How to create a financial forecast for an alfalfa farm?

Developing and maintaining an up-to-date financial forecast for your alfalfa 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 an alfalfa 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 an alfalfa farm?
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 alfalfa farm becomes handy.
Creating an alfalfa farm 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 alfalfa farm.
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 alfalfa farm 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 alfalfa farm'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 used as input to build an alfalfa farm financial forecast?
A alfalfa 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 alfalfa farm.
If you are creating (or updating) the forecast of an existing alfalfa 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 alfalfa 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 alfalfa 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 alfalfa farm's financial forecast.
The sales forecast for an alfalfa farm
From experience, it usually makes sense to start your alfalfa farm's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your alfalfa 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 alfalfa 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:
- Weather conditions: As an alfalfa farmer, you know that the amount of rainfall and temperature can greatly affect the quality and yield of your crops. Droughts or extreme heat can lead to a lower supply of alfalfa, driving up the average price as demand remains constant.
- Competition: Keep an eye on other alfalfa farms in your area. If they increase their production, it may lead to a decrease in your average price as there is a higher supply in the market. On the other hand, if a competitor goes out of business, there may be an opportunity for you to increase your prices.
- Transportation costs: The cost of transporting alfalfa from your farm to customers can greatly impact your average price. Keep track of fuel prices and any changes in transportation fees to accurately forecast your costs and adjust your prices accordingly.
- Pest infestations: Insects and other pests can damage your alfalfa crops and result in a lower supply. This can drive up the average price as customers may be willing to pay more for a limited supply of high-quality alfalfa.
- Demand from livestock industry: The demand for alfalfa is largely driven by the livestock industry, specifically for dairy cows and horses. Keep track of any changes in the industry, such as an increase in dairy cow population or a shift towards alternative feed sources, as it can affect the demand for alfalfa and subsequently your average price.
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 an alfalfa farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your alfalfa 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 an alfalfa farm will include some of the following items:
- Seed and Fertilizer: As an alfalfa farmer, you will need to regularly purchase seeds and fertilizers to maintain the quality and yield of your crop.
- Water and Irrigation: Alfalfa requires a significant amount of water, so you will need to account for the cost of irrigation systems and water usage.
- Labor Costs: You will need to pay for the labor of yourself and any employees you may have, including wages and benefits.
- Machinery and Equipment Maintenance: Alfalfa farming requires specialized equipment, such as tractors and balers, which will need regular maintenance and repairs.
- Pest Control: Pests can significantly damage alfalfa crops, so you may need to invest in pest control measures to protect your harvest.
- Utilities: You will need to cover the cost of electricity, gas, and other utilities to run your farm operations.
- Insurance: It is essential to have insurance coverage for your alfalfa farm, including liability and crop insurance.
- Accounting and Bookkeeping: Keeping track of your farm's financials is crucial, so you may want to hire an accountant to handle your books.
- Marketing and Advertising: To sell your alfalfa, you may need to invest in marketing and advertising efforts to reach potential buyers.
- Software Licenses: You may need to purchase software licenses for farm management, record-keeping, or other specialized programs.
- Banking Fees: As a business owner, you will likely incur banking fees for transactions, loans, and other financial services.
- Taxes: You will need to pay taxes on your farm's income, property, and other applicable taxes.
- Crop Insurance Premiums: To protect your alfalfa crop from natural disasters, you may need to pay premiums for crop insurance.
- Fuel and Transportation: You will need to factor in the cost of fuel and transportation for your farm operations, such as delivering your alfalfa to buyers.
- Legal Fees: As a business owner, you may need to seek legal advice or representation, resulting in legal fees.
This list will need to be tailored to the specificities of your alfalfa farm, but should offer a good starting point for your budget.
What investments are needed to start or grow an alfalfa farm?
Once you have an idea of how much sales you could achieve and what it will cost to run your alfalfa farm, it is time to look into the equipment required to launch or expand the activity.
For an alfalfa farm, capital expenditures and initial working capital items could include:
- Land and Buildings: This includes the cost of purchasing or leasing land for your alfalfa farm, as well as any buildings or structures needed for the farm, such as barns, storage sheds, or a processing facility.
- Equipment and Machinery: This includes the cost of purchasing or leasing tractors, mowers, balers, and any other equipment needed for planting, harvesting, and maintaining your alfalfa crop.
- Irrigation Systems: Alfalfa requires a significant amount of water, so investing in a reliable and efficient irrigation system is essential. This can include the cost of pumps, pipes, and sprinklers.
- Fencing and Livestock Equipment: If you plan on raising livestock on your alfalfa farm, you will need to invest in fencing and equipment for their care, such as feeding troughs and watering systems.
- Processing and Packaging Equipment: If you plan on selling your alfalfa as a product, rather than just for feed, you may need to invest in equipment for processing and packaging, such as a hay baler or packaging machine.
Again, this list will need to be adjusted according to the specificities of your alfalfa 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 alfalfa farm
The next step in the creation of your financial forecast for your alfalfa 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 an alfalfa farm?
Now let's have a look at the main output tables of your alfalfa farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your alfalfa farm's expected growth and profitability over the next three to five years.

A financially viable P&L statement for an alfalfa 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 alfalfa 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 alfalfa 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 alfalfa 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 alfalfa 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 alfalfa 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 alfalfa farm's financial projections?
Building an alfalfa farm 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 alfalfa 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional alfalfa farm 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 alfalfa farm's financial forecast?
Creating an accurate and error-free alfalfa 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 alfalfa 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 alfalfa farm

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 alfalfa 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 an alfalfa 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 project sales for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start an alfalfa farm? Share our financial projection guide with them!