How to build a taproom financial plan

There’s a lot at stake when building a budget.

Over the years, I (Kary) have created hundreds of financial budgets and I still get anxious when starting a new one. It’s a big job, and there is a lot of work involved. Moreover, there is a lot of pressure to get the plan done right. People are counting on the numbers to be accurate in order to make good business decisions that impact the brewery.

A financial plan can feel like an overwhelming task. So many numbers. So many unknowns. So many changes that come up unexpectedly and turn the whole business upside down. How can you be expected to predict everything that will happen accurately and get it all down on paper?

Short answer: You can’t.

A famous guy once said that plans were useless but planning was indispensable. This holds true for creating your taproom financial plan.

The process of planning – talking with your team and dreaming about the future of your taproom – are the fun parts of creating your financial budget.

That’s why I recommend writing out the plan in words first. Don’t worry about the numbers in the beginning. Just write down your goals, objectives and strategy in words. The numbers will come easy after that.

Taproom Planning Basics

The taproom financial plan involves five building blocks:

Sales forecast
Margin plan
Operating expense plan
Capital budget
Debt schedule

Below, we’ll dig into each of the building blocks and give you some tips to get started. Use these ideas in connection with the financial planning templates and you’ll be well on your way to creating a solid financial plan for your taproom.

Sales Forecast

The sales forecast is simply a projection of how much you will sell each month. It should show the sales by category (draft, package, food, etc.) and by month.

The Sales Forecast template provides a starting point for this exercise.

Ask questions. Challenge assumptions. Build an achievable plan.

Margin Plan

Let’s begin with some simple math:

Sales minus the cost of goods sold = margin
margin divided by sales = margin percentage

Where possible, use an expected margin % to create your plan. This will make budgeting a lot easier. For example, if the historical trend for margins in your taproom is 75%, use this as an expectation for your new budget.

Generally speaking, the longer the history and the more consistent the margin percentage, the more confidence you can have in the accuracy of the number.

Use your Taproom Sales Plan model to project margins by each sales category: draft beer, packaged beer, food, etc. The margins by category can be very different.

Look at the cost components of your beer – labor, materials and overhead. Look to your written financial plan for reminders on goals, plans and strategy for next year. If no major changes, use the trend.

Operating Expense Plan

Operating expenses are the day to day costs of running your brewery: payroll, lease costs, insurance, and so on. If the cost is not directly related to the production or packaging of your beer it gets included in the operating expense section of your plan.

For the large operating expenses, like payroll, it’s helpful to have a supporting schedule. This is a detailed listing of what makes up the expense. In the case of payroll, this schedule should list out all the employees, hourly rates, expected hours worked, and salary information.

To build up the expense plan and make sure everything is accounted for, I find it very helpful to comb through the detailed transactions in the general ledger. The general ledger lists out all the transactions that hit the financial statements. It’s basically like a check register that shows where money was spent and a description of what was purchased. Where did we spend money? Will that happen again? Will we spend more or less? What new plans do we have next year? What will it cost?

Chances are, if you bought something this year, you’ll buy it again next year. Use the general ledger to jog your memory on expense items that are likely to repeat. Use the historical amounts as a baseline for budgeting expenses next year.

And don’t forget to invest in training for your taproom manager and staff. Here, I hand it off to my co-pilot Andrew Coplon to talk about the importance of professional development for your employees.

Training is perhaps the most overlooked area of investment in a brewery.

You hire a star bartender from another brewery and you assume they know everything they need to know. Wrong. Just because someone has worked in the craft beer industry before does not mean they know your story and your unique procedures.

Taking the time to successfully on-board a new team member (please don’t cringe at those corporate-y words) is valuable for not only that employee, but your company as a whole. Just like Kary, I’m a huge fan of the checklist when bringing on a new team member, no matter what position. I recommend having 2 unique checklists for each role at your brewery.

The first checklist covers everything surrounding “company education.” This can include your teaching that new employee about your company history, your mission statement, your beers, and introducing them to everyone else on your team.

The second checklist you should have in your back pocket is on “operational skills.” This will be unique for each position and will go over the tasks that employees must be proficient at to achieve success in this role. For a taproom bartender, this may include the very basics, like simply knowing how to turn on and off the lights or settle the POS. Never assume someone knows the answer, but take the time to train them — even if the simplicity humors both of you.

Training shouldn’t just happen upon arrival. It should be a consistent tool used to educate your entire team. Invest in this from the get-go and offer your staff additional opportunities to better themselves. The more they’re invested in your mission, the more valuable they are.

Taking the time to properly train and maintain a team member will ultimately create a more efficient and profitable brewery.

Capital Budget

So far we’ve covered the sales plan, margin plan, and operating expenses. Next it’s time for the Capital Budget. This is the place for big purchases. Big ticket items go here: that new canning line, keg washer and delivery van.

Anything that costs more than a set amount, say $1,000, and will last longer than a year should be on the capital budget.

The difference between a Capital Expense and an Operating Expense is that capital items need to be written off over a certain period of time. If you buy a box of copy paper for $50 it’s an expense on the current income statement. If you buy a $10,000 draft system, that’s a capital expense that will be depreciated over the next five to seven years.

Make your wish list. Determine what the items will cost and when you expect to buy them. This will help with cash needs planning.

Lastly, match up the expected spending to the expected funding. It’s important to figure out how you’re going to pay for that new draft system. List any new loans or new capital you will need to make the Capital Budget a reality.

Debt Service

Debt Service is the amount you pay each month on your loans. This is like customer service, except with debt. The customer is always right, and so is the bank.

Create a schedule of all your debt and the payments due on each. List the bank, type of loan, term of the debt and of course the payment amounts.

Remember, only interest expense shows up on your income statement. The principal portion of your payment needs to be figured into your cash plan. The Debt Service schedule will serve as a reminder of how much is due and when.

Wrap Up + Action Items

Here’s the bottom line: any financial plan is better than no plan at all. Begin the process by writing out your plan in words. The main characters in the story are the sales forecast, margin plan, operating expense plan, capital budget and debt service plan.

Take your budget story and translate it into numbers. Use the sales template as a jumping off point. A beautiful budget for your taproom is within your reach. Now, crack open a beer and build a financial plan that will make us proud.

Before you mosey along, we’d love to have YOU join the Taproom Success Membership. Use Coupon Code 25YAMS at checkout to save 25% off any membership level.

This piece comes from the Taproom Success team. Taproom Success Membership gives you the tools, resources, and support you need to manage and grow your taproom business. From fundamentals, to best practices, backed by data, and actionable strategies, the Taproom Success Membership fills the void of taproom educational opportunities.