Math

Our business is about pennies

Here I go again with numbers, when I was going to talk about the value of using serving tanks rather than kegs…. but I’ll save that for next time.

Instead I want to talk about money. Yes I know you aren’t in this business for the money, but keep cleaning tanks for another five years, and you might start to be a little more interested.

What I want to do is to get you thinking about the money you spend to operate your brewery. I also want to give you a little math paradigm to use whenever you choose to spend that hard earned money.

Over the course of a year, you take in a lot of money and write just as many checks to purveyors and employees. But it’s the little things that really add up and if you are aware of every penny you spend so that you get the full value out of it, there will be something at the end of the year left over. If not you are celebrating another New Years Eve but the check book looks pretty much as it did at the beginning of the year.

Last news letter I talked about the Scoreboard and how by following it, you get the most bang for your buck by concentrating on the big things. Please go back and read it. Now I want to talk about the little things.

Let’s start with a bit of math! The average restaurant net profit (the money left over after everything is paid for) falls between 3-5% of gross sales. The high would be about 15%. Just for dramatic effect however I will use 5%.

Now, a bartender breaks a pint glass. It’s a nice one and it cost you $2.65 to replace that glass. What do you suppose you need to do in sales to make enough net profit to pay for that glass? Take the cost of the glass, $2.65 and divide it by your net profit. Our example is 5% or .05. This equals a whopping $53. Think about that, if you start the day at 0 and someone breaks a glass, you now need to sell $53 just to get back to 0.

Another example is the band you hire for entertainment. If the band charges you $400, you need to do $8,000 above what you would have normally done for the day to make it worthwhile.

My caveat is the band does build a promotional value, and glasses break - that’s just the cost of business. But learning this simple math will help you pause just a wee bit before making a purchase, or at the least give you a different perspective.

This way of thinking applies to how you build your brewery as well. I catch a lot of flack from my brewing friends for always trying to “Frankenbrew” everything. But if the amount of kegs I need to clean per week is only about eight, why do I need a $20,000 automatic keg cleaner when I can build a simple Frankenbrew Keg Cleaner for less than $500? At a savings of $19,500 that equals $390,000 you don’t have to produce in sales to pay for it.

I’m not cheap in all things. For example I like new refrigeration. I also like high quality ingredients in our beers and our pizzas we make. As in all things it’s a balance based on your values.

The end result is that when that New Years celebration happens, you will actually have money in the bank for bonuses, vacations, equipment upgrades and capital improvements. This puts you in the drivers seat, which is where you should be running your brewery.