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The Validation Model: How One Brewery Keeps Reinventing Itself · Craft Brewery Financial Training Podcast

• 0:00
  Speaker 1: Today on the podcast, we hear from Brian Degnan from Validation Ale.
• 0:03
  Speaker 1: This is part of our Brewery Spotlight series on the business of beer, where we're going to cover real-world insights from breweries who are making it work.
• 0:10
  Speaker 1: So each month, we'll shine the spotlight on one exceptional craft brewery to explore what makes their business thrive.
• 0:16
  Speaker 1: In my conversation with Brian, we go beyond the beer to uncover best practices, smart financial strategies, creative sales tactics and real-world lessons that Brian has learned.
• 0:27
  Speaker 1: So this is your front row seat to learn from your peers who are building profitable, resilient breweries and raising the bar for the industry.
• 0:35
  Speaker 1: So for now, please enjoy this conversation with Brian Degnan from Validation Ale.
• 0:46
  Speaker 1: Shanael, 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.
• 0:51
  Speaker 1: I'm your host, kerry Shumway, a CPA CFO for a brewery and a former CFO for a beer distributor.
• 0:58
  Speaker 1: I've spent the last 20 years using finance to improve financial results in our beer business.
• 1:03
  Speaker 1: Now I'm helping other craft breweries to do the same.
• 1:06
  Speaker 1: Are you ready to take your brewery financial results to the next level?
• 1:10
  Speaker 1: Okay, let's get started.
• 1:12
  Speaker 1: Just a quick note, we'll be right back to the podcast.
• 1:19
  Speaker 1: I want to let you know about a new network for beer industry professionals.
• 1:23
  Speaker 1: It's called the Beer Business Finance Association.
• 1:26
  Speaker 1: 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.
• 1:37
  Speaker 1: So I'd love to tell you a little bit more about this.
• 1:40
  Speaker 1: If you are interested in learning more, please email me kary at beerbusinessfinancecom.
• 1:45
  Speaker 1: That's K-A-R-Y at beerbusinessfinancecom.
• 1:50
  Speaker 1: Or you can visit bbfassociationorg that's bbfassociationorg.
• 1:56
  Speaker 1: To learn more.
• 1:57
  Speaker 1: Hey, brian, welcome back to the podcast.
• 2:01
  Speaker 1: How are you doing today?
• 2:02
  Speaker 1: I'm great, I'm excited to be here.
• 2:04
  Speaker 1: I'm excited to have you here.
• 2:05
  Speaker 1: So we are going to basically have you on our brewery spotlight.
• 2:10
  Speaker 1: This is a new feature that we're doing, where we bring forward some owners, managers of breweries that are doing some cool things kind of share that with the world.
• 2:17
  Speaker 1: So excited to have you here.
• 2:19
  Speaker 1: Why don't you give folks who aren't familiar?
• 2:21
  Speaker 1: We've done a podcast previously and I'll link that but if folks are not familiar with you or your brewery, tell them a bit about that.
• 2:28
  Speaker 2: Yeah.
• 2:28
  Speaker 2: So my career, the bulk of my career, was in technology, in sales and running sales teams.
• 2:34
  Speaker 2: At the end of it I was running pretty large P&Ls and sales groups across the world and it got to the point where I wanted to spend more time with my family and follow some of my passion.
• 2:46
  Speaker 2: I had been a home brewer for 13 years or so at that time, and so we took the leap and my wife and I spun up a brewery here in Santa Barbara.
• 2:57
  Speaker 2: The concept is unique.
• 2:58
  Speaker 2: We're called Validation Ale because we have two different beers in each category light coffee, etc.
• 3:03
  Speaker 2: We have a validated beer and then we have a challenger recipe each category light coffee, et cetera.
• 3:05
  Speaker 2: We have a validated beer and then we have a challenger recipe that we brew.
• 3:08
  Speaker 2: We call it a vying beer and if that challenger outsells the validated beer, it becomes validated.
• 3:13
  Speaker 2: We kick the validated one out and we brew a new beer to beat ourselves.
• 3:16
  Speaker 2: So we're just under three years.
• 3:19
  Speaker 2: In two weeks we'll be three years old and we've done 143 unique recipes.
• 3:29
  Speaker 2: So we're pretty prolific.
• 3:30
  Speaker 2: But it is getting harder and harder to beat our validated beers.
• 3:31
  Speaker 2: It's getting harder to beat ourselves, but there's definitely been some upsets.
• 3:34
  Speaker 2: So it's been a valuable and fun concept.
• 3:38
  Speaker 1: That's such an interesting model right, Because I think that's you know, when tap rooms kind of were coming on the scene, that was sort of.
• 3:44
  Speaker 1: The idea is to validate the beers at retail to your customers, get feedback, refine the recipe, Then maybe eventually go out to market with it because you're like oh yeah, this, this really nails it, but you're you're just keeping it in house, at least for now.
• 3:56
  Speaker 1: Is that right?
• 3:56
  Speaker 1: Do you do any wholesale distribution?
• 4:05
  Speaker 2: We're very, very light on distribution by by choice.
• 4:07
  Speaker 2: We're in maybe a dozen restaurants here in town, but it's really just a marketing ploy at this point.
• 4:11
  Speaker 2: I go through a process that we can talk about, if you're interested, at some point every year where I decide what my growth driver will be the next year.
• 4:18
  Speaker 2: Wholesale distribution is always on that list because you can't ignore it.
• 4:24
  Speaker 2: Sale distribution is always on that list because you can't ignore it, but it's never been anywhere near the top 10 when I evaluated each year.
• 4:31
  Speaker 2: But I think the thing that's interesting is that I saw a lot of breweries evolve into having these core beers and specialty beers, and personally I think the challenge with that is that those core beers can get old or stale over time.
• 4:48
  Speaker 2: Not physically, but our taste buds are constantly changing and if you're not forcing yourself to disrupt yourself, it can be tough to do so, and so when we started our brewery, we wanted to put a concept in place that forced us to innovate and brew what people were drinking, so much so that our menu board shows live sales and which beer is winning.
