting contracts, obtaining necessary permits and licenses, and handling any legal disputes.
- Office Supplies: This expense covers the cost of office supplies, such as paper, pens, and printer ink, used in day-to-day business operations.
- Employee Benefits: In addition to salaries and wages, you may need to provide employee benefits such as health insurance, retirement plans, and paid time off.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small canned soup manufacturing business might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a canned soup manufacturing business?
Creating and expanding a canned soup manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a canned soup manufacturing business could include elements such as:
- Soup Manufacturing Equipment: This includes all the machinery and equipment needed to make and package the canned soups, such as industrial-sized cooking pots, canning machines, labeling machines, and packaging materials.
- Facility Renovations: Depending on the size and condition of your existing facility, you may need to invest in renovations to accommodate the production and storage of canned soups. This may include upgrading the kitchen area, installing storage shelves, and creating a designated packaging area.
- Delivery Vehicles: In order to distribute your canned soups to retailers and other customers, you will need to purchase delivery vehicles. These can range from small vans to larger trucks, depending on the volume of product you plan to distribute.
- Inventory Costs: As a canned soup manufacturer, you will need to purchase ingredients in bulk to keep up with production demands. This may include vegetables, broth, spices, and other necessary ingredients. Additionally, you will need to budget for the cost of storing and managing your inventory.
- Quality Control Equipment: Maintaining high quality standards is crucial for any food manufacturing business. You may need to invest in equipment for testing and monitoring the quality of your canned soups, such as pH meters and temperature gauges.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your canned soup manufacturing 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.
The financing plan of your canned soup manufacturing business
The next step in the creation of your financial forecast for your canned soup manufacturing business 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 canned soup manufacturing business?
Now let's have a look at the main output tables of your canned soup manufacturing business'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 canned soup manufacturing business'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 canned soup manufacturing business will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your canned soup manufacturing business'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 canned soup manufacturing business. 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 forecast
Your canned soup manufacturing business's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the canned soup manufacturing business:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your canned soup manufacturing business's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your canned soup manufacturing business's financial plan - so that banks or investors can assess seasonal variation and ensure your business 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 canned soup manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your canned soup manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your canned soup manufacturing business'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional canned soup manufacturing business 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 canned soup manufacturing business's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free canned soup manufacturing business financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your canned soup manufacturing business's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
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 canned soup manufacturing business 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 canned soup manufacturing business, 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 project sales for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a canned soup manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
