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By Boris Soleki (Neobuild) and Patrice Clément (CEC)


The purpose of studying the financial feasibility of your project is to determine if – and when – the project revenues will cover the costs and generate a profit. Since you are going to start from scratch, this feasibility study is mainly based on assumptions about costs, investments, and sales volumes.
This will help you determine whether you can expect your project to generate profits and cash or whether it will require additional funds or revenue action plans to reach a financial balance. This section will guide you on how to make and verify your business assumptions and how to integrate the revenue and cash flow forecasts of your project.
You should be able to anticipate problems and take countermeasures to avoid them. All of this is the entrepreneur’s responsibility.
This document gives you some basic methods, tips, and a basic calculation tool to estimate the income (P&L: profit & loss) and the cash situation of the project at every moment.


When you outline your project, some data are known, and others have to be estimated. The first important thing to do is to try and make your estimations as accurate and sure as possible. For the investment part, see to it that everything is included in your calculations and double-check by calling for tenders from several potential suppliers (see example below “Cost Calculation Bürstadt"). You will mostly know the costs of the biggest investments (building, land, most important devices and facilities, etc.). As for the revenue forecast, make your market study as accurate as possible, not too optimistic as to sales prices, competitors, customer behaviour, etc. A good way to make reliable estimations is to double-check if each forecast figure of each line of your calculation file is realistic.  If you can find state-of-the-art examples or business experiences to base your estimations on, do not hesitate to use them. Besides forecasting the operation of the business with hypotheses that you find realistic, a way to secure the business is to make a worst-case forecast. This means that the P&L and cash forecasts are based on the most pessimistic hypotheses. The idea is that if the business keeps its P&L and cash balance with pessimistic hypotheses, it should be very safe in reality.



In the example ‘Construction Cost Calculation’ attached, you can find a calculation model for a standard rooftop greenhouse  (RTG) construction. The worksheet is intended to be as complete as possible in the case of RTG construction on an existing building. The costs of adaptation of the existing building, roof adaptation, RTG construction and RTG equipment stick to real pilot experience. The structure may have to be extended or completed to follow your specific project. The essential principle is that investments will concern all the purchases that will only have to be made once before you can start your own RTG project. These items will last for several years before they have to be replaced. They will be subject to depreciation corresponding to their life cycle in the RTG bookkeeping.
As for costs, we suggest another ‘Budget Estimate’ worksheet where you can integrate fixed and variable costs for every working period (mostly 1-year periods). Fixed costs are those that are to be paid regardless of whether you are producing or not, and variable costs are directly related to your production. For example, fire insurance will have to be paid for even if production is stopped (fixed cost), whereas seeds will only have to be bought for production (variable cost). Several software programs are available (like Agritechno); better still, you can work with a consultant.


Additional incomes are possible (saved water, recycling or energy production by machines). It is important to mention cash revenue sources that have to cover the cash needs at any time: operational revenues are those from greenhouse products sales + own cash investment + subsidies + bank credits + possibly a cash pool from crowd funding or cooperative investors.  The cash situation in the excel file should also contain 1 line per cash revenue source to check that the total available cash covers cash needs at any time.


When making a business plan, the P&L forecast has to be independent from the cash forecast. At any moment the P&L result is generated by the difference between all the recorded costs and revenues. But the cash situation is the difference between revenues and expenses. The cash balance is the amount of cash that is available in the project at any moment. Every day, it is the money you need to spend vs. the money you receive from your customers and other cash sources. For example, if you buy a product for 10 € and sell it for 12 €, you will book a cost of 10 € and a turnover of 12 €, so the P&L bottom line will be a profit of 2 €.  But if you already paid the invoice of 10 € to your supplier and your customer did not pay the invoice of 12 € to you (e.g. because you allowed him/her to pay 1 month later), your cash situation at this same moment will be - 10 €. Therefore, both a P&L forecast AND a cash forecast need to be made. Bankruptcy never happens because of P&L, but because of negative cash situations.


Taxation systems and the way businesses can manage their costs, expenses, and revenues greatly vary among countries.  Good examples are the way the depreciation of an investment is considered or labour cost taxation levels, which can differ a lot across Europe. So always check the accounting rules and taxation system applied in the country where the investment is made, especially if your plan to invest abroad.


A forecast can be made per month, per trimester, semester, per year or even daily. Our advice is to forecast P&L and cash using “the higher the financial risk, the shorter the forecast period” as a principle. In most cases the bankruptcy risk is high at the beginning because high expenses need to be made although revenues are close to 0. This means that it is safe to control the cash situation very frequently to avoid default payment which can block the business. After the first months/years of experience you can revise your forecast based on the calculation of the actual business results. If upcoming periods are ‘copies’ of actually experienced periods, the risk will be lower, and your forecast will be more reliable and accurate. Then you will be able make new forecasts over longer periods.


To keep an eye on the health of the business, key performance indicators (KPIs) can be defined and measured regularly and compared with the forecast to see if the business is running above, below, or equal to expectations. Like driving a car, each KPI tells you if the car drives as it should be. Like speed, oil, petrol for a car, each crucial datum of the business is measured to tell you if the business is healthy or if something needs to be adapted. KPIs altogether form the dashboard of the business.  This allows the manager to take relevant decisions. So, if most KPIs are above your expectations, you can decide to accelerate the business growth by asking more money from the bank, recruiting one more employee, launching a new activity (product) sooner than planned, etc. On the contrary, if KPIs are not doing well you can decide to stop producing a non-productive product or delay an investment.

Most financial partners like to see the performance of their investment measured. They consider this as a risk reduction factor.

NB: KPIs can be financial but also commercial or operational (e.g. they can measure the actual stock volume vs. the ideal stock volume, sales volume, waste volume, etc.). It is good to measure KPIs for all aspects, which are mostly inter-related.  In this specific case, KPIs can also be environmental.

Chapter TECHNICAL, ENVIRONMENTAL AND ECONOMIC ASSESSMENT OF ROOFTOP GREENHOUSES provides more details about KPIs and the way to monitor the RTG from an economic point of view.  Some suggestions are given as to which KPIs to follow according to the type of results that are crucial for your RTG.

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