How to create a financial forecast for a mandarin farm?
Developing and maintaining an up-to-date financial forecast for your mandarin farm is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a mandarin farm financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a mandarin farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your mandarin farm and ensure that it can be financially viable in the years to come.
A financial plan for a mandarin farm 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 mandarin farm 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 mandarin farm'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 needed to build a mandarin farm financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a mandarin farm, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the mandarin farm on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing mandarin farm, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your mandarin farm's financial forecast.
The sales forecast for a mandarin farm
From experience, it is usually best to start creating your mandarin farm financial forecast by your sales forecast.
To create an accurate sales forecast for your mandarin farm, you will have to rely on the data collected in your market research, or if you're running an existing mandarin farm, 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:
- Weather conditions: Weather can have a significant impact on the average price and number of monthly transactions for your mandarin farm. Extreme weather events such as droughts or floods can lead to lower yields and therefore higher prices for your mandarins. On the other hand, if weather conditions are favorable, you may see an increase in production and a decrease in prices.
- Pest infestations: Pests can be a major concern for mandarin farms and can greatly affect your average price and number of monthly transactions. If your farm experiences a pest infestation, it can lead to a decrease in production and an increase in prices as you may have to spend more on pest control measures.
- Competition: The level of competition in the mandarin industry can also impact your average price and number of monthly transactions. If there are many other mandarin farms in your area, it may be harder to sell your produce at a higher price. However, if you are the only mandarin farm in the area, you may be able to charge a premium for your mandarins.
- Demand from export markets: The demand for mandarins in export markets can also have a significant influence on your average price and number of monthly transactions. If there is a high demand for mandarins in certain countries, you may be able to sell your produce at a higher price and increase your monthly transactions.
- Changes in consumer preferences: Consumer preferences can also impact your mandarin farm's sales forecast. For example, if there is a trend towards organic produce, you may see an increase in demand for your organic mandarins, leading to higher prices and more monthly transactions. However, if there is a shift towards other fruits, such as avocados, you may see a decrease in demand for your mandarins.
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 mandarin farm
The next step is to estimate the costs you’ll have to incur to operate your mandarin farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your mandarin farm's operating expenses should normally include the following items:
- Staff costs: This includes salaries, bonuses, benefits, and any other expenses related to your employees. As a mandarin farm owner, you will need to hire workers for tasks such as planting, harvesting, and packaging.
- Accountancy fees: You will need to hire an accountant or bookkeeper to manage your financial records, prepare tax returns, and provide financial advice. These services come at a cost, so make sure to include them in your operating expenses forecast.
- Insurance costs: Protecting your mandarin farm from unexpected events such as natural disasters, crop failures, or accidents is crucial. Consider the cost of insurance for your buildings, equipment, and crops.
- Software licenses: You may need to purchase and renew licenses for software programs that help you manage your farm, such as accounting software, inventory management software, or crop management software.
- Banking fees: As a business owner, you will need to open a business bank account and pay fees for services such as deposits, withdrawals, wire transfers, and check processing.
- Seed and seedlings: In order to grow mandarins, you will need to purchase high-quality seeds or seedlings from a reputable supplier. This is an ongoing cost as you will need to replant each season.
- Fertilizers and pesticides: Keeping your mandarin trees healthy and free from pests is essential for a successful harvest. You will need to budget for fertilizers and pesticides to maintain your crops.
- Water and irrigation costs: Mandarins require regular watering to grow and produce fruit. Consider the cost of water and irrigation equipment, such as sprinklers or drip systems, in your forecast.
- Fuel and equipment maintenance: Running a mandarin farm requires various equipment, such as tractors, harvesters, and trucks. Be sure to account for the cost of fuel and regular maintenance to keep your equipment in good working condition.
- Packaging materials: Once your mandarins are harvested, you will need to package them for transport and sale. This includes the cost of boxes, bags, labels, and other materials.
- Marketing and advertising: In order to sell your mandarins, you will need to promote your farm and products. Consider the cost of marketing and advertising strategies, such as social media ads, flyers, or attending local farmers' markets.
- Utilities: Running a mandarin farm also means paying for utilities such as electricity, gas, and internet. These costs can vary depending on the size and location of your farm.
- Transportation and shipping: If you plan on selling your mandarins to customers or retailers outside of your local area, you will need to factor in the cost of transportation and shipping.
- Rent or mortgage: If you do not own the land where your mandarin farm is located, you will need to pay rent or a mortgage. This is a significant expense to consider in your forecast.
- Taxes and permits: As a business owner, you will need to pay various taxes and obtain permits for your mandarin farm. These costs may include property taxes, sales taxes, and business licenses.
This list is not exhaustive by any means, and will need to be tailored to your mandarin farm's specific circumstances.
What investments are needed to start or grow a mandarin farm?
Creating and expanding a mandarin farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a mandarin farm could include elements such as:
- Land Acquisition: This is one of the major capital expenditures for a mandarin farm. You will need to purchase the land where you plan to grow your mandarins. Make sure to factor in the location, soil quality, and size of the land when determining the cost.
- Irrigation System: Proper irrigation is essential for the growth and health of mandarin trees. You will need to invest in an efficient irrigation system that can supply enough water to all the trees on your farm.
- Greenhouse Construction: Depending on your location, you may need to construct a greenhouse to protect your mandarin trees from extreme weather conditions. This will also help to control pests and diseases, leading to better quality fruits.
- Equipment and Machinery: In order to efficiently manage your mandarin farm, you will need to invest in equipment and machinery such as tractors, sprayers, pruning tools, and harvesters. These will help to reduce labor costs and increase productivity.
- Storage and Packaging Facility: As mandarins are a perishable fruit, you will need to invest in a storage and packaging facility to ensure that your fruits stay fresh and are properly packaged for transportation to markets.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your mandarin 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 mandarin farm
The next step in the creation of your financial forecast for your mandarin 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 mandarin farm?
Now let's have a look at the main output tables of your mandarin farm's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy mandarin farm's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established mandarin farm will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your mandarin 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 mandarin 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 projection
The cash flow forecast of your mandarin 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 mandarin 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 mandarin 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 mandarin 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 mandarin farm's financial forecast?
Using the right tool or solution will make the creation of your mandarin farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your mandarin farm'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 mandarin 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 mandarin farm's financial forecast?
Creating an accurate and error-free mandarin farm 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 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 mandarin 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 mandarin 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 mandarin 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 sales forecast for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a mandarin farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
