Page 16 - Beverage MasterOct Nov 2020

Craft Brewery
• Sales minus the cost of sales = margin
• Margin divided by sales = margin percentage
In other words, the price you charge for your beer this by looking through the detailed transactions in
minus the costs to make the beer is your margin.
When building your plan, use an expected margin
percentage. This will make communication of the
margin goal easier and allow for quick comparisons
to past results.
For example, if the historical margins in your
brewery are 45%, use this as an expectation for
your new budget. This can be used as the goal (or a
baseline) for new brands or packages you intend to
create.
To dig in on your margin planning, review the cost
components of your beer: Direct labor, direct mate- to jog your memory on expense items that are like-
rials and overhead.
Direct labor is the cost you pay people to make
the beer. Salaries and benefits for brewers, cellar
and packaging go in direct labor. Direct materials
are the ingredients you combine to make the beer.
Hops and malt go in direct materials.
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Overhead is the cost of everything else that
you need to produce the beer. It includes lease
expense, insurance on the brewery and deprecia-
tion expense of the equipment. Overhead costs are
those indirect costs, or support costs, which keep
the brewery running.
Build up the costs of new beer styles or packag-
es you intend to sell. Determine pricing, calculate
expected margins, and include this information in
your total brewery margin plan.
Budget Building Block #3:
OPERATING EXPENSE PLAN
Every big expense number on your budget should
have a supporting schedule. Examples of big
expenses include payroll, lease payments, travel
budgets, and marketing costs. A supporting sched-
ule is a detailed listing that adds up to that one
number on the operating expense plan.
For example, to create the payroll schedule, list
out the number of employees, expected wage
rates and hours that will be worked. The sum total
should match up with the payroll expense line on
the budget.
To build up the expense plan and make sure
everything is accounted for, I find it helpful to
review spending that has occurred in the past. I do
the general ledger.
The general ledger is a listing of all the transac-
tions that hit the financial statements. It’s like a
check register that shows where money was spent
and a description of what was purchased in the
past.
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
may buy it again next year. Use the general ledger
ly to repeat. Use these amounts as a baseline for
budgeting expenses next year.
Use the budget that you created in words and
estimate spending needs based on those goals and
objectives. If you don’t account for this spending in
the operating expense plan, it’s tough to make the
goals a reality.
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