How to create a financial forecast for a seafood processing firm?
Developing and maintaining an up-to-date financial forecast for your seafood processing firm 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 seafood processing firm 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 seafood processing firm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your seafood processing firm and ensure that it can be financially viable in the years to come.
A financial plan for a seafood processing firm 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 seafood processing firm 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 seafood processing firm'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 seafood processing firm financial forecast?
A seafood processing firm'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 seafood processing firm.
If you are creating (or updating) the forecast of an existing seafood processing firm, 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 seafood processing firm 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 seafood processing firm 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 seafood processing firm's financial forecast.
The sales forecast for a seafood processing firm
The sales forecast, also called topline projection, is normally where you will start when building your seafood processing firm 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 seafood processing firms), and consider the elements below:
- Rising fuel costs: As a seafood processing firm, you rely heavily on transportation to bring in fresh catches from the sea. Fluctuations in fuel prices can directly impact your bottom line, as it will increase the cost of transportation and ultimately lead to higher prices for your products.
- Changes in government regulations: The seafood industry is heavily regulated, and any changes in regulations can have a significant impact on your business. For example, new regulations on fishing quotas or food safety standards can affect the availability and quality of seafood, which can in turn affect your prices and sales.
- Natural disasters: Being in the seafood business, you are vulnerable to natural disasters such as hurricanes, typhoons, or oil spills. These events can disrupt the supply chain and lead to shortages of certain types of seafood, causing prices to increase and potentially decreasing the number of transactions.
- Consumer preferences: The popularity of certain types of seafood can fluctuate depending on consumer preferences. For example, if there is a trend towards healthier eating, there may be an increase in demand for seafood, leading to higher prices and more transactions. On the other hand, if there is a shift towards plant-based diets, it may lead to a decrease in sales for your seafood products.
- Competition: The seafood industry is highly competitive, and the actions of your competitors can affect your prices and sales. For example, if a competitor introduces a new, more affordable product, it may lead to a decrease in your prices and potentially a decrease in sales. On the other hand, if a competitor goes out of business, it may lead to an increase in your sales and prices.
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 seafood processing firm
The next step is to estimate the costs you’ll have to incur to operate your seafood processing firm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your seafood processing firm's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, benefits, and training for all employees involved in the seafood processing, such as fish cleaners, packers, quality control inspectors, and administrative staff.
- Accountancy Fees: You will need to hire an accountant or accounting firm to handle the financial aspects of your seafood processing business, including bookkeeping, tax preparation, and financial reporting.
- Insurance Costs: As a seafood processing firm, you will need to protect your business and assets with various insurance policies, such as property insurance, liability insurance, and workers' compensation insurance.
- Software Licenses: You will likely need to invest in software licenses for programs that will help you manage your operations, such as inventory management software, accounting software, and food safety compliance software.
- Banking Fees: Your seafood processing firm will incur banking fees for various financial transactions, such as wire transfers, check processing, and credit card processing.
- Raw Materials: This includes the cost of purchasing seafood from suppliers, such as fish, shrimp, crab, and other seafood products.
- Packaging Materials: You will need to invest in packaging materials, such as containers, bags, labels, and boxes, to package and ship your seafood products.
- Utilities: Your seafood processing facility will need to pay for utilities, such as electricity, water, and gas, to operate machinery and maintain a suitable environment for processing seafood.
- Transportation: You will need to cover the cost of transporting your seafood products from your processing facility to distribution centers or directly to customers.
- Marketing and Advertising: You will need to allocate funds for marketing and advertising efforts to promote your seafood products and attract customers.
- Maintenance and Repairs: Your seafood processing equipment will require regular maintenance and repairs to ensure it operates efficiently and safely.
- Rent/Lease: If you do not own the property where your seafood processing facility is located, you will need to pay rent or lease fees.
- Permits and Licenses: As a seafood processing firm, you will need to obtain various permits and licenses from local, state, and federal authorities to operate legally.
- Waste Disposal: Your seafood processing facility will generate waste that needs to be disposed of properly, which may incur fees for waste management services.
- Training and Development: You may need to invest in training and development programs for your employees to enhance their skills and knowledge in seafood processing.
This list is not exhaustive by any means, and will need to be tailored to your seafood processing firm's specific circumstances.
What investments are needed to start or grow a seafood processing firm?
Your seafood processing firm 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 seafood processing firm, these could include:
- Processing Equipment: This includes machinery and tools specifically designed for seafood processing, such as filleting machines, oyster shucking machines, and shellfish cleaning equipment.
- Refrigeration and Freezing Equipment: Proper storage and preservation is crucial in seafood processing, making refrigeration and freezing equipment a necessary capital expenditure. This can include walk-in coolers, blast freezers, and refrigerated trucks for transportation.
- Packaging and Labeling Equipment: To ensure food safety and proper branding, a seafood processing firm may need to invest in packaging and labeling equipment. This can include vacuum sealers, label printers, and inkjet coders.
- Facility Construction or Renovation: A seafood processing firm may need to build or renovate a facility to meet the specific requirements of seafood processing. This can include installing drainage systems, creating separate processing areas for different types of seafood, and ensuring proper ventilation.
- Safety and Quality Control Equipment: To comply with food safety regulations and maintain quality standards, a seafood processing firm may need to invest in equipment such as metal detectors, temperature monitoring devices, and quality control software.
Again, this list will need to be adjusted according to the size and ambitions of your seafood processing firm.
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 seafood processing firm
The next step in the creation of your financial forecast for your seafood processing firm 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 seafood processing firm?
Now let's have a look at the main output tables of your seafood processing firm'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 seafood processing firm'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 seafood processing firm will look different than for a startup.
The projected balance sheet
Your seafood processing firm'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 seafood processing firm 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 seafood processing firm'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 seafood processing firm 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 seafood processing firm's financial forecast?
Using the right tool or solution will make the creation of your seafood processing firm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your seafood processing firm's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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 seafood processing firm 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 seafood processing firm's financial forecast?
Creating an accurate and error-free seafood processing firm 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 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 seafood processing firm, 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
- 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 seafood processing firm 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 seafood processing firm, 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 sales forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
