How to create a financial forecast for an apricot 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 apricot farm.
Putting together an apricot 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 apricot 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 apricot farm?
The financial projections for your apricot farm act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your apricot farm's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 apricot farm financial forecast?
A apricot 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 apricot farm.
If you are creating (or updating) the forecast of an existing apricot 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 apricot 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 apricot 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 apricot farm's financial forecast.
The sales forecast for an apricot farm
The sales forecast, also called topline projection, is normally where you will start when building your apricot 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 apricot farms), and consider the elements below:
- Weather conditions: Weather can have a significant impact on the quality and quantity of apricots produced in a given year. Unfavorable weather, such as heavy rain or frost, can damage the crop and lead to a smaller harvest, resulting in a higher average price for apricots.
- Pest infestations: Pests, such as aphids or fruit flies, can cause damage to apricot trees and reduce the overall yield of the farm. This can lead to a decrease in the number of monthly transactions and an increase in the average price of apricots due to limited supply.
- Demand for organic produce: With the increasing demand for organic and locally grown produce, consumers may be willing to pay a higher price for apricots that are grown without the use of pesticides and chemicals. This can result in a higher average price for apricots and potentially an increase in monthly transactions.
- Competition from other fruits: Apricots may face competition from other fruits, such as peaches or plums, during peak harvest season. This can lead to a decrease in the average price of apricots as consumers have more options to choose from.
- Trade policies and regulations: Changes in trade policies or regulations can impact the export of apricots to international markets. This can affect the demand and price of apricots, potentially leading to fluctuations in the average price and number of monthly transactions.
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 apricot farm
The next step is to estimate the expenses needed to run your apricot farm on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your apricot farm's operating expenses should include the following items at a minimum:
- Staff costs: This includes wages, salaries, and benefits for all employees working on the apricot farm. This may also include hiring seasonal workers during peak harvest times.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and financial planning for your apricot farm.
- Insurance costs: It is important to have insurance coverage for your apricot farm, including property insurance, liability insurance, and crop insurance.
- Software licenses: You may need to purchase or renew licenses for software programs that help with farm management, inventory tracking, or sales and marketing.
- Banking fees: You may incur fees for transactions, account maintenance, and loan payments related to your apricot farm's bank accounts.
- Seedlings and seeds: This includes the cost of purchasing new apricot seedlings or seeds to replant and maintain your orchard.
- Fertilizers and pesticides: To ensure healthy and productive apricot trees, you may need to purchase fertilizers and pesticides to use on your farm.
- Irrigation and water costs: Apricot trees require consistent and adequate water supply, so you may need to pay for irrigation systems and/or water usage fees.
- Fuel and maintenance for farm equipment: You will need to budget for gasoline or diesel to power tractors and other farm equipment, as well as regular maintenance and repairs.
- Packaging materials: When harvesting apricots, you will need packaging materials such as crates, boxes, and labels to prepare them for sale.
- Transportation costs: If you are selling your apricots at farmers' markets or delivering them to stores or customers, you will need to cover the cost of transportation.
- Marketing and advertising expenses: To promote your apricot farm and attract customers, you may need to invest in advertising, social media marketing, or attending trade shows.
- Utilities: This includes the cost of electricity, gas, and other utilities needed to operate your apricot farm, such as powering irrigation systems or cooling facilities.
- Rent or mortgage payments: If you do not own the land on which your apricot farm is located, you will need to budget for rent or mortgage payments.
- Taxes and permits: You may be required to pay property taxes, income taxes, or obtain permits for your apricot farm, depending on your location and local regulations.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small apricot farm might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an apricot farm?
Creating and expanding an apricot farm also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an apricot farm could include elements such as:
- Apricot trees: These are the most important investment for your apricot farm. Choose healthy, disease-resistant trees and plant them in well-drained soil with adequate sunlight.
- Irrigation system: Apricot trees require consistent watering to thrive. Install a reliable irrigation system, such as drip or sprinkler, to ensure your trees receive enough water.
- Tractor: A tractor is essential for tasks such as plowing, tilling, and harvesting your apricot farm. Consider your farm's size and terrain when selecting a tractor.
- Fruit sorting and packing equipment: As your apricot farm grows, you may need equipment such as a fruit sorting machine and packing materials to efficiently process and package your apricots for sale.
- Storage facilities: To preserve your apricots, you may need to invest in cold storage facilities such as refrigerators or cool rooms. This will help you extend the shelf life of your apricots and maintain their quality.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your apricot 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 apricot farm
The next step in the creation of your financial forecast for your apricot 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 apricot farm?
Now let's have a look at the main output tables of your apricot farm's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your apricot farm is likely to be in the years to come.
For your apricot farm 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 apricot farms, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your apricot 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 apricot 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 apricot 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 apricot 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 apricot 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 apricot farm's financial forecast?
Creating your apricot farm's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your apricot 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 apricot 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 apricot 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 apricot 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 apricot 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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own apricot farm, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
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 apricot 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 apricot 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 create a sales forecast for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting an apricot farm? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