• 5:10
  Speaker 2: So we can't hide from it.
• 5:11
  Speaker 2: We've got to do what the people say.
• 5:13
  Speaker 1: I love that.
• 5:14
  Speaker 1: That's so smart, Because they say I mean, that's the most important thing you can do, right Is listen to your customers.
• 5:19
  Speaker 1: And we know it and we say it, but we rarely do it.
• 5:22
  Speaker 1: But you're doing it.
• 5:22
  Speaker 1: I mean, you're literally basing your menu on what people are uploading.
• 5:27
  Speaker 2: Yeah, yeah, and it, it.
• 5:29
  Speaker 2: I think the other important distinction is it's what they buy, not I'm not, I'm not relying on somebody going in and voting right, like it's actual dollars, and you know.
• 5:40
  Speaker 2: That's not to say there hasn't been trepidation.
• 5:42
  Speaker 2: There have been some very well-selling beers that just barely got beat by a vying beer.
• 5:47
  Speaker 2: And you know the front of house staff, the brewer, everybody's very nervous about taking it off.
• 5:52
  Speaker 2: Everyone's going to come in and complain and the regulars are going to be so pissed that it's gone and it just doesn't happen because literally more people were buying the other one.
• 6:01
  Speaker 2: That's the whole point.
• 6:04
  Speaker 2: But it is tough to stick to it sometimes.
• 6:07
  Speaker 1: Yeah, it takes that discipline, but it's really like about you know the emotion drives a lot of decisions, which you know we're human beings.
• 6:14
  Speaker 1: It's fine.
• 6:14
  Speaker 1: But you know, if we want to make data driven decisions, you're fundamentally doing that.
• 6:17
  Speaker 1: You're saying data is going to decide.
• 6:19
  Speaker 1: People vote with their dollars.
• 6:20
  Speaker 1: If they really wanted that other beer, come on in and maybe it's a challenger next time and you can get it back on top.
• 6:26
  Speaker 1: So you did say growth drivers and I'm definitely interested in hearing that, and I'm sure listeners are too.
• 6:31
  Speaker 1: So maybe tell us a little bit about your process and what you're focused on now and maybe how you make that decision, because if you said, hey, wholesale is not even in my top 10, I'm really curious to know what is in there, and then how you settled on what you did.
• 6:46
  Speaker 2: Yeah, yeah.
• 6:47
  Speaker 2: So you know, I borrowed a lot of this from my learnings in the executive team on tech companies, where you know the thing you learn in tech pretty quick is that anybody can create the technology that you're probably selling, and they can probably create it cheaper and faster and better because technology is better every day and they would have a better start.
• 7:09
  Speaker 2: And so constantly you're trying to figure out how to run the business better in order to stay ahead, and so I borrowed that kind of practice and discipline from my career at tech.
• 7:19
  Speaker 2: So about October 15th, when we slow down every year, I start to get the growth drivers out and I just have a big list of all the things that might help create growth, and throughout the year I'll just throw things in there as I think about them.
• 7:34
  Speaker 2: I don't prioritize them or categorize them or even think about them.
• 7:37
  Speaker 2: If it comes up, I throw in the list.
• 7:39
  Speaker 2: October 15th comes around and I just start going through the list and my goal for the next two weeks by the end of October is to get as many more things on the list as I can, and so I refresh myself on everything that's on the list and then just force myself to put more and more and more on there.
• 7:57
  Speaker 2: Because, you know, what I've found is that there are often, that there are often obvious answers to these questions, answers to these questions, but sometimes there's one that you haven't thought of until you've really gone through the thinking and you can't come up with anything else.
• 8:10
  Speaker 2: So you're trying to invent something and then you, you know, sometimes come up with something special.
• 8:15
  Speaker 2: I've seen it in tech and I've seen it here, and so, you know, I go through that process for two weeks, I add to the list and then I really take the end of the year, november and December, trying to figure out what I'm going to do the next year.
• 8:28
  Speaker 2: And the prioritization is probably not too.
• 8:32
  Speaker 2: The elements I use to prioritize are probably not too unique here.
• 8:38
  Speaker 2: That's probably what everyone's thinking.
• 8:39
  Speaker 2: I'm trying to do a real rough estimate on how much new revenue it would bring, how much startup capital would be required to execute on it and how much time and energy it would take from me.
• 8:53
  Speaker 2: And then the fourth one is just how likely is it that I could get it done right?
• 8:57
  Speaker 2: And so I'm putting together really basic forecasts for each of those things.
• 9:02
  Speaker 2: I'm going, you know, going small, medium high and as I narrow in on kind of the top five, I'm trying to get a little bit more calculated on total cost, upfront capital to start it.
• 9:17
  Speaker 2: When do I think it would actually launch within the year?
• 9:20
  Speaker 2: How much revenue can I make?
• 9:21
  Speaker 2: But these are very big paintbrush strokes that I'm not spending a ton of time, uh, in excel trying to figure out exactly what it would be.
• 9:31
  Speaker 2: And every year the winner has become pretty obvious and it's always a combination of those things.
• 9:39
  Speaker 2: It's always a it's never the thing that will make the most money, right.
• 9:44
  Speaker 2: It's never the thing that will make the most money, right.
• 9:48
  Speaker 2: It's never the thing that will cost no money.
• 9:50
  Speaker 2: It's always some combination of those things where you know, as you kind of refine your different options, you come to terms with the one that you can execute on that will not take, you know, too much capital, or maybe it does take a ton of capital and you have it available, but the one that is right for that situation becomes pretty evident.
• 10:12
  Speaker 2: Sometimes there's a tie and there's two that I can't decide between, and I'll take a couple of weeks and try and decide, and if I can't decide, I'll make my wife decide she typically has an opinion at that point.
• 10:26
  Speaker 1: I like it.
• 10:27
  Speaker 1: So what did you settle on for this year?
• 10:28
  Speaker 1: What's your main focus?
• 10:30
  Speaker 2: Yeah, so this is an interesting one and it's another discipline point that I think is important that I learned from tech.
