How to create a financial forecast for a soft drink brand?
Creating a financial forecast for your soft drink brand, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your soft drink brand is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a soft drink brand?
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 soft drink brand becomes handy.
Creating a soft drink brand 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 soft drink brand.
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 soft drink brand 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 soft drink brand'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 used as input to build a soft drink brand financial forecast?
A soft drink brand's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing soft drink brand, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a soft drink brand startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the soft drink brand running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your soft drink brand's financial forecast.
The sales forecast for a soft drink brand
From experience, it usually makes sense to start your soft drink brand's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your soft drink brand (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 soft drink brand'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:
- Seasonal demand: As a soft drink brand, you may experience a higher demand during the summer months when people are looking for refreshing beverages to cool off.
- New product launches: If you introduce a new and innovative flavor or packaging, it may attract new customers and increase your monthly transactions.
- Competition: If a new competitor enters the market or an existing one lowers their prices, it may affect your average price and monthly transactions as customers may choose their products over yours.
- Health trends: With a growing focus on health and wellness, customers may be more inclined to choose low-sugar or zero-calorie soft drinks, which could affect your average price and number of transactions.
- Economic trends: Economic factors such as inflation and unemployment rates can impact consumer spending and therefore, your average price and monthly transactions.
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 soft drink brand
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your soft drink brand on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a soft drink brand will include some of the following items:
- Staff Costs: This includes salaries, wages, benefits, and training for employees who work in roles such as production, marketing, and distribution. You will also need to consider the cost of hiring temporary staff for events or seasonal demand.
- Raw Materials: The ingredients and packaging materials used to produce your soft drink will be a significant expense. This may include fruit juices, sweeteners, and bottles or cans.
- Marketing and Advertising: In order to promote your brand and attract customers, you will need to allocate funds for marketing and advertising expenses. This may include social media ads, influencer partnerships, and traditional advertising methods.
- Distribution Costs: This includes the cost of transporting your product from the production facility to retailers or directly to customers. You will need to factor in the cost of vehicles, fuel, and any third-party logistics services.
- Rent/Lease: If you do not own the building where your production facility or offices are located, you will need to budget for rent or lease payments.
- Utilities: Running a production facility and office will require electricity, water, and other utilities. Make sure to include these costs in your forecast.
- Accountancy Fees: You will likely need to hire an accountant or use accounting software to manage your finances and taxes. This expense should be included in your forecast.
- Insurance Costs: Protecting your business and employees with insurance is essential. This may include liability insurance, property insurance, and worker's compensation insurance.
- Packaging and Labeling: Your soft drink will need to be packaged and labeled with your brand's logo and information. These costs should be considered in your forecast.
- Software Licenses: In order to manage your business efficiently, you may need to purchase software licenses for tasks such as inventory management, accounting, and customer relationship management.
- Banking Fees: Processing transactions and managing your business's finances will come with banking fees. These may include fees for wire transfers, ATM usage, and overdraft charges.
- Research and Development: As a soft drink brand, it is important to continuously innovate and improve your products. This may require funds for research and development expenses.
- Legal Fees: Protecting your brand and ensuring compliance with regulations may require the assistance of a lawyer. Legal fees should be included in your forecast.
- Taxes: As a business, you will be responsible for paying taxes such as income tax, sales tax, and payroll taxes. Make sure to budget for these expenses.
- Training and Development: In order to keep your employees skilled and up-to-date with industry trends, you may need to allocate funds for training and development programs.
This list will need to be tailored to the specificities of your soft drink brand, but should offer a good starting point for your budget.
What investments are needed to start or grow a soft drink brand?
Creating and expanding a soft drink brand also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a soft drink brand could include elements such as:
- Equipment: This includes items such as bottling machines, mixers, and canning machines. These are necessary for production and can be a significant expense for a soft drink brand.
- Furniture and Fixtures: This includes items such as tables, chairs, and displays for retail locations. These items can enhance the overall brand image and create a more inviting atmosphere for customers.
- Vehicles: This includes delivery trucks and vans used to transport the soft drink products to retail locations. These vehicles are essential for distribution and can be a major expense for a soft drink brand.
- Production Facility: This includes the purchase or lease of a facility where the soft drinks will be produced. The cost of the facility will depend on the location, size, and condition of the building.
- Packaging Materials: This includes the cost of materials used to package the soft drinks, such as bottles, cans, and labels. These items are necessary for product presentation and can be a significant expense for a soft drink brand.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your soft drink brand.
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 soft drink brand
The next step in the creation of your financial forecast for your soft drink brand 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 soft drink brand?
Now let's have a look at the main output tables of your soft drink brand'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 soft drink brand'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 soft drink brand will look different than for a startup.
The projected balance sheet
Your soft drink brand'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 projection
The cash flow forecast of your soft drink brand 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 soft drink brand'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 soft drink brand 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 soft drink brand'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 soft drink brand's financial projections?
Building a soft drink brand financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your soft drink brand'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
Outsourcing the creation of your soft drink brand 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 soft drink brand's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free soft drink brand financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your soft drink brand's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 soft drink brand, 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 soft drink brand
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 soft drink brand.
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 soft drink brand. 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?
- Example of financial forecast for business idea
Know someone who runs or wants to start a soft drink brand? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
