How to create a financial forecast for a clover farm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your clover farm.
Putting together a clover farm financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your clover farm.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a clover 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 clover farm becomes handy.
Creating a clover 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 clover 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 clover 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 clover 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 clover farm financial forecast?
A clover farm'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 clover farm, 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 clover farm 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 clover farm 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 clover farm's financial forecast.
The sales forecast for a clover farm
The sales forecast, also called topline projection, is normally where you will start when building your clover 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 clover farms), and consider the elements below:
- Your clover farm's location can impact your average price and number of monthly transactions. If your farm is located in an area with high demand for clover, you may be able to charge a higher price for your product and attract more customers.
- The weather is another important factor to consider. A dry season can lead to a decrease in clover production, which could result in a lower supply and potentially higher prices. On the other hand, a wet season could lead to a surplus of clover, causing prices to decrease.
- The overall health of your clover crops can also impact your average price and number of monthly transactions. If your crops are healthy and produce high-quality clover, you may be able to charge a premium price and attract more customers. However, if your crops are affected by pests or diseases, your prices may need to be lowered and you may lose some customers.
- The availability of other competitive clover farms in the area can also affect your business. If there are many other clover farms in your area, you may need to adjust your prices to stay competitive and attract customers. On the other hand, if your farm is one of the few in the area, you may be able to charge higher prices and attract more customers.
- The demand for clover can fluctuate based on the seasonality of certain industries that use clover as a feed for their livestock. For example, if the dairy industry is experiencing a boom, there may be an increase in demand for clover, leading to higher prices and more transactions. However, if the demand for dairy products decreases, it could have a negative impact on your clover sales.
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 clover farm
The next step is to estimate the costs you’ll have to incur to operate your clover farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your clover farm's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, and benefits for all employees working on the clover farm, including farm hands, administrative staff, and managers.
- Accountancy fees: You will need to hire an accountant to help with bookkeeping, tax preparation, and other financial tasks related to your clover farm.
- Insurance costs: It is important to have insurance coverage for your clover farm to protect against potential risks and liabilities, such as property damage, crop failure, or accidents.
- Software licenses: You may need to purchase software licenses for programs that can help with farm management, accounting, or other tasks related to running your clover farm.
- Banking fees: You will likely have to pay fees for maintaining a business bank account, as well as for making transactions and using banking services.
- Seed and fertilizer: These are essential supplies for growing clover, and their costs will vary depending on the size of your farm and the amount of clover you plan to produce.
- Fuel and equipment maintenance: Your clover farm will require machinery, such as tractors and harvesters, as well as fuel and regular maintenance to keep them running smoothly.
- Water and irrigation: Depending on your location and climate, you may need to invest in an irrigation system to ensure that your clover plants have enough water for optimal growth.
- Pest control: Pests and insects can damage your clover crop, so you may need to purchase pesticides or hire a pest control service to protect your plants.
- Marketing and advertising: To sell your clover, you will need to invest in marketing and advertising efforts, such as creating a website, attending trade shows, or printing promotional materials.
- Packaging and shipping: If you plan to sell your clover to customers outside of your local area, you will need to factor in the costs of packaging and shipping your product.
- Utilities: Your clover farm will likely have utility expenses, such as electricity, gas, and water, for running equipment, heating or cooling buildings, and other operations.
- Rent or mortgage: If you do not own the land where your clover farm is located, you will need to factor in the cost of rent or mortgage payments for the property.
- Taxes and permits: As a business owner, you will need to pay taxes on your clover farm income and obtain any necessary permits for operating a farm in your area.
- Training and education: To run a successful clover farm, you may need to invest in training or education for yourself or your employees, such as workshops or courses on farming techniques or business management.
This list is not exhaustive by any means, and will need to be tailored to your clover farm's specific circumstances.
What investments are needed to start or grow a clover farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your clover farm, it is time to look into the equipment required to launch or expand the activity.
For a clover farm, capital expenditures and initial working capital items could include:
Again, this list will need to be adjusted according to the specificities of your clover 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 clover farm
The next step in the creation of your financial forecast for your clover 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 clover farm?
Now let's have a look at the main output tables of your clover farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your clover farm is likely to be in the years to come.
For your clover 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 clover 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 clover 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 cash flow forecast
Your clover 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 clover 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 clover 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 clover 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 clover farm's financial projections?
Building a clover 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 forecasting software to build your clover 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.
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 clover farm 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 clover farm's financial forecast?
Creating an accurate and error-free clover 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 clover 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 clover 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 clover 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 clover farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
