Latest / Craft Brewery Financial Training Podcast / Taproom and Brewery Metrics to Monitor

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Taproom and Brewery Metrics to Monitor · Craft Brewery Financial Training Podcast

• 0:00
  Kary Shumway: Today on the podcast is another solo episode.
• 0:03
  Kary Shumway: I'm going to talk about taproom and brewery metrics to watch.
• 0:07
  Kary Shumway: So we're going to go through your KPIs, your key performance indicators, kind of give you an overview of what they are and how you can track, measure, monitor, and improve them.
• 0:17
  Kary Shumway: And then some best practices, some things to think about as you're building your dashboard of key metrics.
• 0:23
  Kary Shumway: I'll also have some example scorecards, templates, dashboards.
• 0:27
  Kary Shumway: I'm going to talk these things through, but also give you a link so you can download these for yourself and also watch the video version of this presentation.
• 0:37
  Kary Shumway: And I'll wrap up with a discussion of key metrics and compensation, really how you can tie the compensation of your staff towards the achievement of certain KPIs and key metrics.
• 0:51
  Kary Shumway: Really, the goal is to align pay with bottom line company objectives.
• 0:56
  Kary Shumway: So for now, please enjoy this conversation, this presentation on Taproom Brewery Metrics to Watch.
• 1:04
  Kary Shumway: Welcome to the Craft Brewery Financial Training Podcast, where we combine beer and numbers to provide you with tips, tactics, and strategies so that you can improve financial results in your brewery.
• 1:15
  Kary Shumway: I'm your host, Carrie Shumway, a CPA, CFO for a brewery, and a former CFO for a beer distributor.
• 1:21
  Kary Shumway: I've spent the last 20 years using finance to improve financial results in our beer business.
• 1:27
  Kary Shumway: Now I'm helping other craft breweries to do the same.
• 1:30
  Kary Shumway: Are you ready to take your brewery financial results to the next level?
• 1:33
  Kary Shumway: Okay, let's get started.
• 1:39
  Kary Shumway: Just a quick note, and we'll be right back to the podcast.
• 1:42
  Kary Shumway: I want to let you know about a new network for beer industry professionals.
• 1:46
  Kary Shumway: It's called the Beer Business Finance Association.
• 1:50
  Kary Shumway: It's an organization of financial pros, just like you, looking to improve financial results, increase profitability, connect with your peers, and share best practices.
• 2:00
  Kary Shumway: So I'd love to tell you a little bit more about this.
• 2:03
  Kary Shumway: If you are interested in learning more, please email me, Carrie at Beer Business Finance.com.
• 2:09
  Kary Shumway: That's K-A-R-Y at Beer Business Finance dot com.
• 2:13
  Kary Shumway: Or you can visit BBFassociation.org.
• 2:16
  Kary Shumway: That's BBFassociation.org to learn more.
• 2:21
  Kary Shumway: Hello everybody.
• 2:22
  Kary Shumway: It's Carrie Shamway here.
• 2:23
  Kary Shumway: I'm the founder of Craftery Financial Training and the Beer Business Finance Association.
• 2:29
  Kary Shumway: I want to talk to you today about taproom and brewery financial metrics to follow.
• 2:34
  Kary Shumway: Metrics, KPIs, key performance indicators.
• 2:38
  Kary Shumway: We think about these as financial shorthand and measuring the most important numbers in your brewery business.
• 2:44
  Kary Shumway: So I'm going to move kind of quickly through the information.
• 2:47
  Kary Shumway: Obviously, it's available for rewatch, but if you're interested, I did put together a free mini course on key metrics for your breweries.
• 2:56
  Kary Shumway: There's lots of scorecards, templates, best practices, and key questions to help you identify your key metrics.
• 3:05
  Kary Shumway: Because that's usually the first start is you know, we want to measure what matters.
• 3:10
  Kary Shumway: So first we have to kind of identify what that is.
• 3:12
  Kary Shumway: So if you want to scan the QR code, you can grab this free KPI mini course for yourself.
• 3:18
  Kary Shumway: So here's what I'm going to talk about.
• 3:21
  Kary Shumway: Number one, key performance indicators, starting points, basics.
• 3:25
  Kary Shumway: Where do we begin?
