How to create a financial forecast for a chicory farm?
Creating a financial forecast for your chicory 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 chicory 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 chicory 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 chicory farm becomes handy.
Creating a chicory 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 chicory 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 chicory 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 chicory 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 chicory farm financial forecast?
A chicory 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 chicory farm.
If you are creating (or updating) the forecast of an existing chicory 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 chicory 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 chicory 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 chicory farm's financial forecast.
The sales forecast for a chicory farm
The sales forecast, also called topline projection, is normally where you will start when building your chicory 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 chicory farms), and consider the elements below:
- Weather conditions: The weather can greatly influence the growth and harvest of chicory. Extreme temperatures, drought, or heavy rainfall can affect the quality and quantity of chicory produced, which can impact the average price and number of transactions for the farm.
- Demand for chicory: The demand for chicory can vary depending on the current trends in the food industry. If chicory is in high demand, you may be able to sell it at a higher price and increase the number of monthly transactions.
- Competition: The presence of other chicory farms in the area can affect the average price and number of transactions for your farm. If there is high competition, you may need to lower your prices to stay competitive and attract more customers.
- Crop diseases: Chicory is susceptible to various diseases, such as leaf spot and powdery mildew, which can affect the quality and yield of the crop. This can lead to a decrease in the average price and number of transactions for the farm.
- Labor costs: The cost of hiring and retaining labor can impact the profitability of your chicory farm. If labor costs increase, you may need to adjust your prices to cover the expenses, which can affect the average price and number of transactions for the farm.
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 chicory farm
The next step is to estimate the costs you’ll have to incur to operate your chicory farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your chicory farm's operating expenses should normally include the following items:
- Staff Costs: This includes wages, salaries, and benefits for all employees working on the chicory farm. This may also include any training or professional development expenses for your staff.
- Accountancy Fees: As a business owner, it's important to keep track of your finances and ensure you are meeting all tax and regulatory requirements. Hiring an accountant to assist with bookkeeping, taxes, and financial planning is a necessary expense for a chicory farm.
- Insurance Costs: Running a chicory farm comes with certain risks, such as crop damage or liability for accidents. It's important to have insurance coverage to protect your business and assets in case of any unforeseen events.
- Software Licences: In today's digital age, many aspects of running a chicory farm, such as record-keeping, data analysis, and marketing, require the use of software. You may need to purchase licences for specific software or pay subscription fees to use certain programs.
- Banking Fees: As a business owner, you will have various financial transactions, such as depositing and withdrawing funds, making payments, and managing loans. Banks may charge fees for these services, so it's important to factor in these costs when creating your operating expenses forecast.
- Seeds and Planting Materials: As a chicory farmer, you will need to purchase seeds and other materials such as seed trays, pots, and soil to grow your crops. These costs may vary depending on the size of your farm and the type of chicory you are growing.
- Fertilizers and Pesticides: To ensure healthy and high-quality chicory crops, you may need to use fertilizers and pesticides. These can be significant expenses, especially if you have a large farm or use organic products.
- Equipment Maintenance: Owning and operating farming equipment, such as tractors, irrigation systems, and harvesters, requires regular maintenance and occasional repairs. These costs should be included in your operating expenses forecast.
- Utilities: Running a chicory farm requires water and electricity for irrigation, lighting, and other operations. You will need to factor in these utility costs when creating your forecast.
- Transportation Expenses: You may need to transport your chicory crops to buyers or markets, which may incur expenses such as fuel, vehicle maintenance, and tolls.
- Marketing and Advertising: To attract customers and promote your chicory products, you may need to invest in marketing and advertising efforts. This can include creating brochures, attending trade shows, and running online ads.
- Rent or Land Lease: If you do not own the land you are farming on, you will need to pay rent or lease fees. These costs should be included in your operating expenses forecast.
- Packaging Materials: To package and ship your chicory products, you will need to purchase packaging materials such as boxes, labels, and tape. These expenses should be included in your forecast.
- Storage and Refrigeration: Depending on the type of chicory you are growing, you may need to store and refrigerate your crops to maintain their freshness. This may require investing in storage facilities or renting refrigeration space.
- Crop Insurance: In addition to general business insurance, you may also want to consider purchasing crop insurance to protect against potential losses due to weather, pests, or other factors.
This list is not exhaustive by any means, and will need to be tailored to your chicory farm's specific circumstances.
What investments are needed to start or grow a chicory farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your chicory farm, it is time to look into the equipment required to launch or expand the activity.
For a chicory farm, capital expenditures and initial working capital items could include:
- Land and buildings: This includes the purchase or lease of land for the chicory farm, as well as any buildings or structures that will be used for storage, processing, or as a workspace for farm employees.
- Equipment: This includes the purchase or rental of equipment needed for planting, harvesting, and processing chicory. This can include tractors, plows, harvesters, and processing equipment.
- Irrigation system: Since chicory requires consistent moisture levels, an irrigation system may be necessary. This can include the installation of drip or sprinkler systems, as well as the purchase of pumps, pipes, and other necessary equipment.
- Fencing: Fencing is important for protecting the chicory crop from animals and pests. This can include the purchase and installation of fencing materials such as wire, posts, and gates.
- Storage facilities: Once harvested, chicory must be stored in a cool, dry place to maintain its quality. This may require the construction or purchase of storage facilities such as barns, sheds, or silos.
Again, this list will need to be adjusted according to the specificities of your chicory 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 chicory farm
The next step in the creation of your financial forecast for your chicory 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 chicory farm?
Now let's have a look at the main output tables of your chicory 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 chicory 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 chicory farm will look different than for a startup.
The projected balance sheet
Your chicory 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 forecast
Your chicory farm'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 chicory farm:
- 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 chicory farm'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 chicory farm'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 chicory farm's financial forecast?
Using the right tool or solution will make the creation of your chicory farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your chicory 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional chicory 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 chicory farm's financial forecast?
Creating an accurate and error-free chicory 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 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 chicory 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 chicory 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 project sales for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a chicory farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
