How to create a financial forecast for a walnut farm?
Developing and maintaining an up-to-date financial forecast for your walnut 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 walnut 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 walnut farm?
The financial projections for your walnut 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 walnut 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 used as input to build a walnut farm financial forecast?
A walnut 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 walnut farm.
If you are creating (or updating) the forecast of an existing walnut 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 walnut 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 walnut 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 walnut farm's financial forecast.
The sales forecast for a walnut farm
From experience, it is usually best to start creating your walnut farm financial forecast by your sales forecast.
To create an accurate sales forecast for your walnut farm, you will have to rely on the data collected in your market research, or if you're running an existing walnut farm, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- The weather can greatly impact the average price and number of monthly transactions for your walnut farm. A heatwave or drought can lead to smaller and lower quality walnuts, resulting in a decrease in price and transactions. On the other hand, a mild and consistent climate can lead to a larger and better quality harvest, increasing the average price and number of transactions.
- The global demand for walnuts can also affect your farm's sales forecast. If there is a high demand for walnuts in the international market, you may be able to sell your walnuts at a higher price and have more monthly transactions. However, if the demand is low, you may need to lower your prices to attract buyers, resulting in a decrease in your average price and number of transactions.
- The competition in the walnut industry can also play a significant role in your sales forecast. If there are many other walnut farms in your area, it may be challenging to sell your walnuts at a higher price. On the other hand, if you are the only walnut farm in your region, you may be able to set higher prices and have more monthly transactions.
- The cost of production can also affect your average price and number of transactions. If the cost of producing walnuts increases, you may need to raise your prices to maintain profitability, which could lead to a decrease in transactions. On the other hand, if you find ways to reduce production costs, you may be able to sell your walnuts at a lower price and attract more buyers, resulting in an increase in transactions.
- The health benefits associated with walnuts can also influence your sales forecast. If there is a growing trend of people seeking healthier food options, the demand for walnuts may increase, leading to higher prices and more transactions. Conversely, if there is a shift towards other types of nuts or food, it may result in a decrease in demand for walnuts and lower prices and transactions for your farm.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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The operating expenses for a walnut farm
The next step is to estimate the costs you’ll have to incur to operate your walnut farm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your walnut farm's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, benefits, and training for your farm workers. You will need to account for the number of workers you employ and the hours they work.
- Accountancy Fees: You will need to hire an accountant to help you keep track of your finances, file taxes, and make sure you are in compliance with any regulations.
- Insurance Costs: It is important to have insurance for your walnut farm to protect against any potential risks or damages. This can include property insurance, crop insurance, and liability insurance.
- Software Licences: You may need to purchase software to help manage your farm operations such as inventory tracking, payroll, or accounting software. These may come with annual fees or subscription costs.
- Banking Fees: You will need to open a business bank account to manage your farm's financial transactions. Be sure to consider any fees for account maintenance, wire transfers, or ATM usage.
- Seed and Seedling Costs: This includes the cost of purchasing walnut seeds or seedlings to plant in your farm. The cost may vary depending on the quantity and quality of the seeds.
- Fertilizer and Pesticide Costs: You will need to regularly fertilize and protect your walnut trees from pests and diseases. These products can be costly, so it is important to budget for them.
- Irrigation Costs: Walnut trees require regular watering, especially during the growing season. Consider the cost of irrigation systems, water pumps, and the cost of water itself.
- Labor Costs: In addition to staff costs, you may also need to hire additional labor during peak seasons for tasks such as harvesting or pruning.
- Equipment Maintenance and Repairs: Your farm equipment, such as tractors and pruning tools, will require regular maintenance and occasional repairs. Be sure to budget for these costs.
- Fuel and Energy Costs: Running a walnut farm requires energy for irrigation systems, farm equipment, and possibly heating or cooling for storage facilities.
- Transportation Costs: You may need to transport your harvested walnuts to processing facilities or markets. Consider the cost of fuel, vehicle maintenance, and any fees for using transportation services.
- Marketing and Advertising Costs: To sell your walnuts, you may need to invest in marketing and advertising efforts such as creating a website or attending trade shows.
- Rent or Mortgage Costs: If you do not own the land where your walnut farm is located, you will need to budget for rent or mortgage payments.
- Taxes and Permits: Be sure to factor in any taxes or fees you may need to pay for operating a walnut farm, such as property taxes or permits for water usage.
This list is not exhaustive by any means, and will need to be tailored to your walnut farm's specific circumstances.
What investments are needed to start or grow a walnut farm?
Your walnut farm 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 walnut farm, these could include:
- Land: This includes the purchase or lease of land for your walnut farm. You may also need to consider the cost of land clearing, leveling, and drainage.
- Irrigation System: A proper irrigation system is essential for walnut trees to thrive. This may include the installation of irrigation pipes, sprinklers, pumps, and controllers.
- Equipment: Depending on the size of your walnut farm, you may need to purchase or lease various equipment such as tractors, sprayers, harvesters, and pruning tools.
- Storage Facilities: As walnuts are a perishable crop, you will need storage facilities to keep them fresh before they are sold. This may include cold storage units, bins, and drying facilities.
- Processing Equipment: If you plan on processing your own walnuts, you may need to invest in equipment such as hullers, shellers, and dryers.
Again, this list will need to be adjusted according to the size and ambitions of your walnut 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 walnut farm
The next step in the creation of your financial forecast for your walnut 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 walnut farm?
Now let's have a look at the main output tables of your walnut farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your walnut farm is likely to be in the years to come.
For your walnut 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 walnut farms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your walnut farm'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 cash flow forecast
Your walnut farm's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the walnut farm:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your walnut farm's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your walnut farm's financial plan - so that banks or investors can assess seasonal variation and ensure your business 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 walnut farm's financial forecast?
Using the right tool or solution will make the creation of your walnut farm's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your walnut 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.
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 walnut 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 walnut farm's financial forecast?
Creating an accurate and error-free walnut 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 walnut 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 walnut farm
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 walnut farm 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 walnut farm, 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 turnover forecast for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a walnut farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