• 3:26
  Kary Shumway: Next are best practices.
• 3:28
  Kary Shumway: You know, how do we think about KPIs?
• 3:31
  Kary Shumway: How do we think about using them, implementing them?
• 3:34
  Kary Shumway: And when we track, measure, and monitor these, what are we going to get out of this?
• 3:38
  Kary Shumway: What kind of result are we going to see?
• 3:39
  Kary Shumway: I'm going to share with you some scorecards, templates, dashboards that you can use.
• 3:44
  Kary Shumway: And then I want to talk a little bit about how key metrics and compensation can go hand in hand together.
• 3:50
  Kary Shumway: So for example, you're thinking about compensation.
• 3:54
  Kary Shumway: You know, how do we incentivize folks to do things that are in alignment with our bottom line company goals?
• 4:02
  Kary Shumway: So how do we kind of tie those measurements together?
• 4:07
  Kary Shumway: We think about bonus plans, incentive structures, and things of that nature.
• 4:12
  Kary Shumway: How can we use KPIs to help advance that cause?
• 4:16
  Kary Shumway: So, first of all, what are KPIs?
• 4:18
  Kary Shumway: These go by different names, critical numbers, key metrics, key performance indicators.
• 4:24
  Kary Shumway: I just think of them as a quantifiable measure that you can use to evaluate the success in your organization.
• 4:33
  Kary Shumway: More simply put, these are numbers that measure the most important things in your business.
• 4:37
  Kary Shumway: So we want to identify what they are, we want to track them, measure them, see how we're doing, set goals using them, and ultimately do that to improve our financial outcomes.
• 4:49
  Kary Shumway: So KPIs are important because they help you identify and measure the more most important numbers.
• 4:54
  Kary Shumway: And it's I think it's true.
• 4:55
  Kary Shumway: Often we don't know what those most important numbers are, so we need to start with that.
• 5:00
  Kary Shumway: So we want to focus on numbers to achieve the goal.
• 5:03
  Kary Shumway: And what does happen is things come up, distractions happen every day.
• 5:08
  Kary Shumway: We talk about different ways to help prioritize your day.
• 5:14
  Kary Shumway: And you may have heard of the Eisenhower matrix where you think of a grid, and within that grid you've got things that are urgent and not important, urgent and important, not urgent and important, not urgent, not important.
• 5:29
  Kary Shumway: So basically these quadrants and where we want to operate are working on, spending on time on things that are important but not urgent.
• 5:38
  Kary Shumway: And very often it's the exact opposite.
• 5:41
  Kary Shumway: We deal with things that are not important but very urgent.
• 5:44
  Kary Shumway: You can think phone calls, emails, fires that happen in your brewery every day.
• 5:50
  Kary Shumway: Um so the KPIs are really there to bring you back.
• 5:54
  Kary Shumway: Um it's almost like meditation, right?
• 5:56
  Kary Shumway: You have something that you're focused on, and then oh, something happens to take your focus away, and you're off, drifting away from your most important thing.
• 6:04
  Kary Shumway: But meditation would say, just come back.
• 6:06
  Kary Shumway: It's okay.
• 6:07
  Kary Shumway: Let those thoughts go and come back to the most important thing.
• 6:10
  Kary Shumway: KPIs can be can be kind of like that.
• 6:12
  Kary Shumway: We're gonna get distracted, uh, but KPIs can help bring us back.
• 6:17
  Kary Shumway: And I think they're number these numbers are important too because it allows us, and if we think about the focus and turn it into an acronym, follow one course until success.
• 6:27
  Kary Shumway: So measure what's most important, track it, follow it until you achieve and exceed your goals.
• 6:34
  Kary Shumway: When we think about KPIs, they're measured in different ways.
• 6:39
  Kary Shumway: These are just some categories.
• 6:40
  Kary Shumway: We think about lagging indicators, these are things that have occurred in the past.
• 6:45
  Kary Shumway: We're looking historically, leading indicators, and what are the things that we can measure today that are going to help us kind of predict or inform the future, like what's coming?
• 6:56
  Kary Shumway: Uh we think about process goals.
• 6:58
  Kary Shumway: Those are things that are largely within our control.
