As you may know, running a successful winery requires more than just a “love of art.” However, often our focus is solely on perfecting the craft, and we overlook the equally important responsibility of perfecting the business. Thankfully, there is a solution.
One clear way for winery owners and operators to sustain their business is by developing a strong business plan. Many craft brewers have never written a business plan and may not know where to start. To make it easier for you, I have created this quick guide.
What is a business plan?
In short, a business plan is a written description of the future of your business: what you plan to do and how you plan to do it. It can also be seen as a roadmap that includes benchmarks or indicators to reach as you expand.
As your winery grows, the goals outlined in your plan should reflect your growth strategy, projected capabilities, and resources. There are various ways to demonstrate this in your plan, but we will discuss these core elements later on.
Why is a business plan important?
Planning is key to any successful business. A business plan helps you visualize the direction of your business and take action to achieve your goals through smaller, attainable objectives.
Meeting or exceeding your planned forecasts is beneficial, but not meeting them also provides a learning experience and motivation for the future. Therefore, while your business plan can be as simple or specific as you like, it is more beneficial to develop a clear and concise plan.
Additionally, your business plan serves as an internal guide and the first impression for potential investors and partners.
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Drafting your winery business plan
Writing a business plan may seem daunting, but breaking it down into five core elements can make it more manageable:
This component tells the story of your business through an executive summary, product description, and sections on the total addressable market. It provides background information and introduces your business to potential investors.
This section typically includes graphics, pictures, and branding to attract readers and stimulate investor interest. You can include your brand story, pictures of the grains you plan to use, and visual representations related to your expected cost of goods sold.
2. Income statement
This section focuses on numbers. Your income statement should show projected income and expenses for the first five years of operation. For winery owners, cash flow depends on profits from the winery itself, including distilled spirits, travel tickets, and merchandise. The statement should also include any costs like product or facility damage.
Creating sales forecasts, production plans, and calculating expenses are typical steps. Based on your sales forecast, calculate the cost of goods sold for your products, and deduct other expenses like administrative costs, taxes, dividends, and interest.
Your income statement demonstrates whether you have a viable business.
3. Cash flow statement
This statement shows the inflows and outflows of cash, determining the capital required for your winery business. It is closely related to the income statement and outlines any profit or loss.
Think of cash flowing in from customers purchasing products/services and flowing out to pay for raw materials, expenses, and management costs. The cash flow statement allows you and your investors to quickly assess cash flows related to various business operations.
4. Balance sheet
The balance sheet summarizes the financial status of your business, listing assets, liabilities, and net operating value. It balances the winery’s assets and liabilities.
Assets can be liquid or illiquid depending on their convertibility into cash. Liabilities include funds owed by the business. It’s advisable to hire an accountant or financial adviser for assistance with the initial balance sheet.
5. Sales forecast
This section outlines projected annual and monthly sales for the first five years. Calculate the number of products/services you expect to sell, estimate costs, and determine the profit based on unit price. Consider industry challenges, competitors, regulatory changes, and marketing strategies when formulating your sales forecast.
Consulting with a winery owner and using their benchmarks may be helpful.
There are other indicators and analyses to support your predictions, such as capital investment/return schedules, fundraising, profit margin forecasts, variance analysis, and revenue growth.
Balancing both your passion for creating spirits and managing your business is important. A well-written and realistic plan, along with appropriate and effective execution, increases your chances of success.