How to create a financial forecast for an agricultural products wholesaler?
Developing and maintaining an up-to-date financial forecast for your agricultural products wholesaler is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together an agricultural products wholesaler 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 an agricultural products wholesaler?
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 agricultural products wholesaler becomes handy.
Creating an agricultural products wholesaler 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 agricultural products wholesaler.
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 an agricultural products wholesaler 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 agricultural products wholesaler'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 needed to build an agricultural products wholesaler 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 an agricultural products wholesaler, 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 agricultural products wholesaler 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 agricultural products wholesaler, 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 agricultural products wholesaler's financial forecast.
The sales forecast for an agricultural products wholesaler
The sales forecast, also called topline projection, is normally where you will start when building your agricultural products wholesaler 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 agricultural products wholesalers), and consider the elements below:
- Seasonal Demand: As an agricultural products wholesaler, your sales may be affected by seasonal demand for certain products. For example, the demand for fruits and vegetables may increase during the summer months, while the demand for grains and seeds may be higher in the fall.
- Weather Conditions: Weather conditions can have a significant impact on the availability and quality of agricultural products, which in turn can affect the average price and number of monthly transactions. For instance, a drought may lead to a decrease in supply and an increase in prices.
- Economic Factors: Economic factors such as inflation, interest rates, and consumer spending can also affect the demand for agricultural products. In times of economic downturn, consumers may be more price-sensitive and opt for cheaper products, which could impact your average price and number of transactions.
- Competition: The level of competition in the market can also affect your sales forecast. If there are many other agricultural products wholesalers in your area, you may need to adjust your prices or offer promotions to stay competitive and maintain your monthly transactions.
- Government Regulations: Government regulations related to agriculture, such as import/export laws or subsidies, can also have a direct impact on your business. For instance, changes in import tariffs may affect the cost of importing certain products, which could impact your average price and profitability.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 an agricultural products wholesaler
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your agricultural products wholesaler 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 an agricultural products wholesaler will include some of the following items:
- Staff Costs: This includes salaries, wages, bonuses, and benefits for the employees working in your agricultural products wholesaler. This is one of the biggest operating expenses for your business.
- Accountancy Fees: You may need to hire an accountant to help you manage your finances and keep track of your business transactions. Their fees will be an operating expense for your agricultural products wholesaler.
- Insurance Costs: This includes insurance for your business premises, vehicles, and inventory. As an agricultural products wholesaler, you may also need to consider crop insurance or liability insurance.
- Software Licenses: You may need to purchase software licenses for accounting, inventory management, or customer relationship management. These licenses will be an ongoing operating expense for your business.
- Banking Fees: You will need to pay fees for various banking services such as credit card processing, wire transfers, and loan processing. These fees will be an operating expense for your agricultural products wholesaler.
- Rent or Mortgage Payments: If you are not the owner of your business premises, you will need to pay rent. If you own the property, you may have a mortgage to pay off. Either way, this will be an operating expense for your business.
- Utilities: This includes electricity, water, and gas for your business premises. As an agricultural products wholesaler, you may also have additional expenses for cooling or heating to store your products.
- Transportation Costs: You will need to pay for transportation of your agricultural products from the farms to your warehouse and from your warehouse to your customers. This will be an ongoing operating expense.
- Marketing and Advertising: To attract new customers and promote your products, you will need to invest in marketing and advertising. This can include online ads, print ads, brochures, and trade show expenses.
- Office Supplies: You will need to purchase office supplies such as paper, pens, printer ink, and other essentials for your day-to-day operations. These expenses can add up over time.
- Maintenance and Repairs: As an agricultural products wholesaler, you may have equipment and vehicles that require regular maintenance and repairs. These costs will be an ongoing operating expense for your business.
- Professional Memberships and Subscriptions: You may need to pay for memberships to industry associations or subscriptions to trade publications. These can provide valuable resources and networking opportunities for your business.
- Taxes: You will need to pay various taxes, including income tax, sales tax, and property tax. These expenses can have a significant impact on your bottom line.
- Legal Fees: You may need to hire a lawyer for contracts, regulatory compliance, or other legal matters. Legal fees can be a significant operating expense for your agricultural products wholesaler.
- Training and Development: To stay competitive and up-to-date with industry trends, you may need to invest in training and development for your employees. This can include workshops, conferences, and online courses.
This list will need to be tailored to the specificities of your agricultural products wholesaler, but should offer a good starting point for your budget.
What investments are needed to start or grow an agricultural products wholesaler?
Creating and expanding an agricultural products wholesaler also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an agricultural products wholesaler could include elements such as:
- Warehouse Equipment: As an agricultural products wholesaler, you will need to invest in equipment such as forklifts, pallet jacks, and conveyor systems to efficiently store and move your products in your warehouse.
- Delivery Trucks: In order to transport your agricultural products to your customers, you will need to purchase delivery trucks that can handle the weight and volume of your products. These trucks will also need to be properly maintained to ensure timely and safe delivery.
- Cold Storage Facilities: Many agricultural products need to be stored in cold temperatures to maintain their freshness and quality. This may require investing in a cold storage facility or refrigerated trucks to preserve your products before they are sold.
- Packaging and Labeling Equipment: As an agricultural products wholesaler, you will need to package and label your products before they are shipped to your customers. This may include purchasing equipment such as scales, packaging machines, and label printers.
- Office Equipment and Furniture: To efficiently run your business, you will need to invest in office equipment and furniture such as computers, printers, desks, and chairs. These items are essential for managing your financials, communicating with customers, and conducting other day-to-day operations.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your agricultural products wholesaler.
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 agricultural products wholesaler
The next step in the creation of your financial forecast for your agricultural products wholesaler 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 an agricultural products wholesaler?
Now let's have a look at the main output tables of your agricultural products wholesaler's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your agricultural products wholesaler is likely to be in the years to come.
For your agricultural products wholesaler 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 agricultural products wholesalers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your agricultural products wholesaler'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 agricultural products wholesaler 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 agricultural products wholesaler'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 agricultural products wholesaler 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 agricultural products wholesaler'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 agricultural products wholesaler's financial forecast?
Creating your agricultural products wholesaler's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your agricultural products wholesaler's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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
Outsourcing the creation of your agricultural products wholesaler 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 agricultural products wholesaler's financial forecast?
Creating an accurate and error-free agricultural products wholesaler 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 agricultural products wholesaler, 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 agricultural products wholesaler
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 agricultural products wholesaler 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 an agricultural products wholesaler, 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 project revenues for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting an agricultural products wholesaler? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
