How to create a financial forecast for a rapeseed farm?
Developing and maintaining an up-to-date financial forecast for your rapeseed farm 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 rapeseed farm 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 rapeseed farm?
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 rapeseed farm becomes handy.
Creating a rapeseed farm 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 rapeseed farm.
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 rapeseed farm 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 rapeseed farm'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 needed to build a rapeseed 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 rapeseed 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 rapeseed 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 rapeseed 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 rapeseed farm's financial forecast.
The sales forecast for a rapeseed farm
The sales forecast, also called topline projection, is normally where you will start when building your rapeseed 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 rapeseed farms), and consider the elements below:
- Crop yield: The average price of rapeseed can be affected by the crop yield for each season. A higher yield can lead to an increase in supply, potentially driving down prices. On the other hand, a lower yield can lead to a decrease in supply, potentially increasing prices.
- Weather conditions: The weather can have a significant impact on the growth and quality of rapeseed. Unfavorable weather, such as drought or excessive rain, can result in a lower crop yield and potentially affect the average price of the crop.
- Demand for biofuels: Rapeseed is commonly used as a feedstock for biofuel production. Changes in the demand for biofuels, particularly in the transportation industry, can affect the overall demand for rapeseed and subsequently impact its average price.
- International trade policies: Rapeseed is a globally traded commodity, and changes in international trade policies can affect its price. For example, increased tariffs or trade restrictions can limit the market for rapeseed and potentially decrease its average price.
- Pest infestations: Pests, such as aphids and flea beetles, can cause significant damage to rapeseed crops. This can lead to a decrease in crop yield and potentially affect the average price of rapeseed for the farm.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
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The operating expenses for a rapeseed farm
The next step is to estimate the costs you’ll have to incur to operate your rapeseed farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your rapeseed farm's operating expenses should normally include the following items:
- Seed and Fertilizer Costs: These are the expenses for purchasing and applying the necessary seed and fertilizer for growing rapeseed on your farm.
- Labor Costs: This includes the wages and benefits for the farm workers who will be involved in planting, harvesting, and maintaining the rapeseed crop.
- Fuel and Energy Costs: This refers to the cost of fuel and energy used to power farm machinery and equipment for planting, harvesting, and other farm operations.
- Equipment Maintenance and Repair: As with any machinery, farm equipment used for rapeseed farming will require regular maintenance and occasional repairs, which incur expenses.
- Irrigation Costs: If you have an irrigation system in place, you will need to factor in the costs of water usage and any necessary maintenance or repairs.
- Pest and Disease Control: Rapeseed crops are susceptible to various pests and diseases, so you may need to invest in pesticides and other treatments to protect your crop.
- Crop Insurance: In case of any unforeseen circumstances that may damage your rapeseed crop, it is wise to have crop insurance to cover any potential losses.
- Transportation Costs: You will need to transport your harvested rapeseed to market, which may incur expenses such as fuel, vehicle maintenance, and any necessary permits.
- Marketing and Advertising: To attract buyers for your rapeseed crop, you may need to invest in marketing and advertising efforts, such as attending trade shows or placing ads in industry publications.
- Accountancy Fees: As a business owner, you will need to keep track of your finances and taxes, so hiring an accountant or bookkeeper may be necessary.
- Insurance Costs: In addition to crop insurance, you may also need to have general liability insurance and property insurance to protect your farm and equipment.
- Software Licenses: If you use any software programs for record-keeping, accounting, or other farm operations, you will need to pay for software licenses.
- Banking Fees: This includes fees for maintaining a business bank account, as well as any transaction fees for receiving payments from buyers.
- Rent/Lease Expenses: If you do not own the land on which you are growing rapeseed, you will need to factor in the costs of leasing or renting the land.
- Taxes and Permits: As a business owner, you will need to pay taxes and obtain any necessary permits for your rapeseed farm.
This list is not exhaustive by any means, and will need to be tailored to your rapeseed farm's specific circumstances.
What investments are needed to start or grow a rapeseed farm?
Creating and expanding a rapeseed farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a rapeseed farm could include elements such as:
- Land: This includes the purchase or lease of land for the rapeseed farm. This can also include expenses such as land clearing, soil preparation, and drainage.
- Farm Equipment: This includes the purchase or lease of equipment specifically used for rapeseed farming, such as tractors, planters, harvesters, and irrigation systems.
- Storage Facilities: This includes the construction or purchase of storage facilities for harvested rapeseed, such as silos or grain bins.
- Processing Equipment: This includes the purchase or lease of equipment used for processing rapeseed, such as oil presses or seed cleaners.
- Infrastructure: This includes any necessary infrastructure for the rapeseed farm, such as roads, fencing, and buildings for housing workers or storing equipment.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your rapeseed 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 rapeseed farm
The next step in the creation of your financial forecast for your rapeseed 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 rapeseed farm?
Now let's have a look at the main output tables of your rapeseed farm's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy rapeseed farm's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established rapeseed farm will look different than for a startup.
The projected balance sheet
Your rapeseed 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 projected cash flow statement
A projected cash flow statement for a rapeseed 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 rapeseed 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 rapeseed 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 rapeseed farm's financial forecast?
Creating your rapeseed 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 rapeseed 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
Outsourcing the creation of your rapeseed farm financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your rapeseed farm's financial forecast?
Creating an accurate and error-free rapeseed 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 rapeseed 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 rapeseed 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 rapeseed 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 turnover forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a rapeseed farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
