How to create a financial forecast for a forestry support services company?
Creating a financial forecast for your forestry support services company, 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 forestry support services company 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 forestry support services company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your forestry support services company and ensure that it can be financially viable in the years to come.
A financial plan for a forestry support services company 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 forestry support services company 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 forestry support services company'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.
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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 forestry support services company financial forecast?
A forestry support services company'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 forestry support services company, 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 forestry support services company 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 forestry support services company 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 forestry support services company's financial forecast.
The sales forecast for a forestry support services company
The sales forecast, also called topline projection, is normally where you will start when building your forestry support services company 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 forestry support services companies), and consider the elements below:
- Weather conditions: The availability of certain forestry support services, such as tree planting or harvesting, may be affected by weather conditions. For example, heavy rainfall or snow could delay operations and decrease the number of monthly transactions.
- Timber prices: The price of timber can fluctuate based on supply and demand, as well as market conditions. If the price of timber increases, this may lead to higher average prices for services such as tree removal or milling.
- Government regulations: Changes in forestry regulations, such as logging restrictions or environmental protection laws, could impact the number of monthly transactions for certain services. For instance, stricter regulations may result in a decrease in tree cutting or land clearing activities.
- Competition: The presence of competing forestry support services companies in the same area could affect your business's average prices and number of monthly transactions. If there is high competition, you may need to adjust your prices to stay competitive, which could potentially decrease your average price.
- Natural disasters: Natural disasters, such as wildfires or hurricanes, could cause damage to forests and disrupt normal operations. This could lead to a decrease in the number of monthly transactions and potentially increase the average price for services such as tree cleanup and restoration.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a forestry support services company
The next step is to estimate the costs you’ll have to incur to operate your forestry support services company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your forestry support services company's operating expenses should normally include the following items:
- Staff costs: Includes salaries, benefits, and training costs for employees such as forestry technicians, arborists, and administrative staff.
- Accountancy fees: Covers accounting services and tax preparation for your business.
- Insurance costs: Provides liability and property insurance for your equipment, vehicles, and employees.
- Software licenses: Allows you to use specialized software for tasks such as mapping, inventory management, and data analysis.
- Banking fees: Includes charges for business bank accounts, credit card processing, and ATM fees.
- Vehicle expenses: Covers fuel, maintenance, and insurance for company vehicles used for transportation and fieldwork.
- Equipment rental: Includes costs for renting or leasing equipment such as chainsaws, chippers, and trucks.
- Supplies and materials: Covers the cost of tools, safety equipment, and other materials needed for forestry operations.
- Travel expenses: Includes costs for business travel, such as lodging, meals, and transportation.
- Marketing and advertising: Covers expenses for promoting your forestry support services, such as website development, print materials, and online advertising.
- Professional fees: Includes fees for consulting, legal services, and other professional services related to your business.
- Utilities: Covers the cost of electricity, water, and other utilities for your office and equipment.
- Rent or mortgage: Includes the cost of renting or owning office space, storage facilities, or land for your business operations.
- Training and education: Covers the cost of training courses and conferences to improve the skills of your employees.
- Office expenses: Includes costs for office supplies, furniture, and equipment such as computers and printers.
This list is not exhaustive by any means, and will need to be tailored to your forestry support services company's specific circumstances.
What investments are needed to start or grow a forestry support services company?
Your forestry support services company 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 forestry support services company, these could include:
- Heavy Machinery and Equipment: As a forestry support services company, you will need to invest in heavy machinery and equipment such as bulldozers, harvesters, and skidders for logging operations and land clearing projects. These assets will help you efficiently carry out your services and increase your productivity.
- Transportation Vehicles: You will also need to purchase transportation vehicles such as trucks and trailers to transport logs, timber, and other materials to and from your work sites. These vehicles are necessary for the smooth operation of your business and for timely delivery of your services to clients.
- Land and Property: Depending on the size and scope of your forestry support services company, you may need to purchase land or property for your operations. This could include purchasing a forested area for harvesting or a warehouse for storing equipment and materials. Investing in land and property can also be a strategic move for future expansion and growth.
- Office Equipment and Supplies: In addition to equipment and vehicles, your company will also need to invest in office equipment and supplies such as computers, printers, and office furniture. These assets are essential for day-to-day operations and maintaining a professional image for your business.
- Safety Gear and Personal Protective Equipment: As a forestry support services company, safety should be a top priority for your employees. Therefore, investing in safety gear and personal protective equipment such as hard hats, boots, and gloves is crucial. These assets will not only protect your employees but also ensure compliance with safety regulations.
Again, this list will need to be adjusted according to the size and ambitions of your forestry support services company.
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 forestry support services company
The next step in the creation of your financial forecast for your forestry support services company 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 forestry support services company?
Now let's have a look at the main output tables of your forestry support services company'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 forestry support services company'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 forestry support services company will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your forestry support services company'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 forestry support services company. 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 projected cash flow statement
A projected cash flow statement for a forestry support services company 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 forestry support services company'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 forestry support services company 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 forestry support services company's financial forecast?
Creating your forestry support services company'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 forestry support services company'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional forestry support services company 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 forestry support services company's financial forecast?
Creating an accurate and error-free forestry support services company 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 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 forestry support services company, 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 forestry support services company
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your forestry support services company.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a forestry support services company. Don't hesitate to contact us if you 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
- Financial forecast example
- How to project revenues for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
