How to create a financial forecast for a rape oil producer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your rape oil producing company.
Putting together a rape oil producing company 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 rape oil producing company.
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 rape oil producing company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your rape oil producing company and ensure that it can be financially viable in the years to come.
A financial plan for a rape oil producing company 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 rape oil producing company 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 rape oil producing company'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 rape oil producing company financial forecast?
A rape oil producing company's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing rape oil producing company.
If you are creating (or updating) the forecast of an existing rape oil producing company, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new rape oil producing company startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the rape oil producing company to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your rape oil producing company's financial forecast.
The sales forecast for a rape oil producing company
From experience, it usually makes sense to start your rape oil producing company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your rape oil producing company (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 rape oil producing company'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:
- Your company's production capacity may affect the average price of rape oil. If you are able to produce a larger volume of oil, you may be able to negotiate better prices with buyers due to the increased supply.
- The price of alternative oils can also impact your average price. For example, if the price of soybean oil increases, buyers may turn to rape oil as a more affordable alternative, driving up demand and potentially increasing your average price.
- The seasonal availability of rape oil can also affect your average price. If your production is heavily dependent on a particular season, the limited supply may command higher prices during that time.
- Weather conditions can also play a role in your average price. Unfavorable weather such as drought or flooding can affect the quality and yield of your crop, potentially impacting the supply and therefore the price of rape oil.
- The demand for sustainable and eco-friendly products can also drive the average price of rape oil. As consumers become more conscious of their environmental impact, the demand for products like rape oil, which is more sustainable than other oils, may increase, allowing you to charge a higher price.
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 rape oil producing company
The next step is to estimate the costs you’ll have to incur to operate your rape oil producing company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your rape oil producing company's operating expenses should normally include the following items:
- Staff costs: This includes salaries, wages, and benefits for all employees working at your rape oil producing company. This could also include any bonuses or commissions paid to employees.
- Accountancy fees: As a rape oil producing company, you will need to hire an accountant to handle your financial records and taxes. This will incur fees for their services.
- Insurance costs: It is important to have insurance for your rape oil producing company to protect against any potential risks or liabilities. This could include property insurance, liability insurance, and workers' compensation insurance.
- Software licenses: Your company may need to use specialized software for tasks such as inventory management, accounting, or production planning. These software licenses will come at a cost.
- Banking fees: In order to manage your finances, you will need to have a business bank account. This will incur fees for services such as wire transfers, check processing, and ATM fees.
- Raw materials: As a rape oil producing company, your main raw material will be rape seeds. You will need to purchase these seeds from suppliers in order to produce your oil.
- Utilities: Your company will need to pay for utilities such as electricity, water, and gas in order to operate your production facilities.
- Transportation costs: Once your rape oil is produced, you will need to transport it to your customers or distributors. This will incur costs for shipping, trucking, or other means of transportation.
- Packaging materials: Your rape oil will need to be packaged in containers for shipping and distribution. This will incur costs for materials such as bottles, labels, and packaging materials.
- Marketing and advertising: In order to promote your rape oil and attract customers, you will need to allocate funds for marketing and advertising efforts such as social media ads, print ads, and trade shows.
- Rent or lease: If you do not own your production facilities, you will need to pay rent or lease fees for the space you use to produce your rape oil.
- Maintenance and repairs: Your production facilities and equipment will need regular maintenance and repairs to ensure smooth operations. This will incur costs for parts, labor, and service fees.
- Legal fees: As a business, you may encounter legal issues or need legal advice. This will incur fees for services such as hiring a lawyer or legal consultation.
- Training and development: It is important to invest in the training and development of your employees to ensure they have the necessary skills and knowledge to produce high-quality rape oil. This could include workshops, seminars, or online courses.
- Taxes: Your rape oil producing company will be subject to various taxes such as income tax, sales tax, and property tax. These taxes will need to be paid on a regular basis.
This list is not exhaustive by any means, and will need to be tailored to your rape oil producing company's specific circumstances.
What investments are needed to start or grow a rape oil producing company?
Creating and expanding a rape oil producing company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a rape oil producing company could include elements such as:
- Oil Extraction Equipment: This includes machinery and equipment used to extract oil from rape seeds, such as expeller presses, screw presses, and solvent extraction machines. These are essential fixed assets for a rape oil producing company and can be a significant capital expenditure.
- Storage Tanks: As a rape oil producing company, you will need to store large quantities of oil. This requires the purchase of storage tanks, which can be quite expensive depending on the size and material used. These tanks are necessary to store the oil before it is transported to customers or further processed.
- Transportation Vehicles: To deliver the rape oil to customers, you will need transportation vehicles such as trucks or tankers. These are essential fixed assets that can be a significant capital expenditure for a rape oil producing company. The type and number of vehicles needed will depend on the size and location of your company.
- Refining Equipment: If your company plans to refine the rape oil before selling it, you will need to invest in refining equipment. This could include equipment such as degumming tanks, neutralization tanks, and bleaching tanks. The cost of these fixed assets can vary depending on the size and complexity of the refining process.
- Packaging Machinery: In order to package and label the rape oil for sale, you will need packaging machinery such as filling machines, labeling machines, and sealing machines. These are essential fixed assets for a rape oil producing company, and the cost can vary depending on the type and size of the packaging equipment.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your rape oil producing company.
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 rape oil producing company
The next step in the creation of your financial forecast for your rape oil producing company 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 rape oil producing company?
Now let's have a look at the main output tables of your rape oil producing company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your rape oil producing company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a rape oil producing company 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 rape oil producing company'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 rape oil producing company 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 rape oil producing company'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 rape oil producing company 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 rape oil producing company's financial forecast?
Creating your rape oil producing company'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 rape oil producing company's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection 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 rape oil producing company 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 rape oil producing company's financial forecast?
Creating an accurate and error-free rape oil producing company 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 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 rape oil producing company 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 rape oil producing company, 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 rape oil producing company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
