How to create a financial forecast for a wooden container manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your wooden container manufacturing business.
Putting together a wooden container manufacturing business 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 wooden container manufacturing business.
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 wooden container manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your wooden container manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a wooden container manufacturing business 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 wooden container manufacturing business 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 wooden container manufacturing business'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 wooden container manufacturing business financial forecast?
A wooden container manufacturing business'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 wooden container manufacturing business, 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 wooden container manufacturing business 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 wooden container manufacturing business 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 wooden container manufacturing business's financial forecast.
The sales forecast for a wooden container manufacturing business
From experience, it is usually best to start creating your wooden container manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your wooden container manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing wooden container manufacturing business, 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:
- Seasonal demand: As a wooden container manufacturing business, you may experience fluctuations in demand throughout the year. For example, during the summer months, there may be a higher demand for your containers as people use them for outdoor activities such as camping and picnics. This can lead to an increase in your average price as you may be able to charge higher prices during peak demand periods.
- Raw material costs: The cost of raw materials, such as wood, can greatly impact your business's average price. If the cost of wood increases, you may need to raise your prices to maintain your profit margins. On the other hand, if the cost of wood decreases, you may be able to offer lower prices to attract more customers.
- Competition: The level of competition in your market can also affect your business's average price and number of transactions. If there are many other wooden container manufacturers in your area, you may need to lower your prices to stay competitive. Conversely, if you are the only manufacturer in the area, you may be able to charge higher prices.
- Economic conditions: Changes in the economy can have a significant impact on your business's sales. In times of economic downturn, consumers may have less disposable income, leading to a decrease in demand for your containers. In contrast, during a strong economy, people may be more willing to spend money on luxury items, such as wooden containers, leading to an increase in your average price and number of transactions.
- Customer preferences: As a wooden container manufacturer, you may need to adapt to changing customer preferences to stay competitive. For example, if there is a trend towards eco-friendly and sustainable products, you may need to invest in more sustainable materials and production methods, which could affect your average price. Similarly, if there is a shift towards smaller, more portable containers, you may need to adjust your product offerings and pricing accordingly.
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.
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 wooden container manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your wooden container manufacturing business 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 wooden container manufacturing business will include some of the following items:
- Staff costs: This includes salaries, wages, benefits, and any bonuses for your employees. As a wooden container manufacturing business, you may have a team of workers who are responsible for cutting, shaping, and assembling the containers.
- Accountancy fees: You will need to hire an accountant to help you manage your finances and ensure that your business is compliant with tax laws and regulations.
- Insurance costs: It is important to protect your business and assets, so you will need to pay for insurance coverage. This may include general liability insurance, property insurance, and worker's compensation insurance.
- Software licenses: As a modern business, you will likely need to use various software programs to manage inventory, sales, and other aspects of your business. This may include purchasing licenses for accounting software, inventory management software, and design software for creating prototypes of your containers.
- Banking fees: You will need to have a business bank account to manage your finances, and there may be fees associated with this account, such as transaction fees and monthly maintenance fees.
- Raw materials: As a wooden container manufacturing business, you will need to purchase wood, hardware, and other materials to create your containers.
- Rent: If you do not own a facility to manufacture your containers, you will need to rent a space. This may include a warehouse or workshop where you can store materials and equipment.
- Utilities: You will need to pay for utilities such as electricity, water, and gas to power your equipment and keep your facility running.
- Marketing and advertising: In order to attract customers, you will need to invest in marketing and advertising efforts. This may include creating a website, attending trade shows, and running social media campaigns.
- Packaging materials: Once your containers are ready to be shipped, you will need to purchase packaging materials to protect them during transportation.
- Maintenance and repairs: You will need to maintain and repair your equipment and facility to ensure efficient operations.
- Training and development: As your business grows, you may need to invest in training and development programs to help your employees improve their skills and stay up-to-date with industry advancements.
- Taxes: You will need to pay taxes on your business income, property, and any employees you have.
- Legal fees: In the event of a legal issue, you may need to hire a lawyer, which can be costly. It is important to budget for potential legal fees.
- Shipping and logistics: If you plan on selling your containers to customers in different locations, you will need to factor in shipping and logistics costs.
This list will need to be tailored to the specificities of your wooden container manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a wooden container manufacturing business?
Your wooden container manufacturing business 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 wooden container manufacturing business, these could include:
- Machinery and Equipment: This includes the cost of purchasing and installing machines and equipment used in the manufacturing process such as saws, drills, sanders, and packaging machines.
- Facility Renovation: If you are starting your wooden container manufacturing business from scratch, you will need to purchase or lease a facility. The cost of renovating the space to suit your production needs, such as adding ventilation systems and wiring, should be included in your expenditure forecast.
- Raw Materials: As a wooden container manufacturing business, your main raw material will be wood. This includes the cost of purchasing and storing different types of wood, as well as any additional materials needed for finishing and packaging the containers.
- Transportation Vehicles: If you plan on delivering your wooden containers to customers, you will need to purchase or lease transportation vehicles such as trucks or vans. The cost of these vehicles, as well as any necessary maintenance and insurance, should be included in your expenditure forecast.
- Software and Technology: In today's digital age, having the right software and technology is crucial for any business. This includes purchasing and maintaining software for inventory management, accounting, and customer relationship management. Additionally, you may need to invest in technology such as barcode scanners and printers for efficient production and tracking of your wooden containers.
Again, this list will need to be adjusted according to the size and ambitions of your wooden container manufacturing 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.
The financing plan of your wooden container manufacturing business
The next step in the creation of your financial forecast for your wooden container manufacturing business 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 wooden container manufacturing business?
Now let's have a look at the main output tables of your wooden container manufacturing business'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 wooden container manufacturing business'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 wooden container manufacturing business will look different than for a startup.
The projected balance sheet
Your wooden container manufacturing business'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 projected cash flow statement
A projected cash flow statement for a wooden container manufacturing business 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 wooden container manufacturing business'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 wooden container manufacturing 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 wooden container manufacturing business's financial projections?
Building a wooden container manufacturing business 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 wooden container manufacturing business'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional wooden container manufacturing business 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 wooden container manufacturing business's financial forecast?
Creating an accurate and error-free wooden container manufacturing business 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 wooden container manufacturing business, 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 wooden container manufacturing business
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 wooden container manufacturing business 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 wooden container manufacturing business, 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 template for a business idea
Know someone who owns or is thinking of starting a wooden container manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
