How to create a financial forecast for a chocolate wholesaler?
Creating a financial forecast for your chocolate wholesaler, 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 chocolate wholesaler 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 chocolate wholesaler?
The financial projections for your chocolate wholesaler 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 chocolate wholesaler'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.
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 chocolate wholesaler financial forecast?
A chocolate wholesaler'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 chocolate wholesaler, 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 chocolate wholesaler 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 chocolate wholesaler 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 chocolate wholesaler's financial forecast.
The sales forecast for a chocolate wholesaler
From experience, it is usually best to start creating your chocolate wholesaler financial forecast by your sales forecast.
To create an accurate sales forecast for your chocolate wholesaler, you will have to rely on the data collected in your market research, or if you're running an existing chocolate wholesaler, 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:
- You are targeting a new market segment with premium chocolate products, leading to a higher average price per transaction.
- Your suppliers have increased the cost of cocoa beans, resulting in a higher cost of goods sold and potentially affecting your average price.
- A new competitor has entered the market, offering similar quality chocolate at a lower price, potentially leading to a decrease in your average price and number of transactions.
- You have invested in new packaging for your chocolate products, resulting in a higher perceived value and potentially increasing your average price.
- The holiday season is approaching, and you expect a surge in demand for your chocolate products, leading to an increase in your number of transactions and potentially affecting your average price if you offer seasonal discounts.
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.
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The operating expenses for a chocolate wholesaler
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your chocolate wholesaler 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 chocolate wholesaler will include some of the following items:
- Staff costs: This includes the salaries, benefits, and bonuses for your employees, as well as any training expenses and payroll taxes.
- Accountancy fees: As a chocolate wholesaler, you will need to hire an accountant to ensure accurate financial records, prepare tax returns, and provide financial advice.
- Insurance costs: You will need to have insurance to protect your business from any potential risks, such as product liability, property damage, and business interruption.
- Software licenses: To keep track of your inventory, sales, and finances, you will need to invest in software licenses for accounting, inventory management, and point-of-sale systems.
- Banking fees: As a business, you will have various banking needs, such as opening a business account, processing payments, and obtaining loans. These services often come with fees.
- Marketing expenses: To attract and retain customers, you may need to invest in marketing activities such as advertising, promotions, and social media management.
- Rent or lease: If you do not own your warehouse or office space, you will need to budget for rent or lease expenses.
- Utilities: As a chocolate wholesaler, you will have electricity, water, and other utility expenses to keep your operations running.
- Packaging materials: You will need to purchase packaging materials such as boxes, bags, and wrapping paper to package and protect your chocolate products.
- Transportation costs: To deliver your products to customers or receive shipments from suppliers, you will need to budget for transportation expenses, such as gas, vehicle maintenance, and shipping fees.
- Office supplies: You will need basic office supplies such as paper, pens, and printer ink to keep your business running smoothly.
- Professional fees: If you need legal or consulting services, you will need to budget for professional fees.
- Travel expenses: If you attend trade shows or visit suppliers or customers, you will need to budget for travel expenses such as airfare, hotel accommodations, and meals.
- Taxes: As a business, you will have to pay various taxes, including income tax, sales tax, and property tax.
- Repairs and maintenance: You will need to maintain and repair your equipment and facilities to keep your operations running smoothly.
This list will need to be tailored to the specificities of your chocolate wholesaler, but should offer a good starting point for your budget.
What investments are needed to start or grow a chocolate wholesaler?
Creating and expanding a chocolate wholesaler also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a chocolate wholesaler could include elements such as:
- Chocolate Production Equipment: This includes machinery and tools used for the production of chocolate, such as mixers, tempering machines, and packaging equipment. These are essential fixed assets for a chocolate wholesaler and can be a significant expense.
- Warehouse and Storage Facilities: As a chocolate wholesaler, you will need adequate space to store and distribute your products. This may include purchasing or leasing a warehouse, refrigerated storage units, and shelving systems.
- Delivery Vehicles: Depending on the size of your operations, you may need to invest in delivery vehicles to transport your products to customers. This could include vans, trucks, or even a refrigerated truck for transporting perishable goods.
- Point of Sale System: A point of sale (POS) system is essential for processing sales and tracking inventory. This could include hardware such as cash registers, barcode scanners, and computers, as well as software for managing sales and inventory data.
- Packaging Materials: As a chocolate wholesaler, you will need to invest in packaging materials to protect and display your products. This could include boxes, bags, and labels, as well as specialized packaging for holiday or seasonal products.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your chocolate wholesaler.
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 chocolate wholesaler
The next step in the creation of your financial forecast for your chocolate wholesaler 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 chocolate wholesaler?
Now let's have a look at the main output tables of your chocolate wholesaler's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your chocolate wholesaler's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a chocolate wholesaler 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
Your chocolate wholesaler'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 cash flow forecast
Your chocolate wholesaler'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 chocolate wholesaler:
- 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 chocolate wholesaler'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 chocolate wholesaler'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 chocolate wholesaler's financial projections?
Building a chocolate wholesaler 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 chocolate wholesaler'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional chocolate wholesaler 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 chocolate wholesaler's financial forecast?
Creating an accurate and error-free chocolate wholesaler 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 chocolate wholesaler, 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
- 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 chocolate wholesaler.
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 chocolate wholesaler. 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 chocolate wholesaler? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
