How to create a financial forecast for a plastic packing goods manufacturer?
Developing and maintaining an up-to-date financial forecast for your plastic packing goods manufacturing business 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 plastic packing goods manufacturing business 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 plastic packing goods manufacturing business?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your plastic packing goods manufacturing business becomes handy.
Creating a plastic packing goods manufacturing business financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your plastic packing goods manufacturing business.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a plastic packing goods manufacturing business is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your plastic packing goods manufacturing business's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
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 plastic packing goods manufacturing business financial forecast?
A plastic packing goods manufacturing business'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 plastic packing goods manufacturing business, 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 plastic packing goods manufacturing business 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 plastic packing goods manufacturing business 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 plastic packing goods manufacturing business's financial forecast.
The sales forecast for a plastic packing goods manufacturing business
From experience, it is usually best to start creating your plastic packing goods manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your plastic packing goods manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing plastic packing goods manufacturing business, 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:
- Seasonal Demand Changes: As a plastic packing goods manufacturer, you may experience fluctuations in demand for your products throughout the year. For example, during the holiday season, there may be an increase in demand for your plastic gift packaging, leading to a higher average price and number of transactions.
- Raw Material Costs: The cost of raw materials, such as plastic resin, can directly impact your average price and number of monthly transactions. If the cost of resin increases, you may need to raise your prices, leading to a decrease in transactions. On the other hand, if the cost of resin decreases, you may be able to offer lower prices and increase your transactions.
- Competition: The presence of competitors in the plastic packing goods market can affect your average price and number of transactions. If there is a new competitor offering similar products at a lower price, you may need to adjust your prices to remain competitive, leading to a decrease in your average price. This could also result in a decrease in transactions as customers may choose to purchase from the lower-priced competitor.
- Economic Conditions: Economic factors, such as inflation and unemployment rates, can also impact your average price and number of transactions. During times of economic downturn, consumers may be more price-sensitive, resulting in a decrease in your average price. This could also lead to a decrease in transactions as customers may choose to hold off on non-essential purchases.
- Government Regulations: Changes in government regulations, such as environmental policies or tariffs on imported materials, can affect your average price and number of transactions. For example, if there are new regulations on the use of plastic packaging, you may need to invest in more expensive materials or alter your production processes, resulting in a higher average price. This could also lead to a decrease in transactions as customers may be deterred by the higher prices.
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.
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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 plastic packing goods manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your plastic packing goods manufacturing business 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 plastic packing goods manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, benefits, and training costs for your employees. As a plastic packing goods manufacturing business, you will need a team of skilled workers to operate machinery, handle packaging materials, and manage inventory.
- Accountancy Fees: You may need to hire an accountant or outsource your accounting needs to ensure accurate financial records and tax compliance. This can include services such as bookkeeping, tax preparation, and financial analysis.
- Insurance Costs: As a manufacturing business, you will need various types of insurance to protect your assets, employees, and products. This may include general liability insurance, workers' compensation insurance, and product liability insurance.
- Software Licenses: To streamline your operations and increase efficiency, you may need to invest in software licenses for inventory management, accounting, and other business processes.
- Banking Fees: As a business owner, you will have to pay fees for services such as business banking, credit card processing, and wire transfers.
- Cost of Raw Materials: As a plastic packing goods manufacturing business, you will need to purchase plastic materials, packaging supplies, and other raw materials to produce your products.
- Utilities: This includes the cost of electricity, water, and gas for your manufacturing facility.
- Rent: If you do not own your manufacturing facility, you will have to pay rent for your space. This can be a significant expense, especially if you are located in a prime industrial area.
- Maintenance and Repairs: You will need to budget for regular maintenance and repairs of your machinery and equipment to ensure smooth operations.
- Marketing and Advertising: To attract customers and promote your products, you may need to invest in marketing and advertising efforts such as trade shows, print ads, and online campaigns.
- Packaging Materials: As a packing goods manufacturing business, you will need to purchase packaging materials such as plastic bags, containers, and labels to package your products.
- Shipping and Freight Costs: If you sell your products to customers or distributors, you will need to budget for shipping and freight costs to deliver your goods.
- Taxes and Licenses: You will need to pay taxes on your business income and obtain necessary licenses to operate your business legally.
- Professional Services: You may need to hire lawyers, consultants, or other professionals to assist with legal, regulatory, or business development matters.
- Office Supplies: You will need to purchase office supplies such as paper, ink, and stationery to keep your business operations running smoothly.
This list will need to be tailored to the specificities of your plastic packing goods manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a plastic packing goods manufacturing business?
Your plastic packing goods manufacturing business 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 plastic packing goods manufacturing business, these could include:
- Machinery and Equipment: This includes items such as plastic extruders, injection molding machines, and packaging equipment that are necessary for the production of plastic packing goods.
- Facility Improvements: This may include renovations or upgrades to the manufacturing facility, such as installing new lighting, HVAC systems, or security systems, to ensure a safe and efficient working environment.
- Raw Materials: As a plastic packing goods manufacturing business, you will need to purchase raw materials such as plastic pellets, dyes, and additives to produce your products. These materials should be included in your expenditure forecast.
- Transportation and Delivery Vehicles: Depending on the size of your business, you may need to invest in transportation and delivery vehicles to transport your finished products to customers or distributors.
- Inventory Management Software: To track and manage your inventory levels, you may need to invest in inventory management software to ensure that you have enough materials on hand to meet customer demand.
Again, this list will need to be adjusted according to the size and ambitions of your plastic packing goods manufacturing business.
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 plastic packing goods manufacturing business
The next step in the creation of your financial forecast for your plastic packing goods manufacturing business 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 plastic packing goods manufacturing business?
Now let's have a look at the main output tables of your plastic packing goods manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your plastic packing goods manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a plastic packing goods manufacturing business 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 plastic packing goods manufacturing business's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 plastic packing goods manufacturing business 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 plastic packing goods manufacturing business'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 plastic packing goods manufacturing 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 plastic packing goods manufacturing business's financial projections?
Building a plastic packing goods manufacturing business 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 plastic packing goods manufacturing business'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 plastic packing goods manufacturing business 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 plastic packing goods manufacturing business'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 plastic packing goods manufacturing business 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 plastic packing goods manufacturing business'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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own plastic packing goods manufacturing business, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your plastic packing goods manufacturing business
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your plastic packing goods manufacturing business.
- 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 plastic packing goods manufacturing business. 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 sales forecast for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
