How to create a financial forecast for a hazelnut farm?
Creating a financial forecast for your hazelnut 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 hazelnut 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 hazelnut farm?
The financial projections for your hazelnut 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 hazelnut 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 hazelnut farm financial forecast?
A hazelnut farm'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 hazelnut farm.
If you are creating (or updating) the forecast of an existing hazelnut farm, 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 hazelnut farm 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 hazelnut farm 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 hazelnut farm's financial forecast.
The sales forecast for a hazelnut farm
From experience, it usually makes sense to start your hazelnut farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your hazelnut farm (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your hazelnut farm's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Weather conditions: As a hazelnut farmer, you know that favorable weather conditions can lead to a higher yield and therefore, a higher supply of hazelnuts in the market. This can result in a lower average price as there is more competition among farmers to sell their produce.
- Pest infestations: Pests can be a major threat to hazelnut farms, especially during the pollination and harvesting season. If your farm is affected by a pest infestation, it can lead to a lower yield and a decrease in the supply of hazelnuts. This can result in a higher average price as the demand for hazelnuts may still remain the same.
- International demand: The demand for hazelnuts is not only limited to your local market but also extends to the international market. If there is an increase in demand for hazelnuts from other countries, it can lead to a higher average price as you can sell your produce at a higher price to meet the demand.
- Crop rotation: As a hazelnut farmer, you know the importance of crop rotation to maintain the health and productivity of your trees. If you rotate your crops effectively, it can lead to a higher yield and a higher supply of hazelnuts, resulting in a lower average price as there will be more hazelnuts available in the market.
- Labor costs: The cost of labor can have a direct impact on the number of monthly transactions for your hazelnut farm. If labor costs increase, you may have to reduce your workforce, leading to a decrease in the number of monthly transactions. On the other hand, if you are able to find more cost-effective labor options, you may be able to increase your production and therefore, the number of monthly transactions.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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The operating expenses for a hazelnut farm
The next step is to estimate the costs you’ll have to incur to operate your hazelnut farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your hazelnut farm's operating expenses should normally include the following items:
- Labor Costs: You will need to pay your workers for their time and labor in tasks such as planting, pruning, and harvesting hazelnuts.
- Crop Inputs: This includes expenses for fertilizers, pesticides, and other materials to maintain the health of your hazelnut trees.
- Equipment Maintenance: Your farm equipment, such as tractors and harvesters, will need regular maintenance to ensure they are in good working condition.
- Utilities: You will need to cover the costs of electricity, water, and other utilities used on the farm.
- Rent/Lease: If you do not own the land you are farming on, you will need to pay rent or lease fees for the use of the land.
- Insurance: Protect your farm and its assets by investing in insurance coverage for hazards such as natural disasters and crop damage.
- Fuel: You will need fuel for your farm equipment and vehicles, such as tractors and trucks.
- Packaging and Shipping: When your hazelnuts are ready to be sold, you will need to cover the costs of packaging and shipping them to buyers.
- Marketing and Advertising: To attract customers and promote your hazelnut farm, you may need to invest in marketing and advertising efforts.
- Accounting and Bookkeeping: Keep track of your farm's financials by hiring an accountant or using accounting software.
- Licenses and Permits: Obtain necessary licenses and permits to operate your hazelnut farm, such as a farming license and environmental permits.
- Banking Fees: You may incur fees for services such as wire transfers, check processing, and account maintenance.
- Training and Education: Stay up-to-date on industry practices and techniques by investing in training and education for yourself and your workers.
- Legal Fees: You may need to seek legal advice or assistance for issues such as contracts, land disputes, or employment matters.
- Office Supplies: Keep your farm's administrative tasks running smoothly by purchasing necessary office supplies such as paper, ink, and pens.
This list is not exhaustive by any means, and will need to be tailored to your hazelnut farm's specific circumstances.
What investments are needed to start or grow a hazelnut farm?
Creating and expanding a hazelnut farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a hazelnut farm could include elements such as:
- Land: This is one of the most important capital expenditures for a hazelnut farm. You will need to purchase land or lease it for a certain period of time in order to establish your farm. The cost of land will depend on the location and size of the land, as well as the demand for hazelnut farming in the area.
- Irrigation system: Hazelnut trees require a consistent and controlled water supply in order to thrive. Therefore, investing in an efficient irrigation system is crucial for your farm. This includes pipes, pumps, and sprinklers, as well as any additional equipment needed for maintenance and repairs.
- Equipment and machinery: In order to plant, harvest, and process hazelnuts, you will need various types of equipment and machinery. This can include tractors, plows, sprayers, harvesters, and husking machines. These items can be costly, but they are necessary for the success of your hazelnut farm.
- Storage facilities: Hazelnuts need to be stored in a cool and dry environment in order to maintain their quality and freshness. Therefore, investing in storage facilities such as warehouses or silos is important. You may also need to purchase containers or packaging materials for transportation and distribution.
- Infrastructure: Depending on the location of your hazelnut farm, you may need to invest in infrastructure such as roads, fences, and buildings. These are important for the safety and security of your farm, as well as for the efficient operation of your business.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your hazelnut 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 hazelnut farm
The next step in the creation of your financial forecast for your hazelnut 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 hazelnut farm?
Now let's have a look at the main output tables of your hazelnut farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your hazelnut farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a hazelnut farm 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
Your hazelnut farm's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 projection
The cash flow forecast of your hazelnut farm 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 hazelnut farm'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 hazelnut farm 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 hazelnut farm'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 hazelnut farm's financial forecast?
Using the right tool or solution will make the creation of your hazelnut farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your hazelnut 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional hazelnut 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 hazelnut farm's financial forecast?
Creating an accurate and error-free hazelnut 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 hazelnut 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 hazelnut 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 hazelnut 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 turnover forecast for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a hazelnut farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
