How to create a financial forecast for a food and beverage machinery maker?
Developing and maintaining an up-to-date financial forecast for your food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business?
The financial projections for your food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business financial forecast?
A food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business, 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 food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business's financial forecast.
The sales forecast for a food and beverage machinery manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your food and beverage machinery manufacturing business 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 food and beverage machinery makers), and consider the elements below:
- Seasonal demand: As a food and beverage machinery manufacturing business, your sales may be affected by seasonal demand for certain types of machinery. For example, there may be higher demand for ice cream machines in the summer and hot beverage machines in the winter. This could lead to fluctuations in your average price and number of monthly transactions.
- Market trends: Changes in consumer preferences and market trends can also impact your sales. For instance, if there is a growing demand for healthier food and beverage options, you may need to adjust your prices or develop new machinery to meet this demand. This could affect your average price and number of monthly transactions.
- Technological advancements: As technology continues to advance, it may affect the type of machinery your customers are looking for. For example, if there is a new technology that allows for more efficient production of certain foods or beverages, your customers may be willing to pay more for that type of machinery. This could impact your average price and number of monthly transactions.
- Economic conditions: Economic conditions, such as inflation and changes in consumer spending, can also affect your sales forecast. If there is a downturn in the economy, your customers may be more hesitant to invest in new machinery, leading to a decrease in your average price and number of monthly transactions.
- Competition: The presence of competitors in the market can also impact your business's sales forecast. If there are new entrants or established competitors offering similar machinery at lower prices, you may need to adjust your prices to remain competitive, which could affect your average price and number of monthly transactions.
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 food and beverage machinery manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, benefits, and payroll taxes for all employees, including production workers, engineers, and administrative staff.
- Accountancy Fees: You will need to hire an accountant to manage your financial records, file taxes, and provide financial advice.
- Insurance Costs: As a food and beverage machinery manufacturing business, you will need to have insurance for your premises, equipment, and liability.
- Software Licenses: You will need to purchase software licenses for specialized programs used in the manufacturing process, such as CAD software for designing machinery.
- Banking Fees: This includes fees for maintaining a business bank account, wire transfers, and credit card processing fees.
- Raw Materials: You will need to purchase raw materials, such as metal and plastic, to manufacture your machinery.
- Utilities: This includes electricity, water, and gas expenses for your manufacturing facility.
- Rent: If you do not own your manufacturing facility, you will need to pay rent for the space.
- Marketing and Advertising: You will need to allocate a budget for marketing and advertising efforts to promote your business and attract customers.
- Travel Expenses: If you need to travel for business purposes, you will need to cover expenses such as airfare, accommodations, and meals.
- Maintenance and Repairs: Machinery and equipment will require regular maintenance and repairs, which will incur costs.
- Professional Fees: You may need to hire outside professionals, such as lawyers or consultants, for specific projects or tasks.
- Training and Development: You will need to invest in training and development programs for your employees to improve their skills and knowledge.
- Taxes and Licenses: You will need to pay taxes and obtain necessary licenses to operate your food and beverage machinery manufacturing business.
- Office Supplies: This includes expenses for office supplies, such as paper, printer ink, and stationery, needed for daily operations.
This list will need to be tailored to the specificities of your food and beverage machinery manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a food and beverage machinery manufacturing business?
Your food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business, these could include:
- Machinery and equipment: This includes all the necessary machines and equipment used in the production process, such as mixers, ovens, packaging machines, and conveyors.
- Facility improvements: This may include renovations, upgrades, or expansions to your manufacturing facility to accommodate the production of food and beverage machinery.
- Computer systems and software: A food and beverage machinery manufacturing business requires specialized software to design and program the machinery. This may also include purchasing computers and other hardware necessary for running the software.
- Furniture and fixtures: This includes items such as workbenches, storage shelves, and office furniture that are essential for the smooth functioning of the business.
- Vehicles: Depending on your business needs, you may need to purchase vehicles for transportation of raw materials and finished products, as well as for sales and delivery purposes.
Again, this list will need to be adjusted according to the size and ambitions of your food and beverage machinery manufacturing 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.
The financing plan of your food and beverage machinery manufacturing business
The next step in the creation of your financial forecast for your food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business?
Now let's have a look at the main output tables of your food and beverage machinery manufacturing business's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your food and beverage machinery manufacturing business is likely to be in the years to come.
For your food and beverage machinery manufacturing business 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 food and beverage machinery makers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business:
- 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 food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business's financial projections?
Building a food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business'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 food and beverage machinery manufacturing business 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 food and beverage machinery manufacturing business's financial forecast?
Creating an accurate and error-free food and beverage machinery manufacturing business 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your food and beverage machinery manufacturing business.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a food and beverage machinery manufacturing business. Don't hesitate to contact us if you 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
- Financial forecast example
- How to create a sales forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