• 7:01
  Kary Shumway: It's like, what are we gonna do in order to achieve a certain outcome?
• 7:06
  Kary Shumway: What kind of things can we, you know, what kind of action steps can we take?
• 7:10
  Kary Shumway: And then there's outcome goals, which are the measurables, you know, did we achieve sales growth or not?
• 7:16
  Kary Shumway: So we're obviously trying to line up process goals doing certain things with outcome goals, what kind of result did we get?
• 7:23
  Kary Shumway: And then there's benchmarking.
• 7:24
  Kary Shumway: How do we kind of stack up against our peers?
• 7:27
  Kary Shumway: We like to look at industry benchmarks.
• 7:31
  Kary Shumway: So KPIs, you know, who are KPIs for?
• 7:34
  Kary Shumway: I'm a big fan of saying everyone in your business should have a number, whether it's your head brewer, your tap room manager, or the person who's paying the bills in the office.
• 7:42
  Kary Shumway: Anyone in your business that can help achieve the most important thing should be using some form of KPI.
• 7:49
  Kary Shumway: And I do do believe at a minimum it's every department manager, and I think you can even push that down to every staff member in your organization.
• 7:58
  Kary Shumway: Because ultimately, what it is is we're doing work every day, and we want to know where we fit into the organization, and key metrics can help you do that, kind of tie what you do to the numbers, the results of the organization.
• 8:14
  Kary Shumway: And we're going to go through lots of examples of what numbers you might think about for each of your department managers.
• 8:22
  Kary Shumway: So, first, some best practices, some things to think about.
• 8:25
  Kary Shumway: First and foremost is we want to measure what matters and ultimately what makes a difference.
• 8:29
  Kary Shumway: So we want to try to identify what those numbers are.
• 8:33
  Kary Shumway: Next, keep it short, one page, sometimes even one number.
• 8:37
  Kary Shumway: There's a great book called The One Thing, which is really kind of just drilling down on this concept of how important it is to try to identify that one thing and then focus on it until you've you know you've you've completed it.
• 8:50
  Kary Shumway: So keep it short, one page.
• 8:51
  Kary Shumway: I I generally would say everyone has a number, uh, but probably no more than two or three key metrics that they're watching.
• 8:59
  Kary Shumway: We want to share our goals that we want to accomplish and provide regular updates.
• 9:05
  Kary Shumway: So when we give people a number, how are they gonna stay on top of that?
• 9:08
  Kary Shumway: How are they gonna get the data to see how we're doing?
• 9:11
  Kary Shumway: For example, if it's your head brewer and your key metric might be labor hours per barrel brewed, um, do they have the information to calculate that?
• 9:21
  Kary Shumway: What's the goal?
• 9:22
  Kary Shumway: What are they shooting for?
• 9:23
  Kary Shumway: What are the historical numbers on that?
• 9:25
  Kary Shumway: How do we track it?
• 9:26
  Kary Shumway: Where does where do we uh how do we update this information?
• 9:29
  Kary Shumway: So, what's our goal?
• 9:30
  Kary Shumway: How do I get the data to see where I stand to the goal?
• 9:33
  Kary Shumway: What levers can I pull to try to hit and achieve the goal?
• 9:37
  Kary Shumway: Benchmarking against past brewery results.
• 9:40
  Kary Shumway: Um, I kind of like this too because we often will get the question like, how does my brewery, you know, I I brew, you know, 800 barrels a year, um I live in this geography.
• 9:52
  Kary Shumway: How do I compare against other breweries?
• 9:53
  Kary Shumway: Insurance is you you probably don't know because every market's different.
• 9:57
  Kary Shumway: Your strategy, your business strategy is different, your customer base is different, um, your portfolios, you know, everything's different.
• 10:05
  Kary Shumway: Um, so it's awfully hard to say, well, you know, you're out of whack because of we can we can usually give benchmarks in terms of ranges of where you should be.
• 10:15
  Kary Shumway: You know, and often we'll talk about, you know, what should my taproom payroll expense be compared to others?
• 10:22
  Kary Shumway: You say, well, you know, it I we see a range, 15% to 30%.
• 10:28
  Kary Shumway: So if you're somewhere in that 20% range, okay, you're in the range.