• 10:38
  Speaker 2: So last year the growth driver was a second location and the spot that I had picked out, or that kind of, came to me at the end of October and so I kind of sped up this process that I'm talking about to decide if the second location, if it was the right time.
• 11:00
  Speaker 2: And I looked at all the variables and it felt like at least the top three right time.
• 11:04
  Speaker 2: And you know, I looked at all the variables and it it felt like at least the top three right, but probably the top top item if I spent the full end of the year evaluating and so I jumped on it, started to go down that road, um, and at that point the opening time was April, the estimated opening time was April and Santa Barbara city, which I won't comment in this podcast, is another whole conversation.
• 11:27
  Speaker 2: But it wasn't easy.
• 11:28
  Speaker 2: Took, like every project, a lot more time and a lot more budget than I had expected.
• 11:34
  Speaker 2: But, most importantly, throughout the year I'm measuring how my growth driver is doing compared to what my assumption was.
• 11:41
  Speaker 2: That made me decide to move forward with that growth driver and you know, as the year went on, it became more and more evident that April was not going to open and that, you know, it was going to be much closer to the October 15th, timeframe where our whole city just kind of dies and we don't make any money.
• 11:58
  Speaker 2: What ended up happening is that we opened in November, the week, the week, the Monday after Thanksgiving is when we opened.
• 12:06
  Speaker 2: So we're opening, we're paying rent and opening in the worst time of the year, right, but I knew that we were going to open near that.
• 12:15
  Speaker 2: Many, many months prior to that, I looked at my projections.
• 12:18
  Speaker 2: I wasn't going to sell anywhere near what I thought this growth driver was going to sell for me, and so I started the process early of next year's growth driver, and I actually launched that year's growth driver in December of the same year.
• 12:33
  Speaker 2: And the way I look at this is that if I'm missing my projection, the goal is not to just get to the point where I'm making that money.
• 12:45
  Speaker 2: The goal is to make up what has been lost, right, and so, if I look at it that way, I'm thinking all right, so the next year which is this current year, 2025, I've got to book enough to cover two growth drivers essentially right, and so that's what I did.
• 13:01
  Speaker 2: I started down the process and the growth driver for that year, and middle of the year I'm going through the process I just described and what I came to was distilling.
• 13:11
  Speaker 2: And so in December you know it takes a while to get your your sorry, it takes a while to get your licensing for distilling go through the ABC and the Fed, and I'd learned a lot.
• 13:23
  Speaker 2: There were a bunch of things I didn't know and I ended up getting my importer license too because I needed agave.
• 13:29
  Speaker 2: There was a whole bunch of things that happened, but I figured it all out and we started distilling in December.
• 13:35
  Speaker 2: So January comes around and now we are selling spirits day one of January.
• 13:41
  Speaker 2: In California, if you have a restaurant, you can sell everyone else's spirits as well.
• 13:46
  Speaker 1: So essentially, I have a full liquor license.
• 13:48
  Speaker 2: in January we have the second store up and running, and so by the middle of February, when things start to pick up.
• 13:55
  Speaker 2: I'm now four or five months ahead on my growth driver this year, which should fill a gap of my miss last year.
• 14:33
  Speaker 1: Nice.
• 14:33
  Speaker 1: I love that.
• 14:34
  Speaker 1: So are you.
• 14:35
  Speaker 1: It's interesting to me too that you're.
• 14:37
  Speaker 1: It sounds like you kind of have one primary growth driver, which I think a lot of people are thinking like okay, that's great, but what about all the other stuff?
• 14:46
  Speaker 1: How do you sort of maintain equal or the appropriate focus on that new thing and still kind of maintain all the other things that have to be clicking along?
• 14:57
  Speaker 2: Yeah, that's a good question.
• 14:59
  Speaker 2: So you're right, as I think about growth drivers in the way I'm describing it's one big step change right.
• 15:06
  Speaker 2: My day-to-day job is to grow all of the revenue lines that we already have or look for ways for operational efficiency and reduced costs and all those things.
• 15:17
  Speaker 2: But I'm thinking about each of those revenue lines essentially as its own little business, and I'm trying to launch a new business every year, and so it can get daunting.
• 15:28
  Speaker 2: It's hard to prioritize, I'll tell you.
• 15:31
  Speaker 2: Just taking this time out is a hard one to bite off on, but really important because it makes you step back for a minute and, you know, over a couple of hours and that'll be, that'll be important for me.
• 15:42
  Speaker 2: But my to-do list is 10 miles long.
• 15:44
  Speaker 2: I should have three of me, but it you know this, this type of paces, it can be exhausting, but it's really fun and it and it really works.
• 15:55
  Speaker 2: You know, and in California I saw a report just the other day that said in 2024, f&b growth averaged, I think, 2% down.
• 16:06
  Speaker 2: It was negative 2%.
• 16:08
  Speaker 2: And we grew 29% last year and really that was with the current business lines.
• 16:15
  Speaker 2: We didn't have our growth driver, as I mentioned.
• 16:21
  Speaker 1: I like the way you think about it Because, as you said, you're launching a new business each year, so that kind of keeps the innovation fresh.
• 16:27
  Speaker 1: And you're being very purposeful about those revenue drivers.
• 16:31
  Speaker 1: Like what's actually going to make a difference, because these don't sound to me like incremental or small.
• 16:35
  Speaker 1: Like you said, it's a big change.
• 16:36
  Speaker 1: I mean, this is like, uh, what's the opposite of incremental?
• 16:43
  Speaker 1: It's uh, exponential, I guess is yeah, you know what you're we're shooting for.
• 16:45
  Speaker 1: So what, how do you?
• 16:45
  Speaker 1: I mean, I think you've laid out the model nicely, but, um, what like didn't make the cut, like if you weren't going to do the second taproom or the distillery, what were you sort of?
• 16:54
  Speaker 1: I know you said it comes clear and there's this process, but maybe give us an example or two of some things like, well, we thought we were going to do this, but you know, this other thing took precedent.
• 17:04
  Speaker 2: Yeah.
• 17:05
  Speaker 2: So the second location was there were a couple of different options there.
