How to create a financial forecast for a millet farm?
Creating a financial forecast for your millet 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 millet 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 millet farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your millet farm and ensure that it can be financially viable in the years to come.
A financial plan for a millet 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 millet 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 millet 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 millet 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 millet 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 millet 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 millet 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 millet farm's financial forecast.
The sales forecast for a millet farm
From experience, it usually makes sense to start your millet farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your millet farm (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 millet farm'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:
- Weather conditions: As a millet farm owner, you are aware that weather plays a crucial role in the growth and yield of millet crops. Extreme weather events such as droughts, floods, or hailstorms can significantly affect the supply and demand of millets, resulting in fluctuations in prices and monthly transactions.
- Government policies: Changes in government policies related to agriculture can have a direct impact on your millet farm business. For instance, if the government introduces subsidies for millet farmers, it may lead to an increase in the production and supply of millets, resulting in a decrease in prices and an increase in monthly transactions.
- Demand for alternative crops: In recent years, there has been a growing demand for alternative crops such as quinoa, amaranth, and teff. This shift in consumer preferences can affect the demand and prices of millets, as some people may choose to purchase these alternative crops instead of millets, resulting in a decrease in your monthly transactions.
- International trade: The millet market is not limited to domestic buyers. Changes in international trade policies, currency exchange rates, and demand from other countries can affect the prices and demand for millets. For example, an increase in demand from a foreign market can result in an increase in prices and monthly transactions for your millet farm.
- Pest infestations: Pests such as birds, insects, and rodents can cause significant damage to millet crops, resulting in lower yields and poor quality produce. This can lead to a decrease in supply and an increase in prices, as well as a decrease in monthly transactions as consumers may opt for other crops with better quality.
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.
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 millet farm
The next step is to estimate the expenses needed to run your millet farm on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your millet farm's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, and benefits for all employees working on the millet farm, such as farmhands, supervisors, and administrative staff.
- Seeds and Fertilizers: You will need to purchase high-quality millet seeds and fertilizers to ensure a good yield for your farm.
- Pesticides and Herbicides: These chemicals are necessary to protect your millet crops from pests and weeds, which can significantly reduce your harvest if left unchecked.
- Fuel and Maintenance: Your farming equipment, such as tractors and irrigation systems, will require regular fuel and maintenance to keep them running smoothly.
- Water Usage: You will need to cover the cost of pumping water for irrigation and other farm activities.
- Electricity: This includes the cost of electricity for running farm buildings, lighting, and powering equipment.
- Rent or Mortgage: If you do not own the land where your millet farm is located, you will have to pay rent or a mortgage for its use.
- Transportation: This includes the cost of transporting your millet harvest to the market or storage facilities.
- Marketing and Advertising: To increase sales and attract customers, you may need to invest in marketing and advertising efforts, such as creating a website or attending trade shows.
- Insurance Costs: It is essential to have insurance coverage for your farm to protect against potential losses and liabilities.
- Accountancy Fees: You may need to hire an accountant to help you with bookkeeping, taxes, and financial planning for your millet farm.
- Software Licenses: Depending on the size and complexity of your farm, you may need to invest in software programs to manage farm operations, inventory, and finances.
- Banking Fees: These include fees for maintaining bank accounts, processing transactions, and using credit or debit cards for farm expenses.
- Repairs and Maintenance: Farm equipment and buildings will require occasional repairs and maintenance to keep them in good working condition.
- Taxes and Permits: You may be subject to various taxes and fees, such as property taxes and permits, depending on your location and farm operations.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small millet farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a millet farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your millet farm, it is time to look into the equipment required to launch or expand the activity.
For a millet farm, capital expenditures and initial working capital items could include:
- Tractor: This is a necessary capital expenditure for a millet farm as it is used for plowing, tilling, and planting the crops. You may also need to purchase additional attachments for the tractor, such as a harrow or cultivator, which can also be included in your expenditure forecast.
- Irrigation System: As millet is a drought-resistant crop, it requires regular irrigation for optimal growth. You will need to invest in an irrigation system that is suitable for your farm's size and water source. This may include pipes, pumps, sprinklers, and other equipment.
- Storage Facilities: After harvesting millet, it needs to be properly stored to maintain its quality. This may include purchasing grain bins or building a storage shed. You may also need to invest in a drying system if you live in a humid climate.
- Harvesting Equipment: Depending on the size of your farm, you may need to purchase harvesting equipment such as a combine or a harvester. These machines will help you efficiently harvest the millet, saving you time and labor costs.
- Fencing: Fencing is important for keeping your millet farm secure and protecting it from wildlife or livestock. You may need to invest in different types of fencing, such as barbed wire or electric fencing, depending on your farm's location and needs.
Again, this list will need to be adjusted according to the specificities of your millet 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 millet farm
The next step in the creation of your financial forecast for your millet 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 millet farm?
Now let's have a look at the main output tables of your millet farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your millet farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a millet farm 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
The projected balance sheet gives an overview of your millet 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 millet 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 millet 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 millet 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 millet 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 millet 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 millet farm's financial forecast?
Creating your millet farm's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your millet farm's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional millet farm financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your millet farm's financial forecast?
Creating an accurate and error-free millet 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 millet 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your millet farm.
- 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 millet farm. 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?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