• 10:32
  Kary Shumway: So the real question is, are you making any money?
• 10:35
  Kary Shumway: Is you are you cash flowing?
• 10:37
  Kary Shumway: Because it doesn't really matter what someone else is doing if you're not achieving the bottom line financial goals.
• 10:43
  Kary Shumway: So you might have pretty good numbers, eh?
• 10:45
  Kary Shumway: We're on 20%, but you're still not making money.
• 10:47
  Kary Shumway: So that might still be you know too high to achieve your financial goals.
• 10:52
  Kary Shumway: So benchmarking against your past brewery results is really tracking out like where have we come from from?
• 10:58
  Kary Shumway: You know, what was our percentage of payroll as a percentage of sales, you know, last month, six months ago, 12, 18 months ago.
• 11:06
  Kary Shumway: What does that trend look like?
• 11:07
  Kary Shumway: Is it going up?
• 11:08
  Kary Shumway: Is it going down?
• 11:09
  Kary Shumway: What are the things that we can do uh to try to improve that?
• 11:12
  Kary Shumway: You know, i.e.
• 11:13
  Kary Shumway: growth sales and reduce the percentage of that payroll expense.
• 11:17
  Kary Shumway: And then lastly, avoid creating metrics that are difficult or time consuming to calculate.
• 11:22
  Kary Shumway: Uh, because there's there's a real tendency to overcomplicate these key metrics.
• 11:25
  Kary Shumway: They don't necessarily need to be.
• 11:27
  Kary Shumway: So really be mindful of that as you're as you're putting putting them together is you're going to want to kind of calculate these and communicate them on a regular basis.
• 11:35
  Kary Shumway: So I advocate for keeping them simple where you can.
• 11:39
  Kary Shumway: So first and foremost, you know, measuring what matters is a little bit of takes a little bit of introspection.
• 11:46
  Kary Shumway: Look in the mirror, what keeps you up at night, what's an opportunity, or you want to take advantage of a problem that you need to fix.
• 11:53
  Kary Shumway: Um for me personally, cash, cash flow, it keeps me up at night, running out of cash, not having enough, you know, deploying the cash in the right way.
• 12:02
  Kary Shumway: Like, what should I so I set up a bunch of key metrics around cash and cash flow so I can watch it.
• 12:09
  Kary Shumway: It doesn't mean um it's gonna solve the problem, but at least I know I'm addressing it, I'm watching it, I've measured it, I'm doing what I can, and I'm keeping it first and foremost.
• 12:21
  Kary Shumway: Um there's an interest interesting quote that's something to the effect of you know, we are what we focus on.
• 12:26
  Kary Shumway: So if we want to improve cash flow, for example, um, we got to focus on it, and KPIs can help us do that.
• 12:35
  Kary Shumway: We think about our whole business and how to figure out what's the most important number, um, you're gonna have sort of these top-level objectives.
• 12:45
  Kary Shumway: Like, what are the most important numbers in any business?
• 12:47
  Kary Shumway: It's cash flow and net operating income, because without it, you just you can't survive, you can't take care of any of these other things.
• 12:53
  Kary Shumway: You know, marketing is irrelevant, and processing quality doesn't matter if we can't pay the bills.
• 12:58
  Kary Shumway: So I would strongly suggest that we think about creating KPIs that have top-level goals, let's say cash flow and net operating income, and then cascading KPIs that support those.
• 13:11
  Kary Shumway: You know, what are our marketing plans?
• 13:13
  Kary Shumway: What are the metrics that we're gonna monitor in order to support, say, top-level sales, processing quality?
• 13:20
  Kary Shumway: What does this look like in terms of you know the quality of our beer that's going on?
• 13:24
  Kary Shumway: What metrics are there that are gonna support our underlying financial goals, operations, and people, the same thing?
• 13:31
  Kary Shumway: So I'll give you some examples.
• 13:32
  Kary Shumway: The matrix here is really just a visual to kind of get you thinking about how to address all aspects of your business and ultimately assign um that one number to every department manager so everyone has a number.
• 13:47
  Kary Shumway: So it might look something like this if you do the KPI matrix and you've got these four quadrants, and these aren't the only quadrant, you could think about your business differently, but the financial quadrant, process marketing, operations in people, and you can develop uh different KPIs for each one.