• 17:09
  Speaker 2: Right, we ended up opening a location about two miles from our current location and I can tell you kind of what led to that.
• 17:16
  Speaker 2: But there were other items, other locations there that got axed.
• 17:20
  Speaker 2: So Ventura is a really big town right south it's about 20 minutes away.
• 17:24
  Speaker 2: Huge market, four times what Santa Barbara is.
• 17:28
  Speaker 2: That was on the list that one didn't make it, not solely because of this, but a big part because I don't want to drive there.
• 17:36
  Speaker 2: Not solely because of this, but a big part because I don't want to drive there.
• 17:38
  Speaker 2: I wanted something closer and you know that will change right.
• 17:41
  Speaker 2: Like two, three years from now.
• 17:43
  Speaker 2: I may have someone on my team that I trust to be either down there or driving down there and they, you know, they may have the life situation that that makes sense for them and it won't make sense for all of us.
• 17:55
  Speaker 2: But right now that one just doesn't didn't make sense, so I cut that.
• 17:58
  Speaker 2: One Distribution, as I mentioned, is on there.
• 18:03
  Speaker 2: I just can't in our market figure out how to make the economics work.
• 18:07
  Speaker 2: I have a very expensive square footage so I would need to find somewhere else if I wanted to scale rapidly into distribution.
• 18:16
  Speaker 2: Obviously that's a ton of capital and the margins are already near nothing and there's a ton of pressure there, so that one was X'd.
• 18:25
  Speaker 2: But I come back to it every year and try and run the high level numbers and that one just didn't work.
• 18:29
  Speaker 2: Another item on there is to kind of lean into much heavier paid advertising, right, and so that would be total change for us.
• 18:41
  Speaker 2: We do very little paid advertising like on Instagram and a little bit in the paper, but really not much.
• 18:47
  Speaker 2: So you know, another growth driver would be to become a marketing company, essentially get really good at that.
• 18:56
  Speaker 2: Same thing with private events, kind of become an event place.
• 19:07
  Speaker 2: Again, we do two or three of those a month, but I could very much make that a focus in a line of business and do seven or eight a month.
• 19:12
  Speaker 2: That one didn't make the cut.
• 19:13
  Speaker 2: I actually have an app idea, a technology idea, that is always on the list and just didn't make the cut.
• 19:21
  Speaker 2: I've thought about taking my concept to larger regional breweries and kind of providing a place for them to white label and test their recipes versus others and give them the data that I'm already collecting.
• 19:37
  Speaker 2: You know, I think it's an interesting concept but didn't didn't quite make the cut.
• 19:42
  Speaker 2: So you know, I think there's a combination of things that anybody would think of if you just ask them on the street and they own a brewery, and there's a combination of things that, unless you force yourself to think about this for two weeks, you may not have come up with.
• 19:58
  Speaker 2: I'm not sure how many folks out there maybe a lot of them have an app idea, but I'm not sure how many do.
• 20:03
  Speaker 1: Yeah Well, if you ever advance that app idea, keep me posted.
• 20:07
  Speaker 1: That's one of the itches I would like to scratch for myself and yeah, I think there's a lot of opportunity.
• 20:14
  Speaker 1: But that's great, that's a great system that you have and I really like it because it helps people.
• 20:19
  Speaker 1: You know, we can get a little stuck in our own rut, right, and we're like we can't see the forest from the trees and it feels like we're pulling all the levers and nothing's happening.
• 20:28
  Speaker 1: So I think this is a really nice way to kind of 30,000 foot view, really expand your thinking on how you can reinvent your business and relaunch a new business every year, as you said, I like that phrasing on it.
• 20:41
  Speaker 1: So you know we're facing beer is facing a lot of headwinds, right, we got rising costs, you got, you know, as you said.
• 20:45
  Speaker 1: You know, overall F&B is down in your market 2% and much more in others.
• 20:49
  Speaker 1: So we like to hear some good news, maybe some wins.
• 20:52
  Speaker 1: So I'd like to know from you, you know, over the last 12 months, you know, as you kind of look back and reflect, what's what's kind of been the biggest win for your brewery?
• 21:04
  Speaker 2: The biggest win would certainly be the spirits distilling.
• 21:08
  Speaker 2: You know I through this process it became clear that's the one I wanted to take on, but I didn't really have a ton of space or capital to assign to it and so we went very pilot on the program and we already have a vodka and a gin that have won medals.
• 21:28
  Speaker 2: We have a whiskey that's fantastic and flying off the shelves.
• 21:32
  Speaker 2: We had to get pretty creative on how to age it because we didn't want to wait two years before we sold it, so we did some creative innovation there.
• 21:39
  Speaker 2: We have a white rum and a dark rum, and agave is coming.
• 21:43
  Speaker 2: We're still R&D on that one.
• 21:44
  Speaker 2: It's harder, but you know, literally day one we launched cocktails.
• 21:49
  Speaker 2: We had 28% growth on beverage top line.
• 21:52
  Speaker 2: I mean day one, and no one knows that we do it.
• 21:57
  Speaker 2: Yet it's still so early.
• 21:59
  Speaker 2: Everyone still thinks of us as a brewery.
• 22:01
  Speaker 2: That it's, it's, it's going to grow to X that easily.
• 22:05
  Speaker 2: Uh, as folks start to learn, learn what's happening, um, so I think that was the biggest.
• 22:11
  Speaker 2: The second one, which, you know, this was a bit of a surprise to me, a pleasant surprise For anyone out there that's just starting.
• 22:18
  Speaker 2: Hopefully they see the same thing, but it took a long time longer than I anticipated for folks to make this the place they went.
• 22:26
  Speaker 2: I think in town you'd probably say that we have a really good brand, if not one of the best ones, but people coming kind of repeatedly and habitually took much longer than I thought.
• 22:40
  Speaker 2: And I can see the same trend on our second location.
• 22:43
  Speaker 2: It's doing well, but this isn't like in tech where you get a thousand customers and all of a sudden the next thousand come really easy.
• 22:54
  Speaker 2: It takes two and a half years and we started to really see a step change in every day being profitable not just five of the seven days and most lunches being profitable, not zero of them.
