How to create a financial forecast for a garlic farm?
Creating a financial forecast for your garlic farm, 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 garlic farm 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 garlic farm?
The financial projections for your garlic farm 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 garlic farm'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 garlic farm financial forecast?
A garlic 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 garlic 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 garlic 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 garlic 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 garlic farm's financial forecast.
The sales forecast for a garlic farm
From experience, it is usually best to start creating your garlic farm financial forecast by your sales forecast.
To create an accurate sales forecast for your garlic farm, you will have to rely on the data collected in your market research, or if you're running an existing garlic 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:
- Seasonal demand: As the demand for garlic typically increases during the colder months, you can expect to see a higher average price for your product during this time. This may also lead to an increase in the number of monthly transactions as customers stock up on garlic for the winter.
- Crop yield: The amount of garlic your farm produces each year can greatly affect your average price. If you have a particularly successful harvest, you may have more product to sell, which can drive down the average price. On the other hand, a smaller yield may lead to a higher average price as your supply is more limited.
- Competition: The presence of other garlic farms in your area can impact your average price and number of monthly transactions. If there are many other farms selling garlic, you may need to lower your prices to stay competitive. This could also lead to an increase in transactions as customers are drawn to your lower prices.
- Weather conditions: Severe weather events, such as droughts or floods, can have a significant impact on your garlic crops. If your farm experiences a particularly bad season, it may result in a lower yield and a higher average price for your product.
- Consumer preferences: Changes in consumer preferences can also affect the average price and number of monthly transactions for your garlic. For example, if there is a trend towards organic and locally grown produce, you may be able to charge a higher price for your garlic and see an increase in transactions as customers seek out your product.
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 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 garlic farm
The next step is to estimate the expenses needed to run your garlic 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 garlic farm's operating expenses should include the following items at a minimum:
- Labor costs: This includes wages, salaries, and benefits for your farm workers. You will need staff to plant, harvest, and package your garlic.
- Seed and planting materials: You will need to purchase high-quality garlic bulbs and possibly other planting materials such as mulch or fertilizers.
- Irrigation and water costs: Garlic requires consistent moisture, so you may need to set up an irrigation system or pay for water usage.
- Equipment maintenance and repair: Garlic farming involves using machinery such as tractors and harvesters, which will require regular maintenance and occasional repairs.
- Packaging and shipping materials: You will need to purchase packaging materials such as bags, crates, and labels, as well as pay for shipping costs to send your garlic to buyers.
- Utilities: Running a garlic farm will require electricity and possibly other utilities such as gas and water.
- Rent or land costs: If you do not own the land for your farm, you will need to pay rent or lease payments.
- Marketing and advertising: To sell your garlic, you may need to invest in marketing and advertising efforts, such as creating a website or attending farmers' markets.
- Accountancy fees: You may need to hire an accountant to help you keep track of your finances and file taxes.
- Insurance: As a garlic farmer, you will need to protect your business with insurance, such as liability insurance or crop insurance.
- Software licenses: You may need to purchase licenses for software programs to help with tasks such as record-keeping or inventory management.
- Banking fees: To handle financial transactions for your farm, you may need to pay for banking fees, such as wire transfer fees or monthly account maintenance fees.
- Pest and weed control: To keep your garlic plants healthy, you may need to invest in pest and weed control methods, such as using natural or chemical pesticides.
- Training and education: As a garlic farmer, you may need to attend workshops or conferences to learn new techniques or stay updated on industry trends.
- Taxes and permits: You will need to pay taxes on your farm income and obtain any necessary permits to legally operate your garlic farm.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small garlic farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a garlic farm?
Creating and expanding a garlic farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a garlic farm could include elements such as:
- Land and Buildings: This includes the purchase or lease of land for your garlic farm, as well as any buildings or structures that are necessary for the production and storage of garlic. This may also include costs for site preparation, such as clearing land or building irrigation systems.
- Equipment and Machinery: As a garlic farmer, you will need a variety of equipment and machinery to plant, harvest, and process your garlic. This may include tractors, tillers, planters, harvesters, and drying or curing equipment.
- Storage Facilities: Garlic requires proper storage conditions to maintain its quality and prevent spoilage. This may include building or purchasing storage sheds or facilities, as well as equipment for temperature and humidity control.
- Packaging and Labeling Materials: In order to sell your garlic, you will need to package and label it properly. This may include purchasing packaging materials, such as bags or boxes, and labels with your farm's branding and information.
- Other Fixed Assets: Depending on your specific garlic farm operation, there may be other fixed assets that are necessary for your success. This could include items such as irrigation systems, fencing, or vehicles for transportation.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your garlic 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 garlic farm
The next step in the creation of your financial forecast for your garlic 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 garlic farm?
Now let's have a look at the main output tables of your garlic farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your garlic farm is likely to be in the years to come.
For your garlic 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 garlic 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 garlic 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 garlic 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 garlic 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 garlic 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 garlic 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 garlic farm's financial forecast?
Using the right tool or solution will make the creation of your garlic farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your garlic farm'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
Outsourcing the creation of your garlic farm 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 garlic farm's financial forecast?
Creating an accurate and error-free garlic farm financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 garlic 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 garlic 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 garlic 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 create a sales forecast for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting a garlic farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
