How to create a financial forecast for an almond farm?
Creating a financial forecast for your almond farm, 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 almond farm 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 an almond 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 almond farm becomes handy.
Creating an almond 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 almond 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 almond 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 almond 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 almond farm financial forecast?
A almond 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 almond farm.
If you are creating (or updating) the forecast of an existing almond 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 almond 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 almond 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 almond farm's financial forecast.
The sales forecast for an almond farm
The sales forecast, also called topline projection, is normally where you will start when building your almond farm 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 almond farms), and consider the elements below:
- Drought: Drought can significantly impact almond production and lead to a decrease in supply, driving up prices for consumers. It can also result in smaller and lower quality almonds, decreasing the overall demand and number of transactions.
- Foreign demand: The demand for almonds in countries like China and India has been steadily increasing in recent years. This can drive up prices for your almonds and result in higher transaction numbers as more buyers enter the market.
- Pest infestations: Almond farms are vulnerable to various pests, such as the navel orangeworm, which can damage crops and decrease supply. This can lead to higher prices for your almonds and a decrease in monthly transactions as buyers may turn to other sources.
- Trade policies: Changes in trade policies, such as tariffs or subsidies, can have a significant impact on the almond market. For example, increased tariffs on your exports may lead to higher prices for domestic buyers and a decrease in transactions with international buyers.
- Consumer trends: With the rise of health-conscious consumers, the demand for almonds and almond-based products has increased. This can drive up prices for your almonds and result in higher monthly transactions as more consumers incorporate almonds into their diets.
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 an almond farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your almond 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 almond farm will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees, including farm laborers, administrative staff, and management.
- Accountancy Fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and financial planning.
- Insurance Costs: It's important to have insurance coverage for your almond farm, including property insurance, liability insurance, and crop insurance.
- Software Licenses: You may need to purchase software licenses for various programs, such as accounting software, farm management software, and weather tracking software.
- Banking Fees: You may incur fees for various banking services, such as wire transfers, check processing, and ATM fees.
- Seed and Fertilizer: The cost of purchasing and applying seed and fertilizer is a major expense for almond farms.
- Irrigation: Almond trees require consistent and efficient irrigation, which can be a significant expense for the farm.
- Pest and Disease Control: You may need to hire professionals or purchase products to control pests and diseases that can harm your almond trees.
- Fuel and Energy: You will need to budget for fuel and energy costs, including gasoline for farm vehicles and electricity for irrigation pumps.
- Equipment Maintenance: Regular maintenance of farm equipment, such as tractors and harvesters, is necessary to keep them in good working condition.
- Laboratory Testing: You may need to send soil and water samples to a laboratory for analysis to ensure optimal growing conditions for your almond trees.
- Marketing and Advertising: Promoting your almond farm and products may require expenses for advertising, trade shows, and other marketing efforts.
- Packaging and Shipping: If you sell your almonds directly to consumers, you will need to budget for packaging materials and shipping costs.
- Rent or Mortgage: If you do not own the land where your almond farm is located, you will need to pay rent or a mortgage payment.
- Taxes: Property taxes and income taxes are among the taxes you may need to pay as an almond farm owner.
This list will need to be tailored to the specificities of your almond farm, but should offer a good starting point for your budget.
What investments are needed to start or grow an almond farm?
Creating and expanding an almond farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an almond farm could include elements such as:
- Irrigation System: As an almond farmer, you will need to invest in an efficient irrigation system to ensure that your trees receive the right amount of water at the right time. This can include items such as irrigation pipes, pumps, and filters.
- Tractors and Farm Equipment: Almond farming requires specialized equipment to plant, harvest, and maintain the trees. This can include tractors, sprayers, and other machinery specifically designed for almond orchards.
- Storage Facilities: Once harvested, almonds need to be stored in a climate-controlled environment to maintain their quality. This may require building or purchasing storage facilities, such as warehouses or silos.
- Fencing and Security: To protect your almond farm from pests and thieves, you may need to invest in fencing and security systems. This can include installing fences around the orchard and investing in surveillance cameras or alarms.
- Greenhouse or Shade Structure: Depending on your location and climate, you may need to invest in a greenhouse or shade structure to protect your almond trees from extreme temperatures or harsh weather conditions.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your almond 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 almond farm
The next step in the creation of your financial forecast for your almond 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 almond farm?
Now let's have a look at the main output tables of your almond farm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your almond farm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for an almond 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 almond farm'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 an almond farm 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 almond farm'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 almond farm 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 almond farm's financial projections?
Building an almond 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 almond 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.
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 almond 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 almond farm's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free almond farm financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your almond farm's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
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 almond 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 an almond 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 project revenues for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting an almond farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