• 23:07
  Speaker 2: And I think it would have been really easy to and a lot of folks do this it would have been really easy to say, ah, tuesdays and Mondays are never going to be profitable, I'm not going to open those days, or Tuesdays, wednesdays or whatever.
• 23:19
  Speaker 2: I'm not going to open at 1130 because lunch is never going to be profitable.
• 23:22
  Speaker 2: And we weren't for two and a half years on those days, and now we are, and I think that was another really big win, particularly in today's market, to just see that if you stick to it, continue to provide great products.
• 23:35
  Speaker 2: We say our products are beverage, food and service and if we provide all of those products over and over, you will see more and more folks enjoying your place more often.
• 23:46
  Speaker 1: That's interesting, yeah, because you think, like in software or at least a lot of software these days it's a recurring software as a service.
• 23:53
  Speaker 1: Right, it's recurring, you get those first thousand and you'll get some attrition insurance, but you know they're, you're still there and you kind of stack and stack and it's not the same in hospitality as you've just described.
• 24:01
  Speaker 1: What did you do?
• 24:03
  Speaker 1: What do you think was or could you put your finger on anything that, cause I think a lot of tap rooms struggle with this is?
• 24:09
  Speaker 1: You know, you open, you get a nice lift cause you're something new, and maybe that lasts a little while, and then all of a sudden, wow, wait, everybody, they're not coming back.
• 24:16
  Speaker 1: What, what did you do or how did you think about that?
• 24:19
  Speaker 1: Or can you put your finger on anything that was like, yeah, that that actually helped people to make this the place to come?
• 24:27
  Speaker 2: Sadly, I think it's all the things and you know, I think I think the look, if you're confident in your product and I think you know at least a lot of the places I frequent I would say they may not be talking from the top down as service being one of their products.
• 24:44
  Speaker 2: We have really great service, we have really great beverages and we have really great food and we don't compromise on any of those.
• 24:52
  Speaker 2: So I think if you believe in your product, you know, know that we'll eventually get there.
• 25:01
  Speaker 2: Now, of course, you've got to have the capital to get there.
• 25:04
  Speaker 2: You have to be smart running your business and cash flow and all of that's important.
• 25:07
  Speaker 2: But I think you know it's easy to lose confidence when you've got an empty tap room.
• 25:15
  Speaker 2: You know, if you're trying to open for lunch and it's empty, for example, and if you just keep at it and you keep doing all the things, eventually it'll get there.
• 25:24
  Speaker 2: So we, you know we provide great products.
• 25:26
  Speaker 2: We really believe in it.
• 25:28
  Speaker 2: We do an enormous amount on social, which is exhausting and I can't stand it, but we have to do it.
• 25:34
  Speaker 2: We're constantly trying to find things to fill the empty days.
• 25:38
  Speaker 2: I call it our weekly programming things like bingo and trivia and live music and all these things that take a lot of effort.
• 25:46
  Speaker 2: And then you know one of your vendors won't show up and or they'll show up for six weeks and no one comes.
• 25:53
  Speaker 2: You know, like karaoke was great for the first three months and then no one showed up and you had to pivot.
• 25:58
  Speaker 2: But we don't.
• 26:00
  Speaker 2: We don't give up.
• 26:00
  Speaker 2: We're trying to do something every single day and we're trying to be open all the times that that people will want to consume food or beverages.
• 26:08
  Speaker 2: Uh, we just opened for brunch on Saturday and Sunday and I'll tell you the product is fantastic but it's pretty slow and my guess is it's going to be pretty slow through the summer and winter and next summer hopefully, we'll start to make that time of day and days of the week more profitable.
• 26:30
  Speaker 1: I like how you're thinking about the days of the week too, because I think there is that feeling of well, monday, tuesday, let's just not even open and we'll focus on the busy times.
• 26:37
  Speaker 1: And you mentioned, we finally got profitable not five days a week, but seven.
• 26:42
  Speaker 1: How do you measure that?
• 26:43
  Speaker 1: What are you looking at and what are the, I guess, key metrics, for lack of a better word?
• 26:51
  Speaker 1: How do you evaluate?
• 26:52
  Speaker 1: Yes, this is profitable or not?
• 26:55
  Speaker 2: Yeah, so very back of the napkin math.
• 26:58
  Speaker 2: I mean, I have a pretty general understanding based on how many folks are going to be in the front of us and back of us.
• 27:03
  Speaker 2: You know, we have a kitchen too.
• 27:04
  Speaker 2: So look, if we were just selling beer, personally, I think it's pretty hard to not be profitable every moment of every day.
• 27:12
  Speaker 2: I mean, you gotta what?
• 27:13
  Speaker 2: Sell one and a half beers to cover, cover like an hour, it's not.
• 27:17
  Speaker 2: I can't see that not happening.
• 27:20
  Speaker 2: Um, however, you know, I think one thing that, uh, you know we do a bit uniquely here is we.
• 27:27
  Speaker 2: We build a team and train a team in a way and hold them accountable in a way where I don't have to be here all the time, and I think that's important.
• 27:34
  Speaker 2: I am here monday through friday.
• 27:36
  Speaker 2: I'm here nine to five, and that's you know from.
• 27:39
  Speaker 2: Am here Monday through Friday.
• 27:39
  Speaker 2: I'm here nine to five, and that's you know from here.
• 27:43
  Speaker 2: Outside of that, I'm drinking and having fun, not working, but you got to set up systems for that.
• 27:49
  Speaker 2: But back to the key metrics.
• 27:50
  Speaker 2: In terms of profitability, it's pretty back of napkin math, right?
• 27:52
  Speaker 2: I'm taking what our average margin is on the food and on the beverages, I'm assuming some percent of waste, and if it's a really slow Tuesday we probably have a lot of food waste Not necessarily beer waste, but food's going to go bad and we're going to throw it away and prep that's done is going to have to be redone.
• 28:09
  Speaker 2: So I'm looking at that kind of waste number for the day and just have a general idea on what I would need to sell in a day to cover that and you know if I'm we're talking degrees of variance here, right.
