How to create a financial forecast for a microbrewery?
Creating a financial forecast for your microbrewery, 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 microbrewery 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 microbrewery?
The financial projections for your microbrewery 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 microbrewery'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 microbrewery financial forecast?
A microbrewery'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 microbrewery.
If you are creating (or updating) the forecast of an existing microbrewery, 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 microbrewery 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 microbrewery 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 microbrewery's financial forecast.
The sales forecast for a microbrewery
From experience, it usually makes sense to start your microbrewery's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your microbrewery (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your microbrewery's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Seasonal Demand: As a microbrewery, the demand for your beer may vary depending on the season. For example, during the summer months, customers may be more inclined to purchase lighter, refreshing beers while during the winter, they may prefer darker, richer options.
- New Product Releases: Introducing new and unique beer flavors can drive up the average price of your products as customers are willing to pay more for something they haven't tried before. This can also lead to an increase in monthly transactions as customers are excited to try your new offerings.
- Local Events and Festivals: Attending local beer festivals and events can attract new customers and increase brand awareness, resulting in a higher average price and more monthly transactions. These events can also provide an opportunity to collaborate with other breweries and create limited edition beers, further driving up demand.
- Economic Factors: Changes in the economy, such as a recession or economic boom, can affect the average price and number of monthly transactions for your microbrewery. During a recession, customers may be more price-sensitive and opt for cheaper options, while during a boom, they may be more willing to splurge on craft beers.
- Local Regulations and Taxes: Changes in local regulations and taxes can impact the cost of production for your microbrewery, which can then affect the average price of your products. For example, if taxes on alcohol increase, you may need to increase the price of your beer to maintain profitability.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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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 microbrewery
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your microbrewery 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 microbrewery will include some of the following items:
- Staff Costs: Includes salaries, wages, and benefits for brewery employees such as brewers, bartenders, and servers.
- Accountancy Fees: Cost of hiring an accountant to manage financial records and taxes for the brewery.
- Insurance Costs: Covers liability, property, and worker's compensation insurance to protect the brewery from potential risks and lawsuits.
- Software Licences: Fees for software used in the brewery's operations, such as point-of-sale systems, accounting software, and inventory management tools.
- Banking Fees: Includes charges for bank accounts, credit card processing, and other financial services used by the brewery.
- Raw Materials: Cost of ingredients such as hops, malt, and yeast used in the brewing process.
- Packaging Materials: Expenses for bottles, cans, labels, and other packaging materials used to package the brewery's products.
- Utilities: Includes electricity, water, and gas used in the brewery's operations.
- Rent/Mortgage: Cost of leasing or owning the brewery's property or building.
- Marketing and Advertising: Expenses for promoting the brewery's products through advertising, events, and social media.
- Repairs and Maintenance: Includes costs for repairing and maintaining equipment, facilities, and vehicles used in the brewery's operations.
- Taxes and Licences: Includes sales tax, excise tax, and any other licences or permits required to operate the brewery.
- Professional Services: Fees for legal, consulting, and other professional services used by the brewery.
- Training and Development: Expenses for training and developing brewery staff, including certifications and workshops.
- Contingency Fund: Set aside money for unexpected expenses or emergencies that may arise in the brewery's operations.
This list will need to be tailored to the specificities of your microbrewery, but should offer a good starting point for your budget.
What investments are needed to start or grow a microbrewery?
Creating and expanding a microbrewery also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a microbrewery could include elements such as:
- Brewing Equipment: This includes all the necessary equipment needed for the brewing process such as fermenters, mash tuns, and kegs. These are essential fixed assets for a microbrewery as they are needed to produce the beer.
- Tasting Room Furnishings: Your tasting room is an important part of your microbrewery as it is where customers will come to enjoy your beer. This may include tables, chairs, bar stools, and other furniture to create a comfortable and inviting atmosphere for your customers.
- Packaging Equipment: In order to distribute your beer, you will need packaging equipment such as bottling or canning machines. These are necessary for bottling and labeling your beer for sale to customers.
- Refrigeration Units: Beer needs to be stored at a specific temperature in order to maintain its quality. Therefore, investing in refrigeration units specifically designed for storing beer is essential for a microbrewery.
- Delivery Vehicles: If you plan on distributing your beer to local bars and restaurants, you will need a reliable delivery vehicle. This will not only help with transportation but also serve as a marketing tool for your brand.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your microbrewery.
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 microbrewery
The next step in the creation of your financial forecast for your microbrewery 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 microbrewery?
Now let's have a look at the main output tables of your microbrewery's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your microbrewery's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a microbrewery 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 microbrewery'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 microbrewery 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 microbrewery'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 microbrewery 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 microbrewery'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 microbrewery's financial projections?
Building a microbrewery financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your microbrewery'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
Outsourcing the creation of your microbrewery financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your microbrewery'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 microbrewery 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 microbrewery'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 microbrewery, 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.
We have a dedicated microbrewery business plan template.
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 microbrewery 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 microbrewery, 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
- Business plan for a microbrewery
- Example of financial forecast
- How to start a microbrewery?
- How to create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a microbrewery? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
