A friend of mine recently complained about being burned out running his brewpub. He wants to grow but struggles to find “good help” to free up his time, which is spent in the brewery, doing repairs, making schedules, making purchases and so on. His thinking is if he pays more he can get better help, and yes that’s true but it’s not the problem. To get to there (a second location) you have to know where here is first.
The first problem many business owners face is they are working in their business - which is necessary to some extent - rather than on their business. With a busy schedule just keeping the business afloat, any free time you have to work on your business has to yield the greatest results, so that you can free up more of your time. Here is how we accomplish this: Make a scoreboard.
Your profit and loss statement is already laid out in priority. First item is Sales. The second is the cost of sales, which is the cost of the ingredients you sell. Then comes expenses and the largest typically is labor. Concentrate on these three things and you have made a world-changing impact on your operation.
Start by buying a simple large white board, an erasable black marker, and an erasable red marker. At the top write SCORE BOARD. Underneath that, write SALES, SALES PACE, next your COST OF SALES - FOOD, BEER, WINE, MERCHANDISE and whatever else you sell. The last item write LABOR BANK. It goes like this.
SALES. First based on your knowledge make a guess what you expect your sales to be for the month. If you think 90k, then write that down. SALES PACE is what pace you are on and it changes every day. Let’s say you are open 31 days this month and the first day is a Wednesday and you do $2,800 in sales. It’s the first day so 2800 divided by 1, times 31 equals a pace of $86,000. That’s less than your 90k budget so I write that figure down in red, meaning you are not hitting your budget. Next day you do $3,200 in sales, which means your month to date sales are now $6,000. This gets divided by 2 (you have now been open 2 days) then multiplied by 31, which equals $93,000. You are now on a $93,000 pace which is better than your budget of $90,000. So write this in black. Every day this number changes letting you know if you are going to hit your sales budget or not. This is real-time information. If you don’t hit your sales target, you need to do some work.
COST OF SALES. I am always surprised at how many operators do not take the time to do monthly inventories of what they sell. Every month you need to take an inventory of the items you sell. For example for merchandise, you count how many shirts and hats you have on hand on the first of the month. Multiply those by how much they cost to give you a dollar value of your inventory. There is a formula to see what the % of sales are- Beginning inventory (what you started the month with) plus purchases (any amount you bought more inventory) minus ending inventory (what you have on hand at the end of the month). This gets divided by your sales in that category and gives you a percent. If that was 53%, that means .53 cents on the dollar went to pay for the merchandise you sold. But wait! You priced your merchandise at 100% mark up, meaning your goal is 50% cost of sales, so you are higher than you should be. That means you either 1. miscounted 2. the price of the merchandise you bought went up or 3. a hat or two were stolen. Wouldn’t you agree that is important information to know??
For COST OF SALES write down each type of cost of sale you have. For Colorado Boy it’s Food, Beer, Wine, Beverage, and Merchandise. Next to each we write what our goal of that item is and next to the goal, what our last inventory was. If we met our goal it is written in black. If we missed the goal, like in the example above, then it’s written in red, meaning we have work to do.
LABOR BANK. On the score board the sales pace changes every day. The cost of sales however is done at the beginning of the month and if there are no problems, you don’t need to take another inventory until the next month. With the labor bank however it also changes everyday.
To figure out your labor bank you first need to calculate how much labor you will have for the month. I use a spread sheet that mimics the schedule. This takes me about ten minutes at the beginning of the month, but basically I plug in all the positions, how many hours they will work each day in that position, and what their pay is. This all gets multiplied out to give me a total labor for the month. This gets divided by how many days in the month, which gives me a figure of what I can spend each day.
You will spend less on a Monday than you will on a Friday, but it all works out in the end. So let’s say your daily labor budget is $872. On day one you spend $870, that means you saved $2. This you write on your labor bank, meaning you put $2 into the bank. Next day you spent $900, or you over spent by $25. Take that figure and balance it against your $2 you saved and now your labor bank shows negative $23. You keep this up everyday. We have this on a daily sales report work sheet audit just pops these numbers out so it takes no additional work.
Let’s say you as the owner went camping for the weekend. You come in after couple days off and you look at your scoreboard. You budgeted $90,000 and your pace is $93,000. All the cost of sales columns are in the black, but your labor bank shows a negative $23 (written in red). No problem, you are working that shift so you will get a couple people off the clock fifteen minutes early and that will make up for the $23.
You see, with the scoreboard, you instantly know the financial health of your business - everyday! Without this tool you are just flying blind. However if you are hitting all these numbers you are probably going to make money this month.
Breweries, and especially brewpubs are about watching pennies. You know for a fact that successful national franchises crunch numbers and they seem to do pretty well. Don’t you think it might work for you?
This may seem like a lot of work but I have some spread sheets that I’m happy to share with you that make this all pretty easy. You worked your ass off to open your brewery, this is nothing in comparison.