How to create a financial forecast for a chickpea farm?
Developing and maintaining an up-to-date financial forecast for your chickpea farm 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 chickpea farm 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 chickpea farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your chickpea farm and ensure that it can be financially viable in the years to come.
A financial plan for a chickpea farm enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date chickpea farm forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your chickpea farm's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 chickpea farm financial forecast?
A chickpea 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 chickpea farm.
If you are creating (or updating) the forecast of an existing chickpea 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 chickpea 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 chickpea 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 chickpea farm's financial forecast.
The sales forecast for a chickpea farm
The sales forecast, also called topline projection, is normally where you will start when building your chickpea farm 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 chickpea farms), and consider the elements below:
- Your location: As a chickpea farmer, your location can greatly impact the price of your crops. If you are located in an area where chickpeas are in high demand, you may be able to sell them at a higher price compared to a location where chickpeas are not as popular.
- Climatic conditions: Chickpeas are susceptible to changes in weather, such as drought or heavy rains. This can affect the quality and quantity of your crop, which in turn can impact the average price and number of monthly transactions.
- Competition: The level of competition in your area can also affect the price of your chickpeas. If there are a lot of other chickpea farms in your area, you may need to lower your prices to stay competitive.
- Consumer trends: The popularity of chickpeas among consumers can also have an impact on your sales. If there is a growing trend towards plant-based diets or Middle Eastern cuisine, the demand for chickpeas may increase, leading to higher prices and more transactions.
- Government policies: Changes in government policies, such as subsidies for chickpea farmers or tariffs on imports, can also affect the price of your crops. Stay informed about any potential changes that may impact your business.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 chickpea farm
The next step is to estimate the costs you’ll have to incur to operate your chickpea farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your chickpea farm's operating expenses should normally include the following items:
- Seeds: As a chickpea farmer, you will need to purchase seeds for each growing season. These seeds can be a significant operating expense.
- Fertilizers: Chickpeas require specific nutrients to grow, and fertilizers are necessary to provide these nutrients. Fertilizers can be costly, especially if you need to purchase them in large quantities.
- Pesticides: Pests and diseases can damage your chickpea crops, so you will need to invest in pesticides to protect your plants. Pesticides can be expensive, and you may need to purchase them multiple times during the growing season.
- Labor: Farming is labor-intensive, and as a chickpea farmer, you will need to pay for labor to plant, tend, and harvest your crops. This can include hiring workers or paying yourself a salary.
- Water: Chickpeas require adequate water to grow, and depending on your location, you may need to pay for irrigation or use other methods to provide water for your crops.
- Fuel and Maintenance: You may need to use tractors or other farm equipment to plant and harvest your chickpeas. This equipment will require fuel and regular maintenance, which can add to your operating expenses.
- Storage: After harvesting your chickpeas, you will need to store them until you are ready to sell them. This may require investing in storage facilities or renting space in a warehouse, which can be a significant expense.
- Transportation: Once your chickpeas are ready to be sold, you will need to transport them to market. This can include hiring trucks or paying for shipping costs, which can be a significant operating expense.
- Accounting and Bookkeeping: As a business owner, you will need to keep track of your finances and file taxes. You may choose to hire an accountant or use accounting software, both of which can be costly.
- Insurance: Running a chickpea farm comes with risks, such as crop failure or damage from severe weather. To protect your business, you will need to invest in insurance, which can be a significant expense.
- Software Licenses: As a modern farmer, you may use software to manage your farm operations, track inventory, or analyze data. These software licenses can be a recurring expense for your business.
- Banking Fees: You will likely need to open a business bank account to manage your farm's finances. This may come with fees for transactions, wire transfers, or other services.
- Marketing and Advertising: To sell your chickpeas, you may need to invest in marketing and advertising. This can include creating a website, attending trade shows, or running ads in local publications.
- Office Expenses: As a business owner, you will have general office expenses, such as paper, printer ink, and office supplies. These small expenses can add up over time.
- Training and Education: As a chickpea farmer, you may need to stay up-to-date on the latest farming techniques and industry trends. This may require investing in training and education, which can be a valuable expense for your business.
This list is not exhaustive by any means, and will need to be tailored to your chickpea farm's specific circumstances.
What investments are needed to start or grow a chickpea farm?
Creating and expanding a chickpea farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a chickpea farm could include elements such as:
- Land purchase: The cost of purchasing land to use for your chickpea farm is a major capital expenditure. This includes the cost of the land itself, as well as any legal fees or taxes associated with the purchase.
- Irrigation system: Chickpeas require adequate irrigation to grow and thrive. The cost of purchasing and installing an irrigation system, such as drip irrigation or a sprinkler system, is a significant capital expense for your farm.
- Tractors and farm equipment: You will need specialized equipment for planting, harvesting, and maintaining your chickpea crops. This includes tractors, plows, sprayers, and other farm equipment. These items can be expensive, but are necessary for the success of your farm.
- Storage facilities: Once your chickpeas are harvested, you will need a place to store them before they are sold. This may include constructing or purchasing grain bins, silos, or other storage facilities. The cost of these structures should be included in your expenditure forecast.
- Farm buildings: Depending on the size of your farm, you may need to build or purchase additional structures such as a barn, workshop, or office space. These buildings are considered fixed assets and should be included in your expenditure forecast.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your chickpea 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 chickpea farm
The next step in the creation of your financial forecast for your chickpea 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 chickpea farm?
Now let's have a look at the main output tables of your chickpea farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your chickpea farm is likely to be in the years to come.
For your chickpea 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 chickpea 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 chickpea farm'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 chickpea farm 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 chickpea farm'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 chickpea farm 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 chickpea farm's financial projections?
Building a chickpea farm financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial projection software to build your chickpea 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional chickpea farm 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 chickpea farm's financial forecast?
Creating an accurate and error-free chickpea 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 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 chickpea farm, 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 chickpea farm 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 chickpea farm, 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 sales forecast for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a chickpea farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
