How to create a financial forecast for a sugar beet farm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your sugar beet farm.
Putting together a sugar beet farm 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 sugar beet farm.
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 sugar beet farm?
The financial projections for your sugar beet farm act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your sugar beet farm's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 sugar beet 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 sugar beet 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 sugar beet 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 sugar beet 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 sugar beet farm's financial forecast.
The sales forecast for a sugar beet farm
From experience, it usually makes sense to start your sugar beet farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your sugar beet farm (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 sugar beet farm'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:
- You can expect a decrease in the average price of sugar beets if there is a surplus of other crops, such as corn or soybeans, which can be used as alternative sources of sugar.
- Your monthly transaction volume may be impacted by weather conditions, as extreme temperatures or drought can significantly impact the growth and yield of sugar beets.
- If there is a shortage of labor in the agriculture industry, you may face challenges in finding and hiring enough workers to harvest and process your sugar beets, potentially leading to a decrease in monthly transactions.
- Fluctuations in the global market for sugar can also affect your average price, as changes in supply and demand can impact the overall market price for sugar beets.
- You may experience an increase in monthly transactions if there is a growing trend towards plant-based and natural sweeteners, as consumers become more health-conscious and seek out alternatives to traditional cane sugar.
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 sugar beet farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your sugar beet farm 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 sugar beet farm will include some of the following items:
- Seed Costs: As a sugar beet farmer, you will need to purchase high-quality seeds for your crops every season. This expense can vary depending on the size of your farm and the amount of land you are planting.
- Fertilizer and Pesticide Expenses: In order to ensure a successful crop yield, you will need to invest in fertilizers and pesticides to keep your sugar beets healthy and free from pests and diseases.
- Labor Costs: Your farm will require a team of skilled workers to help with planting, harvesting, and maintaining your sugar beet crops. This expense includes wages, benefits, and any training costs for your workers.
- Machinery and Equipment Maintenance: As a sugar beet farmer, you will need to regularly maintain and repair your farming equipment and machinery to ensure efficient and effective operations.
- Irrigation Expenses: Sugar beets require a significant amount of water to grow, so you will need to invest in irrigation systems and cover the cost of water usage.
- Fuel and Energy Costs: Running your farm operations, including irrigation and machinery, will require a significant amount of fuel and energy. This expense can vary depending on the size of your farm and the type of equipment you use.
- Storage Costs: As a sugar beet farmer, you will need to store your harvested crops and equipment in a safe and secure location. This expense includes rent or maintenance costs for storage facilities.
- Transportation Expenses: Once your sugar beets are harvested, you will need to transport them to processing facilities or markets. This expense includes the cost of fuel, labor, and maintenance for your transportation vehicles.
- Accounting Fees: Keeping accurate financial records and filing taxes is crucial for any business, including a sugar beet farm. You may need to hire an accountant to help you with these tasks, which can add to your operating expenses.
- Insurance Costs: Operating a farm comes with certain risks, so it's important to have insurance to protect your business and assets. This expense includes insurance for your crops, equipment, and workers.
- Software Licenses: In today's digital age, you may need to invest in software to help with record-keeping, bookkeeping, and other administrative tasks. This expense includes the cost of purchasing and renewing software licenses.
- Banking Fees: As a business owner, you will have to manage your finances and make transactions through a bank. This expense includes fees for maintaining a business bank account and any other banking services you may use.
- Marketing and Advertising Expenses: In order to sell your sugar beets, you may need to invest in marketing and advertising efforts to reach potential buyers. This expense includes the cost of creating advertising materials, attending trade shows, and other promotional activities.
- Legal Fees: As a business owner, you may encounter legal issues or need legal advice. This expense includes fees for hiring a lawyer or other legal services.
- Training and Education Costs: In order to stay up-to-date with industry trends and best practices, you may need to invest in training and education for yourself and your workers. This expense includes the cost of attending workshops, conferences, and other educational programs.
This list will need to be tailored to the specificities of your sugar beet farm, but should offer a good starting point for your budget.
What investments are needed to start or grow a sugar beet farm?
Creating and expanding a sugar beet farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a sugar beet farm could include elements such as:
- Tractors and equipment: As a sugar beet farmer, you will need to invest in tractors and other farming equipment to prepare and maintain your fields. This includes plows, harvesters, and irrigation systems.
- Storage facilities: Sugar beets need to be stored in proper conditions to maintain their quality. You may need to build or invest in storage facilities such as silos or warehouses to store your crop.
- Processing machinery: After harvesting, sugar beets need to be processed to extract the sugar. This process requires specialized machinery such as sugar mills and centrifuges, which are essential capital expenditures for a sugar beet farm.
- Transportation vehicles: Once your sugar beets are processed, they need to be transported to buyers or to a processing plant. As a farmer, you may need to invest in trucks or other vehicles to transport your crop.
- Land and buildings: If you are starting a new sugar beet farm, you will need to invest in land and buildings to establish your farm. This includes purchasing or leasing land, as well as building structures such as storage sheds and processing facilities.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your sugar beet 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 sugar beet farm
The next step in the creation of your financial forecast for your sugar beet 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 sugar beet farm?
Now let's have a look at the main output tables of your sugar beet farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your sugar beet farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a sugar beet farm 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 sugar beet 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 cash flow projection
The cash flow forecast of your sugar beet 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 sugar beet 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 sugar beet 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 sugar beet 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 sugar beet farm's financial forecast?
Creating your sugar beet 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 sugar beet 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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional sugar beet farm 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 sugar beet farm's financial forecast?
Creating an accurate and error-free sugar beet 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 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
- 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 sugar beet 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 sugar beet 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?
- Financial forecast template for a business idea
Know someone who runs or wants to start a sugar beet farm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
