How to create a financial forecast for a herbs and spices wholesaler?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your herbs and spices wholesaler.
Putting together a herbs and spices wholesaler 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 herbs and spices wholesaler.
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 herbs and spices wholesaler?
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 herbs and spices wholesaler becomes handy.
Creating a herbs and spices wholesaler 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 herbs and spices wholesaler.
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 herbs and spices wholesaler 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 herbs and spices wholesaler'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 herbs and spices wholesaler financial forecast?
A herbs and spices wholesaler'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 herbs and spices wholesaler, 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 herbs and spices wholesaler 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 herbs and spices wholesaler 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 herbs and spices wholesaler's financial forecast.
The sales forecast for a herbs and spices wholesaler
The sales forecast, also called topline projection, is normally where you will start when building your herbs and spices wholesaler 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 herbs and spices wholesalers), and consider the elements below:
- Seasonal Demand: As a herbs and spices wholesaler, your sales forecast may be affected by seasonal changes in demand for certain herbs and spices. For example, the demand for pumpkin spice may increase during the fall season, while the demand for cinnamon may increase during the winter holiday season. This may affect your average price and number of monthly transactions as you may need to adjust your pricing and inventory levels accordingly.
- Health Trends: With the rise in popularity of natural and organic products, there may be a growing demand for herbs and spices that are perceived to have health benefits. This may affect your average price as customers may be willing to pay more for these types of products. It may also lead to an increase in monthly transactions as more people are incorporating these ingredients into their diets.
- Imports and Exports: Changes in international trade policies or disruptions in the supply chain may have an impact on the availability and cost of certain herbs and spices. This could affect your average price as you may need to adjust your prices to cover any increased costs. It may also affect your number of monthly transactions as customers may turn to alternative suppliers if your prices become too high.
- Popularity of Ethnic Cuisines: The popularity of different ethnic cuisines can also affect your sales forecast. For example, if there is a growing trend towards Indian or Thai cuisine, there may be an increased demand for herbs and spices commonly used in these dishes. This could lead to an increase in your average price and number of monthly transactions as customers seek out these ingredients for their cooking.
- Weather Conditions: Extreme weather events such as droughts or floods can impact the supply and quality of herbs and spices. This may result in a limited availability of certain products, which could drive up the average price. It may also lead to a decrease in monthly transactions as customers may turn to alternative ingredients or postpone their purchases until the supply stabilizes.
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 herbs and spices wholesaler
The next step is to estimate the costs you’ll have to incur to operate your herbs and spices wholesaler.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your herbs and spices wholesaler's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and any other expenses related to your employees such as training and development.
- Accountancy fees: You may need to hire an accountant to help you with bookkeeping, tax preparation, and other financial tasks.
- Insurance costs: As a wholesaler, you need to protect your business and assets with insurance policies such as general liability, property, and workers' compensation.
- Software licenses: To manage your inventory, sales, and other operations, you may need to purchase software licenses for systems such as inventory management, accounting, and customer relationship management.
- Banking fees: This includes fees for maintaining your business bank account, wire transfers, and credit card processing fees.
- Rent: If you operate from a physical location, you will have to pay rent for your warehouse or office space.
- Utilities: This includes electricity, water, and gas expenses for your business premises.
- Transportation costs: As a wholesaler, you may need to transport goods from suppliers to your warehouse and from your warehouse to customers, which incurs transportation costs.
- Marketing and advertising: To attract new customers and promote your brand, you may need to invest in marketing and advertising efforts such as social media ads, print ads, and trade shows.
- Packaging and shipping materials: These costs include boxes, tape, bubble wrap, and other materials needed to package and ship your products to customers.
- Professional fees: You may need to hire lawyers, consultants, or other professionals for legal, tax, or other business-related advice.
- Office supplies: This includes expenses for stationery, printer ink, and other office supplies needed to run your business.
- Repairs and maintenance: As a wholesaler, you may need to maintain your warehouse, equipment, and vehicles, which incurs costs for repairs and maintenance.
- Travel expenses: If you attend trade shows or visit suppliers or customers, you may incur travel expenses such as airfare, accommodation, and meals.
- Taxes and licenses: As a business owner, you are required to pay taxes and obtain necessary licenses to operate legally.
This list is not exhaustive by any means, and will need to be tailored to your herbs and spices wholesaler's specific circumstances.
What investments are needed to start or grow a herbs and spices wholesaler?
Creating and expanding a herbs and spices wholesaler also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a herbs and spices wholesaler could include elements such as:
- Warehouse Space: As a herbs and spices wholesaler, you will need a dedicated space to store your inventory. This may include renting or purchasing a warehouse, as well as any necessary renovations or improvements to make the space suitable for storing and organizing your products.
- Delivery Vehicles: In order to transport your herbs and spices to your customers, you will need reliable delivery vehicles. This may include purchasing or leasing vans, trucks, or other vehicles that are capable of safely transporting your products to their destination.
- Equipment and Machinery: Depending on the scale of your operations, you may need to invest in specialized equipment and machinery for processing, packaging, labeling, and other tasks related to your herbs and spices. This could include grinders, mixers, scales, and other tools necessary for your business.
- Technology and Software: As a modern wholesaler, you will likely need to invest in technology and software to manage your inventory, sales, and other aspects of your business. This could include purchasing or subscribing to inventory management software, point-of-sale systems, and other tools to help you streamline your operations and stay competitive in the market.
- Furniture and Fixtures: In addition to the necessary equipment and machinery, you may also need to invest in furniture and fixtures for your warehouse, office space, and possibly a showroom or storefront. This could include shelving, desks, chairs, and other items that will help you create a functional and professional workspace for your business.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your herbs and spices wholesaler.
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 herbs and spices wholesaler
The next step in the creation of your financial forecast for your herbs and spices wholesaler 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 herbs and spices wholesaler?
Now let's have a look at the main output tables of your herbs and spices wholesaler's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your herbs and spices wholesaler's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a herbs and spices wholesaler 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 herbs and spices wholesaler'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 projection
The cash flow forecast of your herbs and spices wholesaler 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 herbs and spices wholesaler'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 herbs and spices wholesaler 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 herbs and spices wholesaler'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 herbs and spices wholesaler's financial forecast?
Using the right tool or solution will make the creation of your herbs and spices wholesaler's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your herbs and spices wholesaler'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 herbs and spices wholesaler 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 herbs and spices wholesaler's financial forecast?
Creating an accurate and error-free herbs and spices wholesaler 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 herbs and spices wholesaler.
- 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 herbs and spices wholesaler. 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 project revenues for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
