How to create a financial forecast for a cider producer?
Developing and maintaining an up-to-date financial forecast for your cider producing company 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 cider producing company 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 cider producing company?
The financial projections for your cider producing company 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 cider producing company'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 cider producing company financial forecast?
A cider producing company'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 cider producing company.
If you are creating (or updating) the forecast of an existing cider producing company, 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 cider producing company 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 cider producing company 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 cider producing company's financial forecast.
The sales forecast for a cider producing company
From experience, it is usually best to start creating your cider producing company financial forecast by your sales forecast.
To create an accurate sales forecast for your cider producing company, you will have to rely on the data collected in your market research, or if you're running an existing cider producing company, 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:
- Seasonal Demand: As a cider producing company, your sales may be affected by the seasonal demand for cider. During the colder months, when consumers are looking for warm and cozy drinks, you may see an increase in sales. However, during the warmer months, when consumers are more likely to opt for cold and refreshing drinks, you may experience a decrease in sales.
- Competition: The number of competitors in the cider industry can also affect your average price and number of monthly transactions. If there are many cider producers in your area, you may need to lower your prices in order to stay competitive. On the other hand, if there are only a few competitors, you may be able to charge a higher price for your cider.
- Weather: The weather can have a significant impact on the demand for cider. A colder and wetter summer may lead to increased sales, as consumers are looking for indoor activities and warm drinks. However, a hotter and drier summer may result in a decrease in sales, as consumers may opt for other cold beverages.
- Changes in Consumer Preferences: As consumer preferences shift towards healthier and more natural products, your average price and number of monthly transactions may be affected. If consumers are willing to pay more for organic or locally sourced cider, you may be able to increase your prices. On the other hand, if there is a trend towards low-alcohol or non-alcoholic options, you may need to adjust your product offerings to cater to these preferences.
- Economic Conditions: The state of the economy can also play a role in your sales forecast. During times of economic downturn, consumers may be more price-sensitive and opt for cheaper alternatives. However, during times of economic growth, consumers may be more willing to spend on premium products like craft cider, allowing you to charge a higher average price.
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 cider producing company
The next step is to estimate the costs you’ll have to incur to operate your cider producing company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your cider producing company's operating expenses should normally include the following items:
- Staff costs: Includes salaries, benefits, and training for employees involved in cider production, packaging, and distribution.
- Raw materials: This includes the cost of apples, yeast, and other ingredients needed to make cider.
- Packaging materials: Includes bottles, labels, and other packaging materials used for cider products.
- Utilities: This includes electricity, water, and gas expenses for the cider production facility.
- Rent: If you are leasing a production facility, this would include the monthly rent or lease payments.
- Marketing and advertising: This includes the cost of promoting and advertising your cider products to potential customers.
- Accountancy fees: This includes the cost of hiring an accountant to handle tax and financial matters for your company.
- Insurance costs: This includes liability insurance, property insurance, and any other insurance necessary for your cider producing company.
- Software licenses: This includes the cost of any software needed for managing inventory, sales, and other aspects of your business.
- Banking fees: This includes any fees associated with business bank accounts, credit card processing, and other financial transactions.
- Transportation and shipping: This includes the cost of transporting raw materials and finished products to and from your production facility.
- Maintenance and repairs: This includes the cost of regular maintenance and any repairs needed for equipment used in cider production.
- Licenses and permits: This includes the cost of obtaining necessary licenses and permits for operating a cider producing company.
- Taxes: This includes income taxes, sales taxes, and any other taxes applicable to your business.
- Professional fees: This includes fees for legal advice, consulting services, and other professional services needed for your business.
This list is not exhaustive by any means, and will need to be tailored to your cider producing company's specific circumstances.
What investments are needed to start or grow a cider producing company?
Creating and expanding a cider producing company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a cider producing company could include elements such as:
- Fermentation tanks: These are large, stainless steel tanks used for fermenting the cider. They are a necessary investment for any cider producing company as they are used to store and ferment the cider before it is bottled or sold.
- Cider press: This is a machine used to extract the juice from apples, which is the main ingredient in cider. A cider press is a vital piece of equipment for a cider producing company as it allows them to produce their own juice instead of purchasing it from a third party.
- Bottling and labeling equipment: In order to package and sell their cider, a cider producing company will need to invest in bottling and labeling equipment. This includes machines for filling, capping, and labeling bottles, as well as packaging materials such as boxes and labels.
- Tasting room: Many cider producing companies have a tasting room where customers can sample and purchase their products. This is a valuable investment as it allows the company to generate additional revenue and build a loyal customer base.
- Storage facility: A cider producing company will need a secure and climate-controlled storage facility to store their finished products. This is an important investment to ensure the quality and freshness of the cider is maintained until it is ready to be sold.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your cider producing company.
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 cider producing company
The next step in the creation of your financial forecast for your cider producing company 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 cider producing company?
Now let's have a look at the main output tables of your cider producing company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your cider producing company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a cider producing company 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 cider producing company'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 cider producing company. 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 projection
The cash flow forecast of your cider producing company 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 cider producing company'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 cider producing company 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 cider producing company'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 cider producing company's financial projections?
Building a cider producing company 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 forecasting software to build your cider producing company's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection software for free by signing up here.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your cider producing company 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 cider producing company's financial forecast?
Creating an accurate and error-free cider producing company 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 cider producing company 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 cider producing company, 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?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
