How to create a financial forecast for a pig farm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your pig farm.
Putting together a pig farm 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 pig farm.
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 pig farm?
The financial projections for your pig farm 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 pig farm'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 needed to build a pig 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 pig 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 pig 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 pig 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 pig farm's financial forecast.
The sales forecast for a pig farm
From experience, it usually makes sense to start your pig farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your pig 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 pig 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 pig farmer, you are aware that weather can greatly impact the health and growth of your pigs. Extreme temperatures, drought, or heavy rain can affect the availability and quality of food sources, leading to higher feed costs and potential health issues for your pigs. These conditions can also affect the demand for pork products, potentially impacting the average price and number of transactions for your farm.
- Disease outbreaks: Pigs are susceptible to various diseases, such as swine flu and African swine fever. These outbreaks can greatly impact the pig population and market demand for pork products. As a pig farmer, you must constantly monitor and take preventative measures to protect your pigs from potential outbreaks. In the event of an outbreak, your farm may experience a decrease in sales and prices due to decreased demand and potential losses from sick pigs.
- Government regulations: The pig farming industry is heavily regulated, and changes in regulations can greatly impact your business. For example, stricter environmental regulations may require you to invest in new equipment or make changes to your farming practices, resulting in higher costs and potentially impacting your average price. On the other hand, changes in trade agreements or tariffs can also affect the demand for pork products and prices.
- Feed prices: As a pig farmer, feed is one of your biggest expenses. Fluctuations in feed prices, whether due to supply and demand or changes in crop yields, can greatly impact your bottom line. Higher feed costs may result in higher prices for your pork products, potentially leading to a decrease in sales. On the other hand, lower feed costs may allow you to offer competitive pricing and potentially increase your number of transactions.
- Consumer trends: Like any other business, the pig farming industry is also affected by consumer trends and preferences. For example, an increase in demand for organic or free-range pork products may require you to make changes to your farming practices, potentially resulting in higher prices. On the other hand, changes in consumer preferences may also present opportunities for your farm to diversify your products and potentially increase sales.
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 pig farm
The next step is to estimate the expenses needed to run your pig 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 pig farm's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, benefits, and training for all employees working on the pig farm, such as farmhands, veterinarians, and administrative staff.
- Feed and Supplies: This covers the cost of purchasing feed and other supplies necessary for the pigs' health and well-being, such as feeders, waterers, and medications.
- Machinery and Equipment Maintenance: This involves the regular maintenance and repairs of all farm machinery and equipment, such as tractors, plows, and barn equipment.
- Accountancy Fees: You may need to hire an accountant to help you manage your finances, prepare taxes, and provide financial advice for your pig farm.
- Insurance Costs: This includes the cost of insuring your farm, equipment, and pigs against potential risks, such as accidents, natural disasters, and liability claims.
- Software Licenses: You may need to purchase software licenses for programs that assist with record-keeping, inventory management, and other farm operations.
- Utilities: This covers the cost of electricity, water, and other utilities needed to run your farm and keep your pigs comfortable and healthy.
- Marketing and Advertising: You may need to spend money on marketing and advertising to promote your pig farm and attract potential customers.
- Transportation Costs: This includes the cost of fuel, vehicle maintenance, and other expenses related to transporting pigs to and from the farm, as well as delivering products to customers.
- Rent or Mortgage: If you do not own the land where your pig farm is located, you will need to pay rent or a mortgage to the landowner.
- Legal Fees: You may need to seek legal advice or hire a lawyer to help with contracts, agreements, and other legal matters related to your pig farm.
- Pig Purchases: This includes the cost of purchasing new pigs to raise on the farm, as well as any costs associated with breeding and genetics.
- Banking Fees: This includes fees for maintaining bank accounts, credit cards, and other financial transactions related to your pig farm.
- Property Taxes: You may need to pay property taxes on the land where your pig farm is located.
- Training and Education: As a pig farmer, it is important to stay updated on industry trends and best practices, which may require attending workshops or conferences and investing in continuing education.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small pig farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a pig farm?
Your pig 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 pig farm, these could include:
- Pig Barn Construction: This is one of the most significant capital expenditures for a pig farm. Building a suitable barn for your pigs to live in is crucial for their health and well-being. The barn should be well-ventilated, have proper flooring, and enough space for the pigs to move around comfortably. Other features to consider include water and feed systems, heating and cooling systems, and waste management systems.
- Feeding Equipment: Investing in high-quality feeding equipment is essential for a successful pig farm. This includes feeders, waterers, and storage bins. Remember, pigs need a specific diet, and it's essential to invest in equipment that can provide them with the right amount of food and water to ensure their health and growth.
- Livestock Trailer: A livestock trailer is necessary for transporting pigs to and from your farm. It's crucial to invest in a durable and well-maintained trailer to ensure the safety and comfort of your pigs during transportation. Additionally, having your own trailer can save you money in the long run compared to renting one every time you need to transport your pigs.
- Fencing and Gates: Proper fencing and gating are essential for keeping your pigs safe and contained within your farm. This includes sturdy fencing around the perimeter of your farm and individual pens or enclosures for your pigs. Investing in high-quality fencing and gates can also prevent potential losses due to escaped pigs or predators.
- Breeding Stock: If you plan on breeding your pigs, you will need to invest in high-quality breeding stock. This includes purchasing healthy, purebred pigs from reputable breeders. Remember, the quality of your breeding stock will directly impact the quality and health of your future piglets.
Again, this list will need to be adjusted according to the size and ambitions of your pig 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 pig farm
The next step in the creation of your financial forecast for your pig 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 pig farm?
Now let's have a look at the main output tables of your pig farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your pig farm is likely to be in the years to come.
For your pig farm to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established pig farms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your pig 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 projected cash flow statement
A projected cash flow statement for a pig farm 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 pig farm'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 pig farm 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 pig farm's financial forecast?
Creating your pig 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 forecasting software to build your pig 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional pig 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 pig farm's financial forecast?
Creating an accurate and error-free pig 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 pig 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 pig 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 turnover forecast for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a pig farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
