How to create a financial forecast for a jam manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your jam manufacturing business.
Putting together a jam manufacturing business 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 jam manufacturing business.
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 jam manufacturing business?
The financial projections for your jam 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 jam 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 jam manufacturing business financial forecast?
A jam manufacturing business'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 jam manufacturing business.
If you are creating (or updating) the forecast of an existing jam manufacturing business, 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 jam manufacturing business 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 jam manufacturing business 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 jam manufacturing business's financial forecast.
The sales forecast for a jam manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your jam 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 jam manufacturers), and consider the elements below:
- Seasonal Demand: With the summer months being peak jam consumption season, you can expect a decrease in average price due to the high demand. On the other hand, during the colder months, the average price may increase as fewer people are buying jam.
- Competitor Pricing: Keep an eye on your competitors' pricing strategies. If they lower their prices, you may need to adjust yours to remain competitive. This could potentially lead to a decrease in your average price.
- Special Events: Special events such as county fairs or food festivals can drive an increase in the number of transactions. Consider attending and selling your jam at these events to take advantage of the increased demand.
- Supply Chain Costs: Fluctuations in the cost of ingredients or packaging materials can impact your average price. If these costs increase, you may need to raise your prices to maintain profitability.
- Consumer Trends: Keep an eye on changing consumer preferences and trends in the food industry. For example, if there is a growing demand for organic or locally sourced products, you may need to adjust your prices to reflect the higher cost of producing these types of jams.
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 jam manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your jam 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 jam manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, benefits, and bonuses for all employees working in your jam manufacturing business. Don't forget to also factor in any payroll taxes and contributions.
- Raw Materials: This expense covers the cost of purchasing fruits, sugar, and other ingredients needed to make your jams.
- Packaging Materials: You will need to purchase jars, lids, labels, and other packaging materials to store and sell your jams.
- Utilities: This includes electricity, water, and gas bills for your manufacturing facility.
- Rent: If you don't own your manufacturing facility, you will need to pay rent for the space you use.
- Equipment Maintenance: Regular maintenance and repairs for your jam-making equipment will ensure smooth operations.
- Transportation Costs: This expense covers the cost of transporting raw materials to your manufacturing facility and shipping finished products to customers.
- Accountancy Fees: You will need to hire an accountant to help you with financial record-keeping and tax preparation.
- Insurance Costs: This includes general liability insurance, product liability insurance, and property insurance for your manufacturing facility.
- Software Licences: You may need to purchase software licenses for accounting, inventory management, and other business operations.
- Marketing and Advertising: Promoting your jams through various channels such as social media, print ads, and events will incur costs.
- Banking Fees: This includes fees for bank accounts, credit card processing, and wire transfers.
- Professional Services: You may need to hire lawyers, consultants, or other professionals for legal or business advice.
- Office Supplies: This expense covers the cost of purchasing office supplies such as paper, pens, and printer ink.
- Training and Development: Investing in training and development for your employees will improve their skills and productivity.
This list will need to be tailored to the specificities of your jam manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a jam manufacturing business?
Creating and expanding a jam manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a jam manufacturing business could include elements such as:
- Manufacturing Equipment: This includes items such as mixers, blenders, and cookers that are essential for making jam. These are considered fixed assets as they are used repeatedly in the production process and have a long lifespan.
- Packaging Machinery: In order to package your jam efficiently and attractively, you will need to invest in equipment such as filling machines, labeling machines, and sealing machines. These are essential for ensuring your product is marketable and can be sold at a higher price.
- Storage Facilities: As a jam manufacturing business, you will need to store large amounts of fruits, sugar, and other ingredients. This will require investing in a warehouse or storage facility, along with refrigerated units to keep your ingredients fresh.
- Delivery Vehicles: In order to transport your finished products to retailers and distributors, you will need to invest in delivery vehicles such as vans or trucks. These vehicles will be used exclusively for your business and are considered fixed assets.
- Land and Building: If you plan on establishing your own production facility, you will need to purchase or lease land and build a factory. This can be a significant capital expenditure but will provide a long-term asset for your business.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your jam 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 jam manufacturing business
The next step in the creation of your financial forecast for your jam 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 jam manufacturing business?
Now let's have a look at the main output tables of your jam manufacturing business's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your jam manufacturing business is likely to be in the years to come.
For your jam 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 jam manufacturers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your jam manufacturing business's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your jam manufacturing business. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 jam 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 jam 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 jam 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 jam 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 jam manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your jam manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your jam manufacturing business's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection 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 jam 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 jam manufacturing business's financial forecast?
Creating an accurate and error-free jam 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
- 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 jam manufacturing business 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 jam manufacturing business, 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?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a jam manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
