How to create a financial forecast for a laying hen farm?
Creating a financial forecast for your laying hen 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 laying hen 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 laying hen farm?
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 laying hen farm becomes handy.
Creating a laying hen farm 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 laying hen farm.
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 laying hen farm 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 laying hen farm'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 laying hen farm financial forecast?
A laying hen 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 laying hen farm.
If you are creating (or updating) the forecast of an existing laying hen 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 laying hen 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 laying hen 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 laying hen farm's financial forecast.
The sales forecast for a laying hen farm
The sales forecast, also called topline projection, is normally where you will start when building your laying hen farm 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 laying hen farms), and consider the elements below:
- The average price of eggs may be affected by the cost of feed. As a laying hen farm owner, you should closely monitor the price of feed and make adjustments to your prices accordingly. Higher feed costs could lead to an increase in your average price per dozen eggs, while lower feed costs could allow you to offer lower prices and potentially increase your sales.
- The number of monthly transactions may be impacted by the health and productivity of your hens. If a disease outbreak occurs, your hens may produce fewer eggs and therefore, you may experience a decrease in sales. On the other hand, if your hens are well-cared for and healthy, they are likely to produce more eggs and lead to an increase in sales.
- The seasonal demand for eggs may also affect your average price and number of transactions. For example, during the holiday season, there may be a higher demand for eggs for baking and cooking, which could lead to an increase in your average price and sales. On the other hand, during the summer months, when people tend to travel and entertain more, there may be a decrease in demand and subsequently, a decrease in your average price and sales.
- The overall economic climate can also impact your sales forecast. During times of economic downturn, consumers may be more price-conscious and opt for cheaper eggs, leading to a decrease in your average price and sales. Conversely, during times of economic growth, consumers may be more willing to pay a premium for higher quality eggs, resulting in an increase in your average price and sales.
- The competition in your local market can also affect your average price and transactions. If there are other laying hen farms in your area offering similar products at lower prices, you may need to adjust your prices in order to remain competitive. On the other hand, if you are the only laying hen farm in your area, you may have more control over your prices and potentially be able to charge a premium.
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 laying hen farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your laying hen farm 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 laying hen farm will include some of the following items:
- Feed Costs: This includes the cost of purchasing feed for your laying hens. This can include both commercial feed and home-grown feed.
- Labor Costs: You will need to pay your farm workers to care for your laying hens, collect eggs, and maintain the farm.
- Bedding Costs: Your laying hens will need clean and comfortable bedding, which can include materials such as straw, wood shavings, or sawdust.
- Veterinary Expenses: Keeping your laying hens healthy is important for their productivity. This can include costs for vaccinations, medications, and regular check-ups.
- Utility Costs: You will need to pay for electricity, water, and heating to keep your laying hens comfortable and maintain the farm.
- Transportation Costs: If you are selling your eggs to local markets or delivering them to customers, you will need to account for transportation costs.
- Packaging and Labeling Costs: If you are packaging and labeling your eggs for retail sale, you will need to budget for materials and printing costs.
- Marketing Costs: You may need to spend money on advertising or promotional materials to attract customers to your farm or products.
- Accountancy Fees: You may choose to hire an accountant to help you manage your farm's finances and taxes.
- Insurance Costs: It's important to have insurance to protect your farm and assets in case of accidents, natural disasters, or other unforeseen events.
- Software Licenses: If you are using any software programs to help manage your farm, such as accounting software or farm management software, you will need to pay for licenses.
- Banking Fees: You may have to pay fees for services such as wire transfers, ATM withdrawals, or check processing.
- Maintenance and Repairs: Regular maintenance and repairs of equipment, buildings, and infrastructure on your farm will be necessary to keep your laying hens safe and productive.
- Pest Control: It's important to keep pests and predators away from your laying hens. This may involve purchasing traps, fencing, or hiring professional pest control services.
- Training and Education: As a farm owner, it's important to stay up to date on industry best practices and regulations. This may involve attending workshops, conferences, or online courses.
This list will need to be tailored to the specificities of your laying hen farm, but should offer a good starting point for your budget.
What investments are needed to start or grow a laying hen farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your laying hen farm, it is time to look into the equipment required to launch or expand the activity.
For a laying hen farm, capital expenditures and initial working capital items could include:
- Henhouses: These are the primary housing structures for your laying hens. They should be well-ventilated, insulated, and have enough space for the hens to move around comfortably. You may also need to invest in nest boxes, roosting poles, and a secure fencing system to keep predators out.
- Feed and Water Systems: Proper nutrition and hydration are essential for the health and productivity of your hens. You may need to purchase feeders, waterers, and a feed storage system to ensure a steady supply of feed and water for your flock.
- Egg Collection and Processing Equipment: As your hens start laying eggs, you will need equipment to collect, clean, and package them. This can include egg baskets, egg washers, and egg cartons. If you plan on selling your eggs, you may also need to invest in egg grading and labeling equipment.
- Incubators and Brooders: If you plan on hatching your own chicks, you will need to invest in incubators and brooders to provide the necessary heat and humidity for the eggs to hatch and the chicks to grow. This can be a significant investment, so it's important to carefully consider your production goals and budget before purchasing these items.
- Egg Storage and Refrigeration: If you plan on storing your eggs before selling them, you may need to invest in refrigeration equipment to ensure they remain fresh until they are sold. This can include walk-in coolers, refrigerated trucks, or smaller refrigerators for smaller operations.
Again, this list will need to be adjusted according to the specificities of your laying hen 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 laying hen farm
The next step in the creation of your financial forecast for your laying hen 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 laying hen farm?
Now let's have a look at the main output tables of your laying hen farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your laying hen farm is likely to be in the years to come.
For your laying hen 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 laying hen farms, 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 laying hen farm'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 laying hen farm. 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 laying hen 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 laying hen 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 laying hen 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 laying hen 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 laying hen farm's financial forecast?
Using the right tool or solution will make the creation of your laying hen farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your laying hen farm'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 laying hen 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 laying hen farm's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free laying hen farm financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your laying hen farm's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 laying hen 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 laying hen 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 laying hen 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 project revenues for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a laying hen farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
