How to create a financial forecast for a plum and sloe 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 plum and sloe farm.
Putting together a plum and sloe 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 plum and sloe 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 plum and sloe farm?
The financial projections for your plum and sloe 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 plum and sloe 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 plum and sloe 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 plum and sloe 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 plum and sloe 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 plum and sloe 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 plum and sloe farm's financial forecast.
The sales forecast for a plum and sloe farm
From experience, it usually makes sense to start your plum and sloe farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your plum and sloe 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 plum and sloe 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: The weather can greatly impact the harvest of plum and sloe fruits. A warm and sunny summer can lead to a larger yield, increasing the supply and potentially lowering the average price. On the other hand, a cold and wet summer may result in a lower supply and higher prices.
- Pest and Disease Outbreaks: Plum and sloe farms are susceptible to various pests and diseases, such as plum curculio and brown rot. If there is a widespread outbreak in the area, it can significantly reduce the harvest and drive up the prices.
- Competition: The number of other plum and sloe farms in the area can also impact your average price and number of transactions. If there is high competition, you may need to adjust your prices to stay competitive, which could affect your profits. Additionally, a larger number of farms could lead to oversupply and lower prices.
- Consumer Demand: The demand for plum and sloe products can also fluctuate based on consumer preferences and trends. For example, if there is a growing interest in natural and organic products, you may see an increase in demand for your farm's products, leading to higher prices and more transactions.
- Export Opportunities: If your farm has the potential to export its products, this can greatly impact your sales forecast. For instance, if there is a high demand for plum and sloe products in other countries, you may be able to sell at a higher price and increase your number of monthly transactions.
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 plum and sloe farm
The next step is to estimate the expenses needed to run your plum and sloe 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 plum and sloe farm's operating expenses should include the following items at a minimum:
- Labor costs: This includes wages for farm workers, as well as any salaries for administrative or management staff.
- Seed and plant expenses: This covers the cost of purchasing plum and sloe seeds or young plants to grow on the farm.
- Fertilizer and pesticide costs: Plum and sloe trees require regular fertilization and pest control to ensure healthy growth.
- Equipment maintenance: This includes the cost of routine maintenance and repairs for farm equipment such as tractors and harvesters.
- Water and irrigation expenses: Plum and sloe trees need regular watering, and irrigation systems may need to be installed and maintained.
- Electricity costs: This covers the cost of powering any farm buildings, equipment, or irrigation systems.
- Transportation expenses: This includes the cost of transporting harvested plums and sloes to market, as well as any delivery costs for supplies.
- Packaging materials: This covers the cost of containers and packaging for selling fresh plums and sloes or processing them into preserves or juices.
- Marketing and advertising: You may need to spend money on marketing and advertising to promote your plum and sloe products to potential customers.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and other financial tasks.
- Insurance costs: It's important to have insurance coverage for your farm and its assets, including buildings, equipment, and crops.
- Software licenses: You may need to purchase licenses for software programs to help with record keeping, inventory management, or other farm tasks.
- Banking fees: This includes any fees associated with maintaining a business bank account and processing transactions.
- Legal fees: You may need to consult with a lawyer for legal advice or assistance with contracts, permits, or other legal matters.
- Training and education: As a farmer, it's important to stay up-to-date on best practices and new techniques, so you may need to invest in training and education programs.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small plum and sloe farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a plum and sloe farm?
Creating and expanding a plum and sloe farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a plum and sloe farm could include elements such as:
- Plum and Sloe Trees: This is the most important capital expenditure for a plum and sloe farm. You will need to purchase a significant number of trees to start your farm and continue to replace them as they age. Make sure to budget for the cost of the trees, as well as any necessary tools and equipment for planting and maintaining them.
- Irrigation System: Plum and sloe trees require a consistent water supply in order to thrive. Investing in a reliable irrigation system is crucial for the success of your farm. This may include pipes, sprinklers, and pumps.
- Harvesting Equipment: As your plum and sloe trees mature, you will need to purchase equipment to efficiently harvest the fruit. This may include specialized picking tools and containers, as well as larger equipment such as tractors or harvesters.
- Storage Facilities: Once your plums and sloes are harvested, you will need a place to store them before they are sold or processed. This may include refrigerated storage units or drying facilities, depending on the type of product you plan to produce.
- Processing Equipment: If you plan to produce value-added products such as jam or liqueur, you will need to invest in processing equipment. This may include crushers, presses, and distillation equipment.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your plum and sloe 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 plum and sloe farm
The next step in the creation of your financial forecast for your plum and sloe 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 plum and sloe farm?
Now let's have a look at the main output tables of your plum and sloe farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your plum and sloe farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a plum and sloe 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 plum and sloe 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 plum and sloe 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 projected cash flow statement
A projected cash flow statement for a plum and sloe 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 plum and sloe 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 plum and sloe 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 plum and sloe farm's financial forecast?
Creating your plum and sloe 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 plum and sloe 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 plum and sloe 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 plum and sloe farm's financial forecast?
Creating an accurate and error-free plum and sloe 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 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 plum and sloe farm, 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 plum and sloe farm
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your plum and sloe 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 plum and sloe 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 sales forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
