How to create a financial forecast for a sesame seed farm?
Developing and maintaining an up-to-date financial forecast for your sesame seed 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 sesame seed 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 sesame seed farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your sesame seed farm and ensure that it can be financially viable in the years to come.
A financial plan for a sesame seed 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 sesame seed 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 sesame seed 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 used as input to build a sesame seed farm financial forecast?
A sesame seed farm'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 sesame seed farm.
If you are creating (or updating) the forecast of an existing sesame seed farm, 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 sesame seed farm 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 sesame seed farm 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 sesame seed farm's financial forecast.
The sales forecast for a sesame seed farm
The sales forecast, also called topline projection, is normally where you will start when building your sesame seed 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 sesame seed farms), and consider the elements below:
- Weather Conditions: As a sesame seed farmer, you are well aware of how weather can directly affect the quality and quantity of your crop. Adverse weather conditions such as drought or heavy rains can result in lower yields, leading to a decrease in supply and potentially driving up the average price of your sesame seeds.
- Foreign Demand: The demand for sesame seeds is not only limited to domestic markets but also extends to international markets. Changes in foreign demand, such as increased interest from countries like China or Japan, can lead to higher prices for your sesame seeds, as well as an increase in monthly transactions.
- Crop Rotation: As a responsible farmer, you know the importance of rotating your crops to maintain soil health and prevent diseases. However, the rotation of crops can also lead to fluctuations in supply and demand for sesame seeds, which can impact the average price and number of monthly transactions for your farm.
- Pest Infestations: Pests such as aphids and thrips can cause significant damage to sesame crops, resulting in lower yields and potentially higher prices for the remaining seeds. This can also lead to a decrease in the number of monthly transactions as the supply of sesame seeds decreases.
- Government Policies: Changes in government policies, such as import/export regulations or subsidies, can have a direct impact on the sesame seed market. For example, if the government introduces subsidies for sesame farmers, it can lead to an increase in supply and potentially lower prices for your sesame seeds.
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 sesame seed farm
The next step is to estimate the expenses needed to run your sesame seed 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 sesame seed farm's operating expenses should include the following items at a minimum:
- Seed Purchases: This includes the cost of purchasing sesame seeds for planting.
- Labor Costs: Hiring and paying farm workers to assist with planting, harvesting, and other farm tasks.
- Irrigation Expenses: This includes the cost of irrigation systems and water usage for the sesame seeds.
- Fertilizer and Pesticide Costs: These are necessary expenses for maintaining healthy and productive sesame plants.
- Equipment Maintenance: Regular maintenance and repairs for tractors, harvesters, and other farm equipment used for sesame farming.
- Shipping and Transportation: The cost of transporting harvested sesame seeds to processing facilities or buyers.
- Packaging Materials: This includes bags, containers, and labels for packaging and selling sesame seeds.
- Utilities: Expenses for electricity, gas, and other utilities used in the farming operation.
- Rent/Lease: If you do not own the land used for sesame farming, you may have to pay rent or lease fees.
- Insurance: Protecting your farm and equipment with insurance is crucial.
- Accounting Fees: Hiring an accountant to manage your finances and taxes can be beneficial for your sesame farming business.
- Software Licenses: Utilizing software for record-keeping, inventory management, and other farm tasks may require annual licensing fees.
- Banking Fees: This includes fees for processing transactions, maintaining accounts, and other banking services.
- Marketing Expenses: Promoting and advertising your sesame seeds to potential buyers may require expenses for marketing materials and campaigns.
- Training and Development: Investing in training and development for yourself and your farm workers can improve efficiency and productivity on your sesame farm.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small sesame seed farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a sesame seed farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your sesame seed farm, it is time to look into the equipment required to launch or expand the activity.
For a sesame seed farm, capital expenditures and initial working capital items could include:
- Land and Equipment: This includes purchasing or leasing land for the sesame seed farm as well as necessary equipment such as tractors, irrigation systems, and harvesting machinery.
- Storage Facilities: Sesame seeds require proper storage to maintain their quality and freshness. This may include building or purchasing storage facilities such as silos or warehouses.
- Packaging and Labeling: Packaging and labeling materials, such as bags and labels, are necessary for selling the sesame seeds. These may be one-time purchases or ongoing expenses depending on the size of the farm.
- Transportation: In order to transport the sesame seeds to buyers or processing facilities, you may need to invest in vehicles or hire transportation services. This is an important consideration for farms located in remote areas.
- Infrastructure: Building or improving infrastructure such as roads, fences, and irrigation systems may be necessary for the successful operation of a sesame seed farm. These can be significant investments but are essential for long-term profitability.
Again, this list will need to be adjusted according to the specificities of your sesame seed 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 sesame seed farm
The next step in the creation of your financial forecast for your sesame seed 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 sesame seed farm?
Now let's have a look at the main output tables of your sesame seed farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your sesame seed farm is likely to be in the years to come.
For your sesame seed farm to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established sesame seed farms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your sesame seed 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 sesame seed 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 cash flow projection
The cash flow forecast of your sesame seed farm will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the sesame seed farm's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your sesame seed farm is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your sesame seed farm's financial plan.
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 sesame seed farm's financial forecast?
Creating your sesame seed 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 sesame seed farm'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional sesame seed 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 sesame seed farm's financial forecast?
Creating an accurate and error-free sesame seed 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 sesame seed 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 sesame seed farm
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 sesame seed 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 sesame seed 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 template for a business idea
Know someone who runs or wants to start a sesame seed farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
