I want to talk about literacy this week. Anyone reading this probably wonders about my own grasp on the subject due to my many misspellings and grammar mistakes, but this is more about business literacy and money literacy. Both are entwined and vital to anyone owning or wanting to own their own business, and beyond. More on that later.
Before you opened your brewery, or if it is still in the planning stage, I bet you have dragged your spouse or friends to every brewery you can find in your town or when traveling. You sit at the bar with your sampler, craning your neck to see their equipment set up, or if you are really savvy, what kind of POS system they are running, how it’s decorated, what their service system is and so on. I think back to my poor Sandy and how she had to hit every brewpub I could find back in the day.
Countless hours are spent figuring out the best brewing system, recipes, and ideas about the overall concept. And that’s vital to your success, however I’m talking now about business literacy. Just like reading and writing, to do it well there are certain rules to follow. Yes I know there are plenty of business books that say to break the rules, guerrilla marketing, blah, blah, blah. But the basics are done in EVERY-SINGLE-SUCCESSFUL-LONG LASTING BUSINESS. If you don’t want your hard work do be in vain or putter out after a few years, it’s a must that you become literate in these practices as well. To name a few:
Understand how a profit and loss statement works and how it works with a balance sheet.
Understand Cost of Sales and how to control it.
Learn how expenses relate to sales. I mention this a lot. If you save .25 and your typical net profit is 5% than that .25 is equal to $5 in sales. Or at 5% net profit it takes you selling $5 to make back that .25. Powerful stuff.
Taxes. Learning what phantom income is.
Record keeping. It’s a business remember not a Frat-House.
There are thousands of business books that deal with these things. (plug - Business Operating System). Also lots of free podcasts, YouTube videos, etc, that explain all of this. This is what you should be listening to while riding your bike, walking, working out at the gym or driving to your soul-sucking job you are planning on quitting to start your brewery.
The other type of literacy I want to bring up is financial literacy. Man, I’ve really learned the hard way on this, but I’m more passionate about it than I am about brewing.
Because you are smart and following these ramblings, it means you are trying to build the best damn brewery for the least amount of money you can. What is the result? You will start to make money. But making money is different than building wealth. I know lots of people that make BUCKETS of money, but they don’t build any wealth. Why? Because they are financially illiterate. As people start making more money they can get caught up in “lifestyle creep” where every time they get a raise or a bonus they go straight online and start buying shit. Vacation homes, fancy ass cars, subscriptions to just about everything. Worst of all, this is mostly leveraged money, meaning credit cards that aren’t paid off at the end of the month.
I could go on and on about this topic (and I have in the past) but again, there are tons of YouTube videos and blogs that deal with financial independence. I recommend the book Your Money or Your Life and I used to teach their stuff, but I also am liking Mr. Money Mustache too. But let me summarize for you the financial literacy basics:
Concentrate on your spending more than your earning. Remember the example from above about expenses vs. sales?
Get out of debt! If you have a successful brewery you will pay that sucker off faster than you think and then the whole world opens up to you.
Try to buy the brewery building. Put it in a separate LLC that rents to the brewery. If you ever sell the business you still will generate income from the rent. Bonus is if you set it up as a triple net, meaning the tenant pays property tax and insurance and any commons area maintenance fees. But be reasonable and not an asshole landlord. The tenant has to make money too.
Invest your savings in simple Index Funds, like Vanguard. It has always beat the stock market since its inception in the early 70’s and then forget it. Don’t sweat the stock market ups and downs.
Save up about 25 times your annual expenditures and you will be financially free. 25 times is the same as the 4% rule, which say’s if you withdraw 4% of your portfolio every year the chances of you EVER running out of money is almost non-existent. That’s why spending less to live will get you there faster than Lifestyle Creep. So if you spend 50k to live you need $1,250,000 in assets.
There, let me hop off my soap box for now. I only mention this because I know from personal experience how hard it is to build a successful brewing business, and there should be a good pay day for all your hard work. I’m not making any of this shit up either. I’ve done it and it works, which is why I’m typing this on my laptop, camping in the desert about to make myself some lunch after an awesome bike ride.
If you disagree, tell me why.