• 28:26
  Speaker 2: And so if I'm looking at it and saying, ah, you know, we may, we may make a couple hundred bucks on this day, I'm I'm calling that not profitable, right, like it's.
• 28:36
  Speaker 2: We've got to make enough money to make it worth me coming into work for me to call it a profitable day.
• 28:42
  Speaker 1: Yeah, makes sense.
• 28:43
  Speaker 1: Talk to me a little bit more about staff training, because you had said earlier, like your beverages, food and service, and I think that's such an important you know, triple play there, if you will.
• 28:56
  Speaker 1: And staff training is a challenge.
• 28:58
  Speaker 1: I mean, when we listen to brewery owners, taproom managers, it's like, you know, outside of getting more people in to your taproom, you know staff training and retention is probably the second biggest pain point.
• 29:08
  Speaker 1: So what do you?
• 29:08
  Speaker 1: How do you approach staff training, or maybe even the culture, to get those outcomes that you want?
• 29:17
  Speaker 2: Yeah, you know, I think that I think the culture is a big part and I hate that word just because it can be so vague and so I'll try and give you some specific things that I do.
• 29:30
  Speaker 2: You know, I think part of it starts with mindset.
• 29:33
  Speaker 2: I set my mind to starting the business this way I said I'm going to open this brewery restaurant.
• 29:38
  Speaker 2: Maybe I'll open more than one, and I'm going to work Monday through Friday from 8 to 5.
• 29:45
  Speaker 2: That's going to be my schedule, and so you know, when you do that, you really have to approach everything with the mindset of teaching someone else to do it and act like an owner, which is pretty, pretty impossible to do.
• 30:01
  Speaker 2: None of them think exactly the way you do.
• 30:03
  Speaker 2: But if you approach it that way, I think it makes it easier to figure out what to do.
• 30:08
  Speaker 2: Some of the things we do.
• 30:09
  Speaker 2: I mean I spend a fair amount of time with my managers and I don't spend a ton of time with the frontline staff, and that's on purpose, not because I don't like them.
• 30:22
  Speaker 2: I hang out with them, they're nice people.
• 30:23
  Speaker 2: But I do need my managers to be able to present my values and where I want to take the business and hold people accountable the way I would, communicate the way I would.
• 30:38
  Speaker 2: So I spend more time with them and we talk a lot about how they will have those conversations with their staff and if somebody messes up.
• 30:46
  Speaker 1: How do you?
• 30:47
  Speaker 2: have that conversation.
• 30:48
  Speaker 2: So I'm focusing most of my training energy on those individuals kind of train, the trainer type thing.
• 30:54
  Speaker 2: I don't get into a ton of the minutia on this is exactly what you need to train them on and when, after they start, and that type of thing.
• 31:02
  Speaker 2: I focus much more on those cultural elements.
• 31:04
  Speaker 2: How do you you know, how do I approach problems?
• 31:08
  Speaker 2: How do you solve?
• 31:10
  Speaker 2: How are you creative in your problem solving?
• 31:13
  Speaker 2: Tip don't do the very first thing you think of.
• 31:17
  Speaker 2: Think of three things, those types of things.
• 31:22
  Speaker 2: And the thing I do with the staff is every other Monday we have a staff meeting the whole staff.
• 31:27
  Speaker 2: It took a long time to get people to show up.
• 31:29
  Speaker 2: I had to fire people because they weren't showing up.
• 31:31
  Speaker 2: And the thing I do with the staff is every other Monday we have a staff meeting the whole staff.
• 31:36
  Speaker 2: It took a long time to get people to show up.
• 31:37
  Speaker 2: I had to fire people because they weren't showing up.
• 31:39
  Speaker 2: It is very much a commitment, but now they love it.
• 31:40
  Speaker 2: The ones that don't weed themselves out and they're not a fit for our culture, but the ones that do love it.
• 31:52
  Speaker 2: Thank me afterwards or they send me messages and thank me for being there and being present and being open and asking them their thoughts.
• 31:55
  Speaker 2: And most of the meeting is, you know, I try and balance it.
• 31:56
  Speaker 2: I try and get 50% of the words said by my staff, not me Really tough to do.
• 32:00
  Speaker 2: I'm lucky if I get 25.
• 32:01
  Speaker 2: But you know, I'm trying to get them to talk as much as as much as I talk.
• 32:06
  Speaker 2: That's the whole purpose of it and I learn a lot and they really appreciate it.
• 32:10
  Speaker 2: So I think that really helps with the culture.
• 32:12
  Speaker 2: Um, and you know, I think the other one is that my managers we have uh, there's a couple that run the kitchen operations who are fantastic.
• 32:22
  Speaker 2: Uh, um, our brewer.
• 32:24
  Speaker 2: You know, all of those folks have this same mentality.
• 32:29
  Speaker 2: We all jump in.
• 32:30
  Speaker 2: No one says that's not my job.
• 32:32
  Speaker 2: Uh, and that staff see that.
• 32:35
  Speaker 2: Right, I mentioned I'm not here monday outside of those working hours, unless I'm drinking.
• 32:40
  Speaker 2: Almost 100 of the time when I'm here drinking I'm clearing tables, right, because I'm here when we're busy and the staff should see me clearing tables and scraping food into trash cans and all that gross stuff that I actually hate doing.
• 32:53
  Speaker 2: But you know, it shows them that we're all in this together and I have no problem rolling up my sleeves.
• 33:00
  Speaker 2: I won't clean toilets, but I'll do every other job here.
• 33:04
  Speaker 1: That's great, yeah, really setting the example.
• 33:06
  Speaker 1: Sure, you know, I think that being there is so important to write because so, while you're training, so I like to kind of just to kind of recap what you're saying is like, how do you train?
• 33:17
  Speaker 1: What's your process?
• 33:18
  Speaker 1: You know you're working with the managers train the trainer that really leverages your time and then acting like an owner.
• 33:26
  Speaker 1: When you say act like an owner, are you instilling that in your management team, that these are my core principles and I want you to embody those?
• 33:32
  Speaker 1: Or how do you communicate that act like an owner approach?
