How to create a financial forecast for a cherry and sour cherry 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 cherry and sour cherry farm.
Putting together a cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry farm becomes handy.
Creating a cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry farm financial forecast?
A cherry and sour cherry 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 cherry and sour cherry farm.
If you are creating (or updating) the forecast of an existing cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry farm's financial forecast.
The sales forecast for a cherry and sour cherry farm
From experience, it is usually best to start creating your cherry and sour cherry farm financial forecast by your sales forecast.
To create an accurate sales forecast for your cherry and sour cherry farm, you will have to rely on the data collected in your market research, or if you're running an existing cherry and sour cherry 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: As a cherry and sour cherry farmer, you know that weather plays a crucial role in the success of your harvest and ultimately, your pricing and sales. Unfavorable weather such as heavy rain or strong winds can damage the fruits, leading to a lower supply and potentially higher prices.
- Disease and pests: Cherries and sour cherries are vulnerable to various diseases and pests, such as brown rot, cherry fruit fly, and cherry leaf spot. These can significantly reduce the quality and quantity of your crop, affecting your average price and monthly transactions.
- Competition: The cherry and sour cherry market can be highly competitive, especially during peak season. If there are many other farms in your area selling similar products, it may be challenging to maintain your average price and attract enough customers to sustain your monthly transactions.
- Consumer demand: The demand for cherries and sour cherries can fluctuate from year to year, depending on various factors such as taste trends, health benefits, and availability. If there is a sudden surge in demand, you may be able to increase your prices and sell more, but if the demand decreases, you may need to adjust your prices and marketing strategies to maintain your monthly transactions.
- Global trade and tariffs: As a cherry and sour cherry farmer, you may also be affected by global trade agreements and tariffs. Changes in these policies can impact the export and import of cherries, which can, in turn, affect the overall supply and demand, ultimately affecting your pricing and number of monthly transactions.
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 cherry and sour cherry farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your cherry and sour cherry 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 cherry and sour cherry farm will include some of the following items:
- Labor costs: This includes wages and benefits for all employees working on the cherry and sour cherry farm, such as farmhands, packers, and administrative staff.
- Fertilizer and pesticide expenses: These are essential for maintaining the health and productivity of your cherry and sour cherry trees.
- Equipment and machinery maintenance: Regular upkeep of tractors, harvesters, and other farm equipment is necessary to ensure their proper functioning and longevity.
- Water and irrigation costs: Cherry and sour cherry trees require ample water to thrive, so you will need to factor in the cost of irrigation systems and water usage.
- Packaging materials: This includes the cost of boxes, crates, and other packaging materials for transporting and storing your cherries and sour cherries.
- Transportation expenses: You will likely need to transport your cherries and sour cherries to markets or distributors, which may incur costs for fuel, vehicle maintenance, and tolls.
- Storage fees: If you do not have on-farm storage facilities, you may need to pay for off-site storage for your cherries and sour cherries.
- Marketing and advertising: In order to sell your cherries and sour cherries, you may need to invest in marketing and advertising efforts, such as creating a website, attending trade shows, or placing ads in local publications.
- Insurance costs: As with any business, it is important to have insurance coverage for your cherry and sour cherry farm, including liability and crop insurance.
- Accounting and bookkeeping fees: Keeping track of expenses and income is crucial for the success of your cherry and sour cherry farm, so you may need to hire an accountant or bookkeeper to assist with financial management.
- Software licenses: Depending on the size and complexity of your farm, you may need to invest in software programs for record-keeping, inventory management, or other aspects of farm operations.
- Banking fees: You will likely have expenses such as transaction fees, ATM fees, and account maintenance fees associated with your farm's banking activities.
- Legal fees: In order to protect your farm and ensure compliance with regulations, you may need to hire a lawyer for legal advice or representation.
- Training and professional development: As a business owner, it is important to continuously improve your skills and knowledge, so you may need to invest in training or attend conferences and workshops related to cherry and sour cherry farming.
- Utilities: This includes the cost of electricity, gas, and other utilities for your farm, such as lighting, heating, and cooling.
This list will need to be tailored to the specificities of your cherry and sour cherry farm, but should offer a good starting point for your budget.
What investments are needed to start or grow a cherry and sour cherry farm?
Your cherry and sour cherry farm 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 cherry and sour cherry farm, these could include:
- Land and Buildings: This includes purchasing or leasing land for your cherry and sour cherry farm, as well as any buildings or structures that will be used for production, storage, or processing. This could also include any renovations or repairs needed to make the land and buildings suitable for your farming operations.
- Machinery and Equipment: As a cherry and sour cherry farmer, you will need various types of machinery and equipment to help with planting, harvesting, and processing your crops. This could include tractors, sprayers, harvesters, and fruit sorting machines, among others.
- Irrigation Systems: Water is essential for the growth and health of your cherry and sour cherry trees. Investing in an efficient irrigation system, such as drip irrigation or micro-sprinklers, can help you conserve water and improve crop yields. These systems can also be used for frost protection during colder months.
- Storage Facilities: Proper storage is crucial for keeping your cherries and sour cherries fresh and in good condition. This could include refrigerated storage for harvested fruit, as well as dry storage for packaging materials and equipment. You may also need to invest in cooling or humidifying equipment to maintain the ideal storage conditions for your crops.
- Vehicles: Depending on the size and location of your cherry and sour cherry farm, you may need to purchase or lease vehicles for transportation and delivery of your products. This could include trucks for hauling fruit, as well as smaller vehicles for daily farm operations.
Again, this list will need to be adjusted according to the size and ambitions of your cherry and sour cherry 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 cherry and sour cherry farm
The next step in the creation of your financial forecast for your cherry and sour cherry 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 cherry and sour cherry farm?
Now let's have a look at the main output tables of your cherry and sour cherry farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your cherry and sour cherry farm is likely to be in the years to come.
For your cherry and sour cherry farm 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 cherry and sour cherry farms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your cherry and sour cherry farm's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry farm's financial forecast?
Using the right tool or solution will make the creation of your cherry and sour cherry farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your cherry and sour cherry farm'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.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your cherry and sour cherry 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 cherry and sour cherry farm's financial forecast?
Creating an accurate and error-free cherry and sour cherry farm 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.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
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.
This is why professional forecasters all use software. 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.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 cherry and sour cherry 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 turnover forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a cherry and sour cherry farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
