How to create a financial forecast for a chewing gum manufacturer?
Developing and maintaining an up-to-date financial forecast for your chewing gum 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 chewing gum 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 chewing gum manufacturing business?
The financial projections for your chewing gum manufacturing business act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your chewing gum manufacturing business's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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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.
What information is used as input to build a chewing gum manufacturing business financial forecast?
A chewing gum manufacturing business'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 chewing gum manufacturing business, 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 chewing gum manufacturing business 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 chewing gum manufacturing business 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 chewing gum manufacturing business's financial forecast.
The sales forecast for a chewing gum manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your chewing gum manufacturing business financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing chewing gum manufacturers), and consider the elements below:
- Fluctuations in raw material costs: As a chewing gum manufacturer, you rely heavily on the raw materials used to make your product. Any changes in the cost of these materials, such as increases in the price of sugar or natural flavorings, can impact your average price and ultimately your sales forecast.
- Competitor pricing strategies: Your competitors' pricing strategies can have a direct effect on your own pricing and sales. If a competitor decides to lower their prices, you may need to adjust your prices accordingly to remain competitive and maintain your market share.
- Consumer trends and preferences: Consumer demand for certain flavors or types of chewing gum can change over time. Keeping up with these trends and adapting your product offering accordingly can impact both your average price and monthly transactions.
- Changes in distribution channels: The way in which your product is distributed can also affect your sales forecast. For example, if you currently sell primarily through traditional retail channels but decide to expand into online sales, this could result in a change in your average price and number of monthly transactions.
- Economic conditions: Economic factors such as inflation, unemployment, and consumer spending can all have an impact on your business's sales forecast. A strong economy may lead to increased consumer spending and higher sales, while a downturn could result in lower sales and a need to adjust your pricing strategy.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a chewing gum manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your chewing gum manufacturing business 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 chewing gum manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and any other related expenses for your employees, such as training and recruitment costs.
- Raw Materials: The cost of the ingredients and materials needed to produce your chewing gum, such as gum base, sweeteners, and flavors.
- Packaging: The cost of the materials used to package your chewing gum, including wrappers, boxes, and labels.
- Rent and Utilities: This includes the cost of renting or leasing your manufacturing facility, as well as utilities like electricity, water, and gas.
- Equipment Maintenance: The cost of maintaining and repairing your production equipment to ensure efficient and safe operations.
- Transportation and Shipping: The cost of transporting your raw materials and finished products to and from your manufacturing facility.
- Marketing and Advertising: The cost of promoting your chewing gum through various channels, such as print ads, social media, and events.
- Accounting and Bookkeeping: The cost of hiring an accountant or bookkeeper to manage your financial records and ensure compliance with tax regulations.
- Insurance: The cost of insuring your business, employees, and products against potential risks and liabilities.
- Software Licenses: The cost of purchasing and renewing licenses for software programs used in your business, such as accounting software or inventory management systems.
- Legal Fees: The cost of hiring a lawyer for any legal services related to your business, such as drafting contracts or handling lawsuits.
- Banking Fees: The cost of maintaining a business bank account, including transaction fees, wire transfer fees, and account maintenance fees.
- Taxes: The amount of taxes you are required to pay on your business profits and employee salaries.
- Employee Benefits: The cost of providing benefits to your employees, such as health insurance, retirement plans, and paid time off.
- Training and Development: The cost of providing training and development opportunities for your employees to improve their skills and knowledge.
This list will need to be tailored to the specificities of your chewing gum manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a chewing gum manufacturing business?
Creating and expanding a chewing gum manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a chewing gum manufacturing business could include elements such as:
- Chewing Gum Making Machine: This is the most important and expensive piece of equipment in your chewing gum manufacturing business. It is used to mix, knead, and shape the gum base and other ingredients into the final chewing gum product. Make sure to budget for maintenance and repairs as well.
- Packaging Equipment: In order to package your chewing gum into individual packs or containers, you will need specialized packaging equipment such as sealers, wrappers, and labelers. These machines can be costly but are essential for your business.
- Storage and Warehouse Facility: As your business grows, you will need a dedicated space to store raw materials, finished products, and packaging materials. You may also need a warehouse to store and organize your inventory. Consider the cost of rent, utilities, and insurance for this space in your expenditure forecast.
- Delivery Vehicles: If you plan on distributing your chewing gum to retailers or directly to customers, you will need delivery vehicles to transport your products. This could include vans, trucks, or even bicycles, depending on the size and location of your business.
- Office Equipment: While not directly related to the production of chewing gum, you will need basic office equipment such as computers, printers, and furniture to manage your business operations. Make sure to include the cost of these items in your expenditure forecast.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your chewing gum 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 chewing gum manufacturing business
The next step in the creation of your financial forecast for your chewing gum 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 chewing gum manufacturing business?
Now let's have a look at the main output tables of your chewing gum manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your chewing gum manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a chewing gum manufacturing business 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
The projected balance sheet gives an overview of your chewing gum 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 chewing gum 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 chewing gum 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 chewing gum 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 chewing gum 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 chewing gum 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 chewing gum manufacturing business's financial forecast?
Creating your chewing gum manufacturing business'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 chewing gum manufacturing business'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional chewing gum manufacturing business 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 chewing gum manufacturing business's financial forecast?
Creating an accurate and error-free chewing gum manufacturing business 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 chewing gum manufacturing business, 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 chewing gum manufacturing business
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 chewing gum manufacturing business.
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 chewing gum manufacturing business. 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?
- Sample financial forecast for business idea
Know someone who runs or wants to start a chewing gum manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
