How to do a Financial Plan for your Beverage Manufacturing Company?
Evaluate if its the right business for you
A manufacturing business is more complicated than retail and will require a lot of time to research your market and competitors and do financial planning. Proper financial planning should be put in place to help you assess if your prospect project is worth it to pursue.
Financial planning is indispensable before starting any business, especially if it’s as complicated as a manufacturing company. Running through the numbers and ensuring that the result is viable is a prerequisite.
Presented below are the considerations in preparing your financial plan.
1. Forecasting Revenue
In computing the revenue of your beverage company, you need to plan how many tanks you are going to produce per cycle, the number of cycles per year, and capacity utilization. There should also be a production losses allowance. Product sizes can be in barrel, sixtel, and per cases of 375 ml and 750 ml. Prices will vary if you sold them to distributors, retailers, or end customers.
2. Estimating Expenses
To produce the desired volume, you incur production costs and general & administrative expenses. Also, identify your variable costs and fixed costs. Variable costs include your ingredients, packaging, and utilities for production. Variable costs increase along with the production volume. On the other hand, fixed costs are not dependent on the production level and are incurred whether you produce less or more. Fixed costs include salaries & benefits, rent, management costs, permits & licenses, etc.
Proper planning of your expenses helps you prepare the financial resources needed to accomplish the desired output level, pay the supplier on time, and finance the day-to-day operation.
3. Personnel Plan
When starting, you need to prepare in advance the personnel plan. These will help you allocate enough resources when times need for hiring additional staff. In this way, the operation will not be hampered, and you can hire competitive workers.
4. Financial Statements
The three financial statements (income statement, balance sheet, and income statement) are practical financial planning mechanisms in assessing business profitability. The income statement provides you EBITDA and Net Income – two helpful accounts to assess whether your beverage company is earning or not. Cash flows show the liquidity of your business if you can finance the day-to-day operation. It also depicts the economics of your business. The balance sheet is a good indication of business financial leverage, whether you have a healthy percentage of debt to your assets and equity.
5. Financial Analysis
The financial analysis provides interpretation to understand better the numbers behind your financial statements. The major categories of the financial ratios for analysis are liquidity ratios, profitability ratios, efficiency ratios, leverage ratios, and growth ratios. These ratios provide different angles of analysis to assess your business economics better.
6. Financial Metrics
Financial metrics help you in deciding whether to pursue the project or not. These include the Return on Investment (ROI), Payback Period, Net Present Value (NPV), and Internal Rate of Return (IRR). ROI and Payback do not consider the time value while NPV and IRR do. By combining these financial metrics in the valuation, a more reliable and comprehensive assessment can be achieved.
Preparing a financial plan is a must-do activity before starting a business or significant capital investment. The financial plan provides the economics of whether the project is worth pursuing or not. Also, by having a financial plan, you can increase the success rate by identifying business pain points and finding solutions before they arise.
eFinancialModels provide vast resources of financial templates for your manufacturing business. These templates are equipped with the financial metrics and analysis for manufacturing company financial planning needs.
About the Creator
Lellith Garcia
Lellith Garcia is the Marketing Manager of eFinancialModels.com, which provides a rich inventory of industry-specific financial model templates in form of Excel spreadsheets.
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