• 14:03
  Kary Shumway: So financial, for example, might be that profit and cash flow and sales growth.
• 14:08
  Kary Shumway: Process and quality could be you know data related to the brewing, packaging, lab, marketing could be, you know, obviously social media events and so forth, and operations and people could be any number of things, but maybe it's working on employee satisfaction or reducing turnover.
• 14:25
  Kary Shumway: So you can do this sort of off-the-shelf, what should I be tracking?
• 14:29
  Kary Shumway: Where you can again kind of use those questions, you know, what keeps me up at night, what's a problem I need to solve, how can I quantify that and improve it.
• 14:40
  Kary Shumway: Here's an example of how you might think about everyone gets a number, KPIs by department.
• 14:46
  Kary Shumway: So brewing the number for your head brewer might be what's our yield percentage?
• 14:51
  Kary Shumway: You know, what how are we doing there?
• 14:52
  Kary Shumway: Packaging could be labor hours per barrel.
• 14:55
  Kary Shumway: Inventory might be something like days on hand.
• 14:58
  Kary Shumway: You know, what is our inventory now?
• 15:00
  Kary Shumway: How does that relate to what we need to produce into the future?
• 15:03
  Kary Shumway: Do we have too much inventory, too little?
• 15:05
  Kary Shumway: Do we have the right mix on hand?
• 15:07
  Kary Shumway: Tap room, lots of good stuff through the tap, and it might be, you know, what's the average check size that's coming in?
• 15:13
  Kary Shumway: Is that going up?
• 15:14
  Kary Shumway: Is it going down?
• 15:15
  Kary Shumway: So you can go on and on with these things, but you can start with just outlining how many departments you have and department managers, and then figuring out and asking that question, you know, what's a problem to solve within this department?
• 15:26
  Kary Shumway: And then thinking about how to align that with your top-level company goals of cash flow and net operating income.
• 16:05
  Kary Shumway: So I would ask you how do you choose your KPIs now?
• 16:10
  Kary Shumway: Do you have KPIs?
• 16:12
  Kary Shumway: And how did you go about choosing them, or how might you think about selecting them?
• 16:18
  Kary Shumway: Uh, because there's really no shortage of KPIs that you could use.
• 16:22
  Kary Shumway: We've done lots of workshops on this, and we probably got hundreds of different things you could uh measure and manage, but we really want to be thoughtful about how we select those.
• 16:33
  Kary Shumway: It's really about kind of curating the ones that are really going to make a difference.
• 16:37
  Kary Shumway: And that's the key takeaway is if you're going to take the time to measure and manage towards these numbers, when you achieve your goal, you want it to have a material effect, a meaningful difference on the financial outcomes of your business.
• 16:53
  Kary Shumway: Alright, next, I want to share some scorecards that you can check out.
• 16:59
  Kary Shumway: Um first is our Taproom dashboard.
• 17:01
  Kary Shumway: We'll talk about sales, average check size, customer visits.
• 17:06
  Kary Shumway: Next, uh taproom trends.
• 17:08
  Kary Shumway: I'm really a big fan of trends, and I'll kind of show you what I mean with some of these cut and paste scorecards.
• 17:14
  Kary Shumway: Looking at the trails on sales, how many guests are coming in, what they're spending when they do, and then we'll look at a summary PL, an income statement, profit and loss, sales margins, profitability, and a one-pager uh that you can think about.
• 17:30
  Kary Shumway: Now, each of the models that I'm gonna show you follows this general outline here.
• 17:37
  Kary Shumway: Where across the top we're we're saying, what is the key metric?
• 17:40
  Kary Shumway: And then we're gonna say what are the actual results uh that we've achieved in the past.
• 17:45
  Kary Shumway: Now, in this example, I'm using just a month and a year.
• 17:49
  Kary Shumway: What were the actual results for a given month, same month last year?
• 17:54
  Kary Shumway: What's the trend for the current month this year, and what is the goal for the current month this year?
• 17:58
  Kary Shumway: And what are some notes?
• 18:00
  Kary Shumway: So in the notes section, I want to say, what do we plan to do?
• 18:04
  Kary Shumway: What are the action items uh to achieve this goal?