• 33:36
  Speaker 2: Yeah, it's more through conversation about what they're dealing with.
• 33:43
  Speaker 2: Right, and I try.
• 33:45
  Speaker 2: You know, one of the things I try and do when I communicate I'm not always great at this, but it's to not give them the answer right away and tell them what I think, but ask them what they think the solution is and then ask them to consider what they think my answer is going to be.
• 34:00
  Speaker 2: So I'm just trying to get them to think through it and it's it's amazing how quickly you can get to a point with somebody that you're working with where they can answer that question and say, oh well, I think we should do this.
• 34:13
  Speaker 2: And then I say what do you think I'm going to say?
• 34:16
  Speaker 2: And they go oh, you're probably going to say it this way.
• 34:19
  Speaker 2: I'm like uh-huh, so let's go do that one.
• 34:23
  Speaker 2: And I've heard at least one of my managers using that same technique with their team and saying what do you think we should do?
• 34:34
  Speaker 2: What do you think I'm going to say we should do?
• 34:37
  Speaker 2: Right, and so you're kind of pushing that all the way down.
• 34:40
  Speaker 2: That thought that is not just singular how am I excuse me, how am I going to solve this problem?
• 34:46
  Speaker 2: But thinking to yourself okay, how am I going to solve this problem?
• 34:50
  Speaker 2: Wait, how would the business want me to solve this problem?
• 34:53
  Speaker 2: Yeah, and then thinking outside, of just just yourself.
• 34:57
  Speaker 1: Yeah, yeah, that's great.
• 34:58
  Speaker 1: That can be really useful too.
• 34:59
  Speaker 1: And I think re, uh, reinstilling that on a regular basis during your training is helpful too, you know, because then people can kind of get it.
• 35:07
  Speaker 1: Oh yeah, I like how you said earlier, like what are you going to do to solve this problem?
• 35:10
  Speaker 1: Don't just here's a tip Don't just do the first thing you think of.
• 35:13
  Speaker 1: Come up with three ideas, because it gives you that little pause where you're like, oh yeah, I should consider other avenues here.
• 35:20
  Speaker 2: Yep, yep.
• 35:20
  Speaker 2: And you know a way to hold your team accountable to that is ask them when they come to you and say, hey, this is happening, you know I want to solve it this way, cause I also asked them to come to me with solutions, not just problems.
• 35:31
  Speaker 2: Um, my first question if they say, hey, I want to solve it this way, is going to be great, what else did you consider?
• 35:38
  Speaker 2: Yeah, right, and oftentimes they haven't considered anything.
• 35:41
  Speaker 2: But you do that over and over and they start coming to you and saying here's what, how I'd like to solve it.
• 35:46
  Speaker 2: I consider doing it this way, but I can't because of this or whatever.
• 35:50
  Speaker 2: And that gives you an opportunity in many, in many situations to remove whatever roadblock they thought existed to solving it.
• 35:57
  Speaker 2: That better way, right.
• 36:00
  Speaker 1: Right, yeah, that's, that's good.
• 36:02
  Speaker 1: Hey, I want to pivot back to marketing.
• 36:03
  Speaker 1: You mentioned that earlier that you do a crap load of socials and you hate it, so tell us about a marketing initiative or some sort of campaign that's worked.
• 36:14
  Speaker 1: You could still hate it, but let's see if it actually had an impact for you.
• 36:19
  Speaker 2: I'll give you two.
• 36:19
  Speaker 2: I'll give you one that worked really well and one that didn't.
• 36:21
  Speaker 2: The one that worked really well and it's an initiative to do more of this this year.
• 36:27
  Speaker 2: It's just like I said.
• 36:28
  Speaker 2: It's hard, uh, and this is probably not surprising.
• 36:31
  Speaker 2: But the ones that that uh got the most engagement in the social were the ones about our people, not not necessarily the sit down interview type thing.
• 36:40
  Speaker 2: We actually haven't done any of those.
• 36:41
  Speaker 2: I'd like to.
• 36:42
  Speaker 2: I think those will actually perform really well as well.
• 36:45
  Speaker 2: But just the behind the scenes people making hamburgers, people making beer, the things that to us might seem really mundane.
• 36:54
  Speaker 2: And you know, I have a I have a tendency to get because of my background.
• 36:58
  Speaker 2: I have a tendency to want all of our marketing to be very perfect and pretty and scripted, you know, on brand, all of these things and, and so that keeps me from doing some of this, this stuff, um, but when we just send somebody with an iPhone back into the kitchen during a busy day to show somebody hustling a burger out, and then they follow them out to the floor and see a bunch of folks in our taproom drinking, those perform really well.
• 37:26
  Speaker 2: I don't quite know why I don't want to watch it, but our customers do, and I think it's that human element, that kind of unpolished look, that genuine look that they appreciate, one that I think, on engagement, an important thing to consider is the result of that, that kind of mark, marking, initiative or story.
• 37:52
  Speaker 2: And so here's one that you know, I think I could have very easily been fooled by and it was not successful.
• 37:59
  Speaker 2: We had an event.
• 38:00
  Speaker 2: I think it was a yoga event, I believe.
• 38:04
  Speaker 2: No, you know what it was line dancing.
• 38:06
  Speaker 2: That's what it was.
• 38:07
  Speaker 2: We had a line dancing event.
• 38:08
  Speaker 2: I talked about doing my weekly programming.
• 38:10
  Speaker 2: One of the employees suggested line dancing.
• 38:14
  Speaker 2: I'm constantly asking for their thoughts during those meetings.
• 38:18
  Speaker 2: I asked them to go find somebody that does line dancing and they did, and we set up our first line dancing.
• 38:24
  Speaker 2: We did a post on social, one or two it was.
• 38:26
  Speaker 2: It is still, to this day, the most shared post that I have put up this line dancing, and you'd think, sharing that's because everybody's going to come do it.
• 38:35
  Speaker 2: Like I was stressed out, we added staff.
• 38:37
  Speaker 2: Like you know, we were all nervous about it.
• 38:39
  Speaker 2: It two people showed up.
