How to create a financial forecast for an apple farm?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your apple farm.
Putting together an apple farm 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 apple farm.
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 an apple farm?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your apple farm and ensure that it can be financially viable in the years to come.
A financial plan for an apple farm 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 apple farm 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 apple farm'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 needed to build an apple farm 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 apple farm, 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 apple farm 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 apple farm, 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 apple farm's financial forecast.
The sales forecast for an apple farm
The sales forecast, also called topline projection, is normally where you will start when building your apple 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 apple farms), and consider the elements below:
- Weather Conditions: As an apple farmer, you are well aware of how weather conditions can greatly affect your crop yield. Droughts, floods, or extreme temperatures can result in a decrease in the number of apples produced, leading to a decrease in your average price or number of monthly transactions.
- Pest Infestations: Pests such as apple maggots, codling moths, and apple aphids can cause significant damage to your apple trees and affect the quality and quantity of your harvest. This can result in a decrease in your average price or number of monthly transactions as customers may be hesitant to purchase damaged or infested apples.
- Competition: Your apple farm may face competition from other local farms or even large-scale commercial farms. If there is an oversupply of apples in the market, this can lead to a decrease in your average price or number of monthly transactions as customers have more options to choose from.
- Changing Consumer Preferences: Consumer preferences can greatly impact the demand for your apples. For example, if there is a growing trend towards organic produce, you may need to adjust your farming methods to cater to this demand. Failure to do so may result in a decrease in your average price or number of monthly transactions.
- Labor Costs: As an apple farmer, you rely heavily on labor to help with tasks such as planting, pruning, and harvesting. Any changes in labor costs, such as minimum wage increases, can directly impact your business's profitability and may result in an increase in your average price to compensate for these costs.
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 apple farm
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your apple 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 apple farm will include some of the following items:
- Staff costs: This includes salaries, wages, and benefits for your farm workers, as well as any seasonal or contract labor you may need.
- Accountancy fees: You will need to hire an accountant to help with bookkeeping, taxes, and other financial matters related to your apple farm.
- Insurance costs: It is important to have insurance to protect your farm from potential risks, such as damage to crops or equipment, liability claims, and accidents.
- Software licences: As technology plays a crucial role in modern farming, you may need to purchase software licenses for farm management, accounting, or other necessary tools.
- Banking fees: You will incur fees for services such as checking and savings accounts, wire transfers, and credit card processing.
- Seed and fertilizer costs: These are essential inputs for growing healthy and productive apple trees.
- Irrigation and water costs: Apples require regular watering, so you will need to factor in the cost of irrigation systems and water usage.
- Pest control: To protect your apple trees from pests and diseases, you may need to spend money on pesticides, traps, or other methods of control.
- Fuel and energy costs: Running tractors and other farm equipment, as well as heating or cooling farm buildings, will contribute to your operating expenses.
- Packaging materials: Once your apples are ready for market, you will need to package them in boxes, bags, or other containers, which will incur costs.
- Marketing and advertising: To attract customers and promote your apples, you may need to spend money on advertising, market research, or attending trade shows.
- Equipment repairs and maintenance: As with any machinery, your farm equipment will need regular maintenance and occasional repairs.
- Rent or mortgage payments: If you do not own the land where your apple farm is located, you will need to pay rent or a mortgage on the property.
- Transportation costs: Getting your apples from the farm to market will require transportation, whether it is your own vehicle or hiring a third-party carrier.
- Taxes and licenses: You will need to pay property taxes, income taxes, and possibly obtain licenses or permits to operate your apple farm.
This list will need to be tailored to the specificities of your apple farm, but should offer a good starting point for your budget.
What investments are needed to start or grow an apple farm?
Creating and expanding an apple farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an apple farm could include elements such as:
- Tractors: Tractors are essential for an apple farm as they are used for plowing, tilling, and harvesting. They come in various sizes and models, so make sure to choose one that fits your specific needs and budget.
- Irrigation Systems: Apples require a consistent and sufficient water supply to grow and thrive. Installing an irrigation system will ensure that your trees receive the proper amount of water, leading to healthier and more abundant harvests.
- Storage Units: Proper storage is crucial for preserving the quality of your apples. Investing in storage units such as refrigerated rooms or controlled atmosphere storage will help you keep your apples fresh for a longer period, allowing you to sell them at a higher price.
- Pesticide Sprayers: To protect your apple trees from pests and diseases, you will need to invest in quality pesticide sprayers. These can come in the form of handheld sprayers or tractor-mounted sprayers, depending on the size of your farm.
- Harvesting Equipment: Harvesting apples by hand can be time-consuming and physically demanding. Consider investing in mechanized harvesting equipment such as apple pickers, which can greatly increase your efficiency and productivity.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your apple 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 apple farm
The next step in the creation of your financial forecast for your apple 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 apple farm?
Now let's have a look at the main output tables of your apple farm'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 apple farm'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 apple farm will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your apple farm's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your apple farm. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 apple farm 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 apple farm'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 apple farm 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 apple farm'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 apple farm's financial projections?
Building an apple 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 apple 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 apple 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 apple farm's financial forecast?
Creating an accurate and error-free apple farm financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 apple 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 apple 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 apple 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 apple 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?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting an apple farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
