How to create a financial forecast for a poultry 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 poultry farm.
Putting together a poultry 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 poultry 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 poultry farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your poultry farm and ensure that it can be financially viable in the years to come.
A financial plan for a poultry 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 poultry 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 poultry 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 poultry 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 poultry 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 poultry 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 poultry 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 poultry farm's financial forecast.
The sales forecast for a poultry farm
The sales forecast, also called topline projection, is normally where you will start when building your poultry 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 poultry farms), and consider the elements below:
- Seasonal demand: As a poultry farm owner, you know that demand for poultry products can vary greatly depending on the time of year. For example, during the holiday season, demand for turkeys and other poultry products tends to increase, which can drive up your average price and number of monthly transactions.
- Weather conditions: Weather can also have a significant impact on your sales forecast. Extreme weather events such as heatwaves or severe storms can affect the growth and health of your birds, leading to potential shortages and higher prices. On the other hand, mild and favorable weather conditions can result in higher production and lower prices.
- Disease outbreaks: Disease outbreaks within your flock can have a significant impact on your business's average price and number of transactions. If your birds become ill, you may need to cull them, resulting in a decrease in supply and potentially higher prices. Additionally, if a disease outbreak occurs in your area, consumer demand for poultry products may decrease, leading to lower prices and fewer transactions.
- Competition: The presence of competitors in your market can also affect your sales forecast. If there are other poultry farms in your area, you may need to adjust your prices or marketing strategies to remain competitive. Alternatively, if you are the only poultry farm in the area, you may have more control over your prices and can potentially increase your average price.
- Government regulations: Changes in government regulations related to poultry farming can also impact your business. For example, if new regulations require you to make costly upgrades to your facilities or change your production methods, this could lead to higher prices for your products. On the other hand, government subsidies or incentives for sustainable and ethical farming practices may help lower your costs and increase your profits.
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 poultry farm
The next step is to estimate the expenses needed to run your poultry 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 poultry farm's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, wages, and benefits for farm workers, as well as any seasonal or temporary labor that may be needed for tasks such as harvesting eggs or cleaning poultry houses.
- Feed: The majority of your operating expenses will likely be allocated towards purchasing feed for your poultry. This includes both starter and grower feed for chicks and feed for adult birds.
- Veterinary Services: Keeping your birds healthy is crucial for a successful poultry farm. You may need to budget for routine check-ups, vaccinations, and any necessary medications.
- Utilities: Running a poultry farm requires a significant amount of electricity, water, and gas. These costs can add up quickly, so it's important to include them in your operating expenses forecast.
- Equipment Maintenance: Poultry houses and equipment such as feeders and waterers will require regular maintenance to keep them in good working condition.
- Bedding: Providing clean and comfortable bedding for your birds is essential. This could include materials such as straw, wood shavings, or sand, depending on the type of poultry you are raising.
- Packaging and Shipping: If you plan on selling your poultry products, you will need to budget for packaging materials and shipping costs.
- Marketing and Advertising: Getting the word out about your poultry farm and products may require some investment in marketing and advertising efforts.
- Accountancy Fees: As a business owner, you may need to hire an accountant to help you manage your finances and file taxes. This can be especially important for keeping track of expenses and profits in a poultry farm.
- Insurance Costs: Protecting your farm and assets with insurance is crucial. You may need to budget for insurance coverage for your poultry, buildings, and equipment.
- Software Licenses: Depending on the size and complexity of your poultry farm, you may need to invest in software for tasks such as record-keeping, inventory management, and financial tracking.
- Transportation: If you need to transport your poultry or equipment, you may have to factor in costs such as fuel and vehicle maintenance.
- Banking Fees: As a business owner, you may incur fees for services such as bank account maintenance, wire transfers, and credit card processing.
- Rent/Lease: If you are not the owner of the land and buildings for your poultry farm, you will need to budget for rent or lease payments.
- Legal Fees: In case of any legal issues or contracts, you may need to hire a lawyer, which can add to your operating expenses.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small poultry farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a poultry farm?
Creating and expanding a poultry farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a poultry farm could include elements such as:
- Land and Buildings: This includes the cost of purchasing or leasing the land for your poultry farm, as well as any buildings that need to be constructed or renovated for housing the chickens.
- Equipment and Machinery: Poultry farms require a variety of equipment and machinery for breeding, feeding, and processing the chickens. This can include items such as incubators, feeders, waterers, and processing equipment.
- Vehicles: Depending on the size and location of your poultry farm, you may need to purchase vehicles for transportation of supplies, equipment, and chickens. This can include trucks, trailers, and tractors.
- Infrastructure: Poultry farms need proper infrastructure to function efficiently, such as electricity, water supply, and waste management systems. These may require initial investment for installation or ongoing expenses for maintenance.
- Livestock: The cost of purchasing the initial flock of chickens for your farm is also considered a capital expenditure. This can include the cost of chicks, pullets, or mature chickens depending on your business model.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your poultry 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 poultry farm
The next step in the creation of your financial forecast for your poultry 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 poultry farm?
Now let's have a look at the main output tables of your poultry farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your poultry farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a poultry 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
Your poultry farm'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 cash flow forecast
Your poultry 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 poultry 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 poultry 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 poultry 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 poultry farm's financial forecast?
Creating your poultry 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 poultry 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 poultry 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 poultry farm's financial forecast?
Creating an accurate and error-free poultry farm financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 poultry 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 projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your poultry farm.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a poultry farm. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to create a sales forecast for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start a poultry farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