• 38:41
  Speaker 2: Two people showed up.
• 38:43
  Speaker 2: I was like, oh my gosh, that's amazing, Amazing failure.
• 38:48
  Speaker 2: And so you know that one was an obvious one, because people were coming in for a very specific event and did not even though the metrics on social said that it was a really good story or a really good post.
• 39:01
  Speaker 2: Some other ones are harder, but I think, just forcing yourself to not get too fixated on one individual post or engagement or key metrics in social and ask yourself the question okay, but are people liking this and sharing it and following because it's funny or because they're actually going to come in and drink some beer?
• 39:27
  Speaker 1: It's funnier because they're actually going to come in and drink some beer.
• 39:30
  Speaker 1: Yeah, that's a great point, right, where we can get lost in wow, this is super successful because we get a lot of, you know, impressions and that doesn't really.
• 39:34
  Speaker 1: I mean, okay, maybe that helps your brand recognition, but if they're not coming in the door, that's the point of marketing.
• 39:39
  Speaker 1: Right Is to connect a customer with the product that you offer and, you know, have the two come together.
• 39:44
  Speaker 1: And if it's not working, then the socials, you know, the other stuff is just vanity stats really.
• 39:50
  Speaker 2: Yeah, yeah.
• 39:51
  Speaker 2: And so you know the way I think about it and the way we talk about it here is that validation does all the things, and I do that on social too.
• 39:59
  Speaker 2: We do all of the social and it's, like I said, exhausting and I kind of hate it.
• 40:04
  Speaker 2: But we, we try and post multiple times every single day and we do posts and stories and some of them are professional looking shots and some of them are these more uh, you know kind of less filtered shots or videos.
• 40:16
  Speaker 2: We do videos, we do posts, we do reels, we do the carousels.
• 40:20
  Speaker 2: We, we just try and do everything right and during the week we try and have events every day.
• 40:27
  Speaker 2: We try and provide beverages for everybody.
• 40:30
  Speaker 2: We have non-alcoholic stuff, we have a cold room that you can walk into and pick out things like meat or seltzer or cider that we don't have.
• 40:39
  Speaker 2: We obviously make our own beer and seltzer and now booze, and we have four wines on tap like we're just we're.
• 40:45
  Speaker 2: You know, I think there was a, there was, was.
• 40:48
  Speaker 2: I wasn't, I didn't have a brewery during the boom, but my guess is there was a time in the boom where you could focus on just one thing and absolutely crush it, and what I'm finding is I've really got to try to appeal to everybody because my market is shrinking.
• 41:02
  Speaker 1: Yeah, yeah, that's, that's great advice.
• 41:03
  Speaker 1: So, speaking of that, if you could give one piece of advice, as we kind of wind down here, to other brewery owners that might be struggling, you know, maybe they're struggling with the bottom line, the top line or both.
• 41:19
  Speaker 2: What's one piece of advice you'd leave them with.
• 41:20
  Speaker 2: I'd say go through the growth driver exercise.
• 41:23
  Speaker 2: I mean, the longer we're stale, the more likely it is that you know we're going to have financial issues.
• 41:28
  Speaker 2: And you know, to be transparent, I'm not great at the cutting cost side.
• 41:35
  Speaker 2: I grew up in tech sales, so like we spend a lot of money and made a lot of money, and so I just naturally, I think, go more to the revenue drivers versus the cost cutting.
• 41:46
  Speaker 2: But you know, I think in today's market we really have to be reinventing ourselves as much as we can, because our market's not growing on its own.
• 41:55
  Speaker 2: We need to make new markets for ourselves.
• 41:58
  Speaker 2: So I'd say, go through the growth driver exercise.
• 42:00
  Speaker 2: Doesn't mean you have to start a whole new business, but you know, force yourself to think about all the things you can do.
• 42:06
  Speaker 1: Love it.
• 42:06
  Speaker 1: So, brian, this has been fantastic.
• 42:09
  Speaker 1: Thank you so much for your time.
• 42:10
  Speaker 1: Why don't you close out by giving people you know again where you guys are located and maybe, if there's something cool you got coming up here in the next couple of weeks or month or so?
• 42:21
  Speaker 2: Yeah, absolutely.
• 42:22
  Speaker 2: So.
• 42:22
  Speaker 2: We're in Santa Barbara.
• 42:23
  Speaker 2: We have two locations.
• 42:24
  Speaker 2: Our headquarters is in what's called the Funk Zone.
• 42:27
  Speaker 2: It's kind of the up and coming industrial area of Santa Barbara.
• 42:31
  Speaker 2: We're right on the corner in literally where the map points to Funk Zone.
• 42:36
  Speaker 2: And we have a second location two miles away in Santa Barbara as well, kind of in the neighborhoods where we've launched New York style pizza, so that's a new one for us.
• 42:48
  Speaker 2: We're full restaurants in both locations beer, wine and now at headquarters we have spirits as well.
• 42:54
  Speaker 2: In the next couple of months I'd say really all summer we have something going on.
• 42:59
  Speaker 2: We have our three-year anniversary party coming up on the 19th of July.
• 43:04
  Speaker 2: We have Oktoberfest that we'll do the first weekend of October, and then at the very beginning of August Santa Barbara has a big celebration called Fiesta Old Spanish Days.
• 43:15
  Speaker 2: It's the biggest day every year, so if you're anywhere near Santa Barbara, that's a great, great day to check things out down here.
• 43:22
  Speaker 1: That's awesome.
• 43:23
  Speaker 1: Ryan, thanks so much for the time.
• 43:25
  Speaker 2: Yeah, appreciate it, Kerry.
• 43:28
  Speaker 1: Thank you for listening to the Craft Brewery Financial Training Podcast, where we combine beer and numbers so that you can improve financial results in your brewery.
• 43:38
  Speaker 1: For more resources, tools, guides and online courses, visit craftbreweryfinancialtrainingcom.
• 43:42
  Speaker 1: And don't forget to sign up for the world famous craft brewery financial training newsletter.
• 43:47
  Speaker 1: Until next time, get out there and improve financial results in your brewery today.