How to create a financial forecast for a flower 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 flower farm.
Putting together a flower 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 flower 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 flower farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your flower farm and ensure that it can be financially viable in the years to come.
A financial plan for a flower 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 flower 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 flower 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 flower farm financial forecast?
A flower 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 flower 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 flower 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 flower 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 flower farm's financial forecast.
The sales forecast for a flower farm
From experience, it is usually best to start creating your flower farm financial forecast by your sales forecast.
To create an accurate sales forecast for your flower farm, you will have to rely on the data collected in your market research, or if you're running an existing flower farm, 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:
- Weather conditions: Unpredictable weather patterns can affect the availability and quality of flowers, which may impact the average price and number of transactions. For example, a dry spell may lead to a decrease in supply and an increase in price, while a prolonged rainy season may result in damaged flowers and lower prices.
- Competition: The presence of other flower farms in the area can affect the average price and number of transactions. If there are many competitors offering similar flowers, you may need to adjust your prices to remain competitive and attract customers. On the other hand, if there is little competition, you may be able to charge higher prices and increase your sales.
- Holiday seasons: Holidays such as Valentine's Day and Mother's Day are peak seasons for flower sales. During these times, you may experience a surge in demand, leading to higher prices and more transactions. However, outside of these peak periods, the average price and number of transactions may decrease.
- Transportation costs: The cost of transporting flowers from the farm to the market can also impact your average price and number of transactions. For example, if fuel prices increase, you may need to raise your prices to cover the additional cost. This could potentially lead to a decrease in sales if customers are unwilling to pay the higher prices.
- Crop cycle: Different types of flowers have different growing seasons and cycles. For example, if you specialize in seasonal flowers that are only available during certain times of the year, your average price and number of transactions may fluctuate accordingly. Additionally, if there are any unexpected events that affect the crop, such as pests or disease, it may also impact your sales forecast.
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.
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 flower farm
The next step is to estimate the expenses needed to run your flower farm on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your flower farm's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, benefits, and training for your employees who will be involved in planting, harvesting, and maintaining your flower farm.
- Accountancy fees: You will need to hire an accountant to help you with bookkeeping, tax preparation, and financial planning for your flower farm.
- Insurance costs: It is important to have insurance coverage for your flower farm to protect against potential risks such as crop damage, natural disasters, and liability claims.
- Software licences: You may need to purchase software licences for programs that will help you with inventory management, sales tracking, and financial analysis for your flower farm.
- Banking fees: You will need to pay for services such as checking accounts, wire transfers, and credit card processing for your flower farm.
- Seed and plant costs: This includes the cost of purchasing seeds, bulbs, and plants to grow on your flower farm.
- Fertilizer and pesticide costs: You will need to budget for the cost of fertilizers and pesticides to maintain the health and growth of your flowers.
- Water and irrigation costs: Your flower farm will require regular watering, so you will need to factor in the cost of water usage and any irrigation systems.
- Greenhouse or nursery rental: If you do not have enough space on your own property, you may need to rent a greenhouse or nursery space to grow your flowers.
- Packaging and shipping costs: Once your flowers are ready for market, you will need to package and ship them to customers, which will incur costs for materials and shipping fees.
- Marketing and advertising expenses: To attract customers and increase sales, you may need to invest in marketing and advertising efforts such as creating a website, running ads, or attending trade shows.
- Utility costs: Your flower farm will require electricity for lighting and equipment, so you will need to budget for utility costs such as electricity and gas.
- Equipment rental or purchase: You may need to rent or purchase equipment such as tractors, mowers, and tillers to maintain your flower farm.
- Transportation expenses: If you need to travel to purchase supplies, deliver products, or attend events for your flower farm, you will need to factor in transportation costs for gas, vehicle maintenance, and lodging.
- Taxes and permits: As a business, you will need to pay taxes and obtain permits for your flower farm, which may include sales tax, income tax, and business license fees.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small flower farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a flower farm?
Your flower farm financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a flower farm, these could include:
- Greenhouse structure and equipment: This includes the cost of purchasing or constructing a greenhouse as well as the necessary equipment such as irrigation systems, benches, and lighting.
- Transportation vehicles: You may need to invest in a truck or van for transporting your flowers to market or delivering them to customers. This can also include the cost of a trailer for hauling larger quantities of flowers.
- Coolers and storage facilities: Proper storage is essential for maintaining the quality and freshness of your flowers. This can include the cost of refrigerated coolers, containers, and shelves for storing your flowers.
- Land and irrigation systems: If you are starting a flower farm from scratch, you will need to purchase or lease land for growing your flowers. You will also need to invest in an irrigation system to ensure your flowers receive the necessary water and nutrients.
- Harvesting and processing equipment: This can include items such as pruning shears, harvesting knives, and processing machinery for trimming and packaging your flowers for sale.
Again, this list will need to be adjusted according to the size and ambitions of your flower 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 flower farm
The next step in the creation of your financial forecast for your flower 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 flower farm?
Now let's have a look at the main output tables of your flower 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 flower 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 flower farm will look different than for a startup.
The projected balance sheet
Your flower 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 flower 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 flower 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 flower 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 flower 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 flower farm's financial forecast?
Using the right tool or solution will make the creation of your flower farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your flower 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 flower 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 flower farm's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free flower farm financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your flower farm's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own flower farm, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your flower farm
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 flower 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 flower 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 write a flowers farm business plan
- How to create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a flower farm? Share our forecasting guide with them!