• 18:08
  Kary Shumway: So that we've sort of given ourselves the lay of the land, like what happened, like where are we coming from, where are we now, where are we trying to get to, and how are we gonna get there?
• 18:19
  Kary Shumway: So this is a dashboard that I particularly like, and it's measuring these five KPIs of total sales, sales growth, average spend per customer, total visits, and revenue per barrel.
• 18:31
  Kary Shumway: Pretty simple stuff.
• 18:33
  Kary Shumway: Um most of the data is available in your POS system.
• 18:36
  Kary Shumway: It may or may not look like this, um, all kind of together, but this is a I think a very useful tool to keep on top of what might be the most important numbers for your taproom.
• 18:48
  Kary Shumway: So looking in this case the actual month of last year versus the trend of the month this year and the goal for the month concluded, we can kind of fill in these numbers, and I'll just kind of highlight on you know maybe a couple of these items.
• 19:02
  Kary Shumway: First is like what is our sales growth goal?
• 19:04
  Kary Shumway: So for the month here, we see our sales growth goal is plus 15.
• 19:07
  Kary Shumway: Where are we trending for the month?
• 19:09
  Kary Shumway: Now, what I like about this dashboard is I'm not waiting for the income statement to be produced, I'm not waiting for all the financials to be closed.
• 19:17
  Kary Shumway: I don't need to.
• 19:18
  Kary Shumway: It's like what's my goal?
• 19:20
  Kary Shumway: I have a plan, I've set my plan, and what is my trend?
• 19:23
  Kary Shumway: So if I'm sitting here, you know, with about a week left in the month, how am I tracking towards my goal?
• 19:29
  Kary Shumway: Well, it looks like I'm falling short.
• 19:30
  Kary Shumway: What now I know, okay, I'm I'm behind plan, I need to do something.
• 19:34
  Kary Shumway: Very simple, but at least gives you directionally like are what am I on plan?
• 19:39
  Kary Shumway: Am I behind?
• 19:40
  Kary Shumway: We're behind.
• 19:40
  Kary Shumway: All right, we need to do something, we need to kick it into gear, we need a sense of urgency because we can see where in if we think about like um you know a sporting analogy, we're losing the game.
• 19:51
  Kary Shumway: You know, it's like in baseball, it's it's the bottom of the eighth inning.
• 19:54
  Kary Shumway: We won't we've got little time, we've got to get going here.
• 19:57
  Kary Shumway: Um so that's sales growth and it's percentages.
• 20:00
  Kary Shumway: It's very easy to communicate and think about.
• 20:03
  Kary Shumway: Uh, another one might be just the two drivers of your sales are gonna be how many people come in and what do they spend when they do.
• 20:10
  Kary Shumway: So, are we tracking that?
• 20:11
  Kary Shumway: Are we measuring that?
• 20:12
  Kary Shumway: Are we setting goals on how many people we want to have come in and how might we drive more customer visits when they do come in?
• 20:20
  Kary Shumway: What are they spending now?
• 20:21
  Kary Shumway: And how might we you know drive that number up?
• 20:24
  Kary Shumway: What are these levers that we can pull?
• 20:26
  Kary Shumway: So that's really where the action items come in is to kind of think.
• 20:29
  Kary Shumway: Think about that.
• 20:31
  Kary Shumway: This is where you can take this dashboard and kind of explode it.
• 20:35
  Kary Shumway: And in this case, we're going to look at just one component.
• 20:38
  Kary Shumway: Let's look at our sales dollars.
• 20:40
  Kary Shumway: So, what were our sales dollars month over month over month?
• 20:43
  Kary Shumway: How does that compare?
• 20:44
  Kary Shumway: What's the growth look like?
• 20:45
  Kary Shumway: So we can kind of set the context of where have we been, what are what are our trends look like.
• 20:51
  Kary Shumway: And we can take this trend approach to how many customers come in.
• 20:56
  Kary Shumway: So if we look at it by month, and I would recommend you know looking back, you know, at least a full 12 months, because then we can sort of see 12, maybe 18 months of trends, month over month over month.
• 21:08
  Kary Shumway: Are we increasing?
• 21:10
  Kary Shumway: Are we decreasing?
• 21:11
  Kary Shumway: What's happening with sort of traffic coming in?
