How to create a financial forecast for a malt 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 malt manufacturing business.
Putting together a malt 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 malt 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 malt manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your malt manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a malt manufacturing business enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date malt manufacturing business forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your malt manufacturing business's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 malt manufacturing business financial forecast?
A malt manufacturing business'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 malt manufacturing business, 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 malt manufacturing business 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 malt manufacturing business 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 malt manufacturing business's financial forecast.
The sales forecast for a malt manufacturing business
From experience, it is usually best to start creating your malt manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your malt manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing malt manufacturing business, 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:
- Fluctuations in the price of barley and hops, two key ingredients in malt production, can affect your average price and profitability. If the price of these ingredients increases, you may need to pass on the additional cost to your customers, resulting in a higher average price for your malt.
- The demand for organic and locally-sourced malt may also impact your average price. If there is a growing trend towards these types of products, you may be able to charge a premium for your malt, resulting in a higher average price.
- The overall health of the beer industry can also affect your average price and number of monthly transactions. If there is a decline in the demand for beer, breweries may be less likely to purchase your malt, resulting in a decrease in your number of transactions and potentially lower prices.
- The availability and quality of your malt may also impact your average price. If you are able to consistently produce high-quality malt, breweries may be willing to pay a higher price for your product, resulting in a higher average price.
- New regulations or laws related to the production or sale of alcohol can also affect your average price and number of transactions. Changes in taxes or labeling requirements can increase your costs and potentially lead to higher prices for your malt, while restrictions on alcohol sales may decrease the demand for 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.
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 malt manufacturing business
The next step is to estimate the costs you’ll have to incur to operate your malt manufacturing business.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your malt manufacturing business's operating expenses should normally include the following items:
- Raw materials: This includes the cost of purchasing grains, such as barley and wheat, which are the main ingredients used in malt production.
- Labor costs: Your employees are a crucial part of your malt manufacturing business. This expense includes salaries, wages, and benefits for all staff members, including production workers, administrative staff, and management.
- Utilities: Running a malt manufacturing facility requires a lot of energy. You will need to budget for electricity, gas, and water bills.
- Rent or mortgage: If you do not own the building where your malt manufacturing business is located, you will need to pay rent. If you own the building, you will have a mortgage payment that needs to be factored into your expenses.
- Equipment maintenance: Your malt production equipment will need regular maintenance to ensure it is running efficiently. This expense includes the cost of repairs, replacement parts, and routine servicing.
- Packaging materials: Malt is typically packaged in bags or containers. You will need to budget for the cost of purchasing these materials.
- Transportation costs: Once your malt is packaged, you will need to transport it to customers. This expense includes the cost of shipping, trucking, or other transportation methods.
- Marketing and advertising: To attract customers and promote your malt products, you will need to invest in marketing and advertising expenses. This can include creating a website, attending trade shows, and running social media campaigns.
- Accounting and bookkeeping fees: It is important to keep accurate financial records for your malt manufacturing business. You may choose to hire an accountant or bookkeeper to help with this, which will incur a cost.
- Insurance: As a business owner, you will need to protect your assets with insurance. This expense includes property insurance, liability insurance, and worker's compensation insurance.
- Software licenses: To keep your business running smoothly, you may need to invest in software for inventory management, accounting, or other business operations. This expense includes the cost of purchasing and renewing software licenses.
- Banking fees: Your business bank account may have fees associated with it, such as monthly service fees or transaction fees. It is important to include these in your operating expenses.
- Taxes and permits: As a business owner, you will need to pay taxes and obtain necessary permits to operate your malt manufacturing business. This expense includes income taxes, property taxes, and any other required permits or licenses.
- Maintenance and repairs: In addition to equipment maintenance, you will also need to budget for general maintenance and repairs for your facility, such as plumbing, electrical, or structural repairs.
- Training and development: To keep your staff up-to-date on industry trends and best practices, you may need to invest in training and development programs. This expense includes the cost of workshops, seminars, and other educational opportunities.
This list is not exhaustive by any means, and will need to be tailored to your malt manufacturing business's specific circumstances.
What investments are needed to start or grow a malt manufacturing business?
Once you have an idea of how much sales you could achieve and what it will cost to run your malt manufacturing business, it is time to look into the equipment required to launch or expand the activity.
For a malt manufacturing business, capital expenditures and initial working capital items could include:
- Malt Mill: This is a key piece of equipment for a malt manufacturing business, as it is used to crush and grind grains to create the malt. Depending on the size and capacity of your business, a malt mill can range from a basic manual mill to a larger, automated mill.
- Malt Roaster: Roasting is an important step in the malt manufacturing process, as it helps to develop the flavor and color of the malt. A malt roaster is a fixed asset that is used to heat and roast the grains to the desired level.
- Malt Kiln: After the grains have been roasted, they need to be dried in a kiln to stop the germination process. A malt kiln is a fixed asset that is used to dry the grains and prepare them for the next step in the manufacturing process.
- Malt Storage Silos: Once the grains have been processed, they need to be stored before being sold or used in the brewing process. Malt storage silos are fixed assets that are used to store large quantities of malt in a controlled environment to maintain its quality.
- Malt Packaging Machine: If you plan on selling your malt to other businesses or consumers, you will need a packaging machine to pack the malt into bags, containers, or other packaging materials. This is a fixed asset that is essential for a malt manufacturing business.
Again, this list will need to be adjusted according to the specificities of your malt 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 malt manufacturing business
The next step in the creation of your financial forecast for your malt 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 malt manufacturing business?
Now let's have a look at the main output tables of your malt manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your malt manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a malt manufacturing business 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 malt manufacturing business'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 projected cash flow statement
A projected cash flow statement for a malt manufacturing business is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your malt manufacturing business's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the malt manufacturing 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 malt manufacturing business's financial forecast?
Creating your malt manufacturing business's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your malt manufacturing business'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.
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 malt 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 malt manufacturing business's financial forecast?
Creating an accurate and error-free malt manufacturing business 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 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 malt manufacturing business.
- 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 malt manufacturing business. 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 create a turnover forecast for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
