How to create a financial forecast for a peach and nectarine farm?
Creating a financial forecast for your peach and nectarine 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 peach and nectarine 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 peach and nectarine farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your peach and nectarine farm and ensure that it can be financially viable in the years to come.
A financial plan for a peach and nectarine 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 peach and nectarine 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 peach and nectarine 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 used as input to build a peach and nectarine farm financial forecast?
A peach and nectarine farm'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 peach and nectarine farm, 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 peach and nectarine farm 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 peach and nectarine farm 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 peach and nectarine farm's financial forecast.
The sales forecast for a peach and nectarine farm
The sales forecast, also called topline projection, is normally where you will start when building your peach and nectarine 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 peach and nectarine farms), and consider the elements below:
- Weather conditions: The weather plays a crucial role in the production and quality of peaches and nectarines. A warmer and drier growing season can result in a larger and sweeter harvest, leading to higher prices and increased demand for your fruits.
- Availability of labor: Finding enough skilled labor to harvest and maintain your peach and nectarine orchards can be a challenge. If there is a shortage of workers during peak season, it could impact the quantity and quality of your produce, affecting your average price and number of transactions.
- Pest and disease outbreaks: Peach and nectarine trees are susceptible to various pests and diseases, such as peach scab and brown rot. A severe outbreak can damage your crops and reduce your supply, resulting in higher prices and fewer transactions.
- Competition: As a peach and nectarine farmer, you are not the only one in the market. The presence of other local farms or imports can affect the demand for your fruits and ultimately impact your average price and number of transactions. Keep an eye on your competitors and their pricing strategies.
- Consumer trends: The demand for peaches and nectarines may fluctuate depending on current consumer trends. For example, if there is a growing interest in organic and locally sourced produce, you may be able to charge a premium price for your fruits, leading to higher average prices and increased transactions.
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 peach and nectarine farm
The next step is to estimate the costs you’ll have to incur to operate your peach and nectarine farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your peach and nectarine farm's operating expenses should normally include the following items:
- Labor Costs: This includes wages and benefits for farm workers, managers, and other staff members. Labor costs can vary depending on the size of your farm and the number of employees.
- Crop Inputs: These are the materials and supplies needed to grow and maintain your peach and nectarine crops, such as fertilizers, pesticides, and irrigation equipment.
- Fuel and Energy: Running a farm requires a lot of fuel and energy, whether it's for operating machinery or powering irrigation systems.
- Equipment Maintenance: Regular maintenance and repairs to farm equipment are necessary to keep your farm running smoothly and efficiently.
- Packaging and Shipping: Once your peaches and nectarines are ready to be sold, you'll need to invest in packaging materials and cover the costs of shipping them to market.
- Market Fees: When selling your produce at farmers markets or through other channels, there may be fees or commissions that you need to pay.
- Storage and Refrigeration: If you plan on storing your peaches and nectarines before selling them, you'll need to budget for the costs of storage and refrigeration.
- Insurance: As with any business, it's important to have insurance coverage to protect your farm from potential risks and liabilities.
- Accounting and Bookkeeping: Keeping track of your farm's financials and taxes requires the help of an accountant or bookkeeper.
- Legal and Permit Fees: Depending on your location, you may need to obtain permits or licenses for your farm, which may come with associated fees.
- Software Licenses: Investing in software that can help with farm management, recordkeeping, and marketing can be a valuable expense for your peach and nectarine farm.
- Banking Fees: Maintaining a business bank account and processing transactions can come with fees that need to be factored into your budget.
- Marketing and Advertising: To attract customers and promote your peach and nectarine farm, you may need to allocate funds for marketing and advertising efforts.
- Training and Education: As a farm owner, it's important to stay updated on industry trends and best practices, which may require investing in training and education programs.
- Property Taxes: Owning land for your peach and nectarine farm means you'll also have to pay property taxes on that land.
This list is not exhaustive by any means, and will need to be tailored to your peach and nectarine farm's specific circumstances.
What investments are needed to start or grow a peach and nectarine farm?
Your peach and nectarine farm financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a peach and nectarine farm, these could include:
- Land and Buildings: This includes the purchase or lease of land for your peach and nectarine farm, as well as any buildings or structures that are necessary for the operation of your farm such as a packing shed, storage facility, or office space.
- Equipment and Machinery: As a peach and nectarine farmer, you will need specialized equipment and machinery for tasks such as planting, harvesting, and pruning. This may include items such as tractors, sprayers, and pruning shears.
- Irrigation System: Peach and nectarine trees require consistent watering to produce high-quality fruit. Installing an irrigation system, whether it be drip or sprinkler, is a necessary capital expenditure for your farm.
- Vehicles: You will likely need a vehicle to transport your fruit to market or to deliver supplies to your farm. This could include a truck, van, or other type of vehicle that can handle the weight and size of your produce.
- Greenhouse: Depending on your location and climate, you may need to invest in a greenhouse to protect your peach and nectarine trees from harsh weather conditions. This is especially important for young trees that are still establishing their root systems.
Again, this list will need to be adjusted according to the size and ambitions of your peach and nectarine 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 peach and nectarine farm
The next step in the creation of your financial forecast for your peach and nectarine 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 peach and nectarine farm?
Now let's have a look at the main output tables of your peach and nectarine 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 peach and nectarine 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 peach and nectarine farm will look different than for a startup.
The projected balance sheet
Your peach and nectarine farm'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 forecast
Your peach and nectarine 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 peach and nectarine 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 peach and nectarine 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 peach and nectarine 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 peach and nectarine farm's financial projections?
Building a peach and nectarine farm 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 peach and nectarine 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 peach and nectarine 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 peach and nectarine farm's financial forecast?
Creating an accurate and error-free peach and nectarine 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 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
- 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 peach and nectarine 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 peach and nectarine 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?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