• 21:15
  Kary Shumway: And then it's the average spend.
• 21:16
  Kary Shumway: When people do come in, are they spending more?
• 21:19
  Kary Shumway: Are they spending less?
• 21:20
  Kary Shumway: How do we know?
• 21:22
  Kary Shumway: In months where they spent more, did we do something?
• 21:24
  Kary Shumway: Did we have a what might we have done?
• 21:27
  Kary Shumway: We brought in new food vendors, or we had a big push on events, or you know, we had our loyalty program kick in, and then months it went down, what happened?
• 21:36
  Kary Shumway: What didn't we do?
• 21:37
  Kary Shumway: Or what went wrong?
• 21:38
  Kary Shumway: So you can't really diagnose without the data.
• 21:42
  Kary Shumway: That's the other buzzword these days is you know, we want to make data-driven decisions.
• 21:47
  Kary Shumway: Uh, and we generally have a lot of data at our disposal, we just need to look at it and interpret it.
• 21:53
  Kary Shumway: And then the last scorecard I'll share here is our summary profit and loss statement with the key metrics.
• 22:00
  Kary Shumway: Um, so one of my pet peeves with traditional financial accounting and reporting is that it's really hard to know day to day, week to week, what's actually going on in our business.
• 22:12
  Kary Shumway: So, if our most important numbers are cash flow and net operating income, we often don't know until the financial statements are produced at the end of the month, and then it takes a few weeks, and then we get the information.
• 22:23
  Kary Shumway: So we're what we're always operating way behind the curve.
• 22:27
  Kary Shumway: So a summary PL like this can be a way to pull the information together and one, see what it's telling us, and two something we can watch on a more regular basis.
• 22:38
  Kary Shumway: You know, we can actually create a daily or weekly PL.
• 22:41
  Kary Shumway: We bake in a lot of estimates.
• 22:43
  Kary Shumway: I know these are really big numbers, and we'd all love to have a business like this, but just for example, this is summarizing sales, cost of sales, margins, expenses, and net income.
• 22:55
  Kary Shumway: That's it, five lines.
• 22:56
  Kary Shumway: What is it telling us?
• 22:57
  Kary Shumway: Turning it into percentages, which is very easy to communicate.
• 23:01
  Kary Shumway: So when we talk about what's our goal, you know, you keep saying net income and cash flow.
• 23:06
  Kary Shumway: Well, what does that mean?
• 23:07
  Kary Shumway: Like our net income goal is 15% of sales.
• 23:11
  Kary Shumway: So we all can just communicate.
• 23:12
  Kary Shumway: Where are we at?
• 23:12
  Kary Shumway: We should be at 15, where are we at?
• 23:14
  Kary Shumway: We're at 10.
• 23:15
  Kary Shumway: Oh.
• 23:15
  Kary Shumway: In this case, we've got what it's actually occurred and what our plan is.
• 23:20
  Kary Shumway: So we can compare the two percentages, communicate them easily.
• 23:23
  Kary Shumway: What's our goal for margins?
• 23:25
  Kary Shumway: What's our goal for net income?
• 23:27
  Kary Shumway: And then in this case, you can also layer in other key metrics: payroll, lease expense.
• 23:33
  Kary Shumway: What does that look like in terms of percentage of sales?
• 23:37
  Kary Shumway: And what is our goal for each of those?
• 23:40
  Kary Shumway: So I encourage people to think about what's your favorite KPI?
• 23:44
  Kary Shumway: My favorite KPI, cash flow, net operating income.
• 23:48
  Kary Shumway: Simple, boring.
• 23:49
  Kary Shumway: If I throw in another one, sales growth, we want to throw in another one, it's all of those tapram metrics, and it's really business specific.
• 23:57
  Kary Shumway: So if you're only if you're tapram only, obviously that's where we're gonna focus our our metrics and our dashboard.
• 24:04
  Kary Shumway: Um, but I always come back to the fundamentals of cash flow, net operating income.
• 24:09
  Kary Shumway: And the reason I hammer those is A, it allows you to stay in business, B, it allows you to, once you have those, reinvest in your business and your people, and your community.
• 24:19
  Kary Shumway: Um, and without it, you know, unfortunately, we just we're we're out of business.
• 24:24
  Kary Shumway: So let's bring it home here with KPIs and compensation.
• 24:27
  Kary Shumway: So we want to identify what matters, that's measure what matters, quantify it, tie it to compensation and/or some sort of incentive or bonus structure, and then pay for results that matter most.
• 24:39
  Kary Shumway: So where we can get ourselves in trouble with this is we'll create key metrics, we'll tie it to an incentive plan.
• 24:48
  Kary Shumway: The key metric is not achieved, but we're like, well, they tried really hard and we pay it out anyway.
• 24:54
  Kary Shumway: It sort of undermines the whole concept here is we want to pay for results that matter.
• 25:00
  Kary Shumway: So it's just a cautionary tale that once you construct this to maybe resist the temptation of kind of going down that path, because again, paying for results is what this is all about.
• 25:10
  Kary Shumway: Now I'll go back to the KPI by department, everybody has a number, and you can may think about how might I use this in order to incentivize my sales team, for example, um, to hit the revenue growth number?
• 25:24
  Kary Shumway: How might I incentivize my Taproom team, Taproom Manager to increase the average spend per customer?
• 25:32
  Kary Shumway: How can I tie compensation and these KPIs?
• 25:36
  Kary Shumway: So it starts with what's most important, identifying it, and then creating that incentive plan to kind of align all of your goals.
• 25:46
  Kary Shumway: So to wrap up, give you some next steps, you know, first identify what matters most in your business, what's a big problem you need to solve, an opportunity you need to take care of, how can you quantify that?
• 25:57
  Kary Shumway: How can you measure it, track it, and how can you build a dashboard, share that with folks so that you can improve?
• 26:04
  Kary Shumway: So those were the questions that I would leave you with.
• 26:06
  Kary Shumway: And I thank you for your time.
• 26:08
  Kary Shumway: Hopefully, there was something valuable here.
• 26:11
  Kary Shumway: If you want these scorecards, templates, best practices, and key questions.
• 26:15
  Kary Shumway: Um we go through this a lot slower than I have right now.
• 26:20
  Kary Shumway: And it's there for you.
• 26:21
  Kary Shumway: You can share it with your team, you can just scan the QR code and get all that information.
• 26:26
  Kary Shumway: If you have any questions, you can hit me up here, Carrie at beerbusinessfinance.com.
• 26:32
  Kary Shumway: And I would also leave you with this is we've put together a network of brewery owners and managers, and we come together on a monthly basis to do what we're calling a brewery financial round table meeting.
• 26:45
  Kary Shumway: So we'll cover a specific topic each month.
• 26:48
  Kary Shumway: Uh this last month we did financial planning, how to build your best financial plan ever.
• 26:54
  Kary Shumway: What are the key components of that?
• 26:56
  Kary Shumway: What sort of scorecards should I use?
• 26:57
  Kary Shumway: How do I where do I start?
• 26:59
  Kary Shumway: You know, what are the building blocks?
• 27:01
  Kary Shumway: And I'll lead that discussion and I'll provide the information that I have, and then we'll have a lot of peer-to-peer sharing of information.
• 27:08
  Kary Shumway: Like, how do you do it?
• 27:09
  Kary Shumway: You know, it's breweries from across the country sharing ideas, best practices, networking with one another.
• 27:17
  Kary Shumway: We've done a number of these meetings, they're all recorded and available for you in our Beer Business Finance membership.
• 27:26
  Kary Shumway: So if you're interested in joining that, you can email me here at carry at beer businessfinance.com, or I will put some links in the show notes so you can learn more about that.
• 27:37
  Kary Shumway: And if you decide to join our Beer Business Finance membership, I hope you find it profitable.
• 27:44
  Kary Shumway: Thank you for listening to the Kraft Brewery Financial Training Podcast, where we combine beer and numbers so that you can improve financial results in your brewery.
• 27:52
  Kary Shumway: For more resources, tools, guides, and online courses, visit Craft Brewery Financial Training.com.
• 27:59
  Kary Shumway: And don't forget to sign up for the world famous Kraft Brewery Financial Training newsletter.
• 28:04
  Kary Shumway: Until next time, get out there and improve financial results in your brewery today.