8 Craft Brewery Cash Flow Strategies to Boost Revenue & Gain a Competitive Edge

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Obviously, there's more to owning and operating a craft brewery, than just brewing beer. The business end of things must be managed, and managed efficiently, if you want to be successful. Here are eight valuable craft brewery tips to boost growth and aid in the foundation of your craft breweries future:

  1. Annual Review on Production cost - Your year-end reporting should be able to tell you what your production costs are for each product and service you offer. When you're reviewing production costs with an eye on profit margins, there are key factors to consider. One of these factors is vendor-related costs. If you're outsourcing production of any items, a thorough invoice-level review is necessary to see where a vendor might have changed your costs. For example, they might have lowered your per-unit cost, yet increased your shipping fees. You can't find the holes unless you look. You should also consider your own costs. An annual review is a good time to examine worker wages, hiring, overtime, materials costs, and other factors that can vary year-to-year. Find your increases and decreases, and see where there can be room for improvement.

  2. Identifying Seasonality - Examining monthly historical cash flow figures should quickly give clues as to which months are the busiest. However, one-time bumps or declines in cash flow may distort this perception. So compare averages for a given month, quarter or other period to the historical averages for the entire year. Also be aware that historical data may not tell the whole story. Consider future one-time events, such as a product supplier's planned price cut, as well as intuition, judgment and knowledge about general economic conditions when forecasting seasonal effects.

  3. Cash vs. Credit - The old adage “cash is king" still carries weight when it comes to effectively operating and growing a brewery. It's essential to maintain operating cash to fund the daily operations of your brewery, but cash reserves beyond that can be viewed as capital that can be used to fund growth or reinvestment in the brewery. Before even entertaining the question of cash versus credit, you should make sure you have a clear picture of what operating cash you need to comfortably run your brewery.

  4. Preventative Maintenance - It's advisable that brewery owners take a six-month view of their overall cash flow situation. Ask yourself, what's your expected revenue for the next six months, which opportunities do you have coming up, what are your expenses, and where are your possible peaks and valleys? You need to know that you can pay your bills, and then, having this level of visibility, you can have the confidence hire additional staff, buy new equipment, invest in expanding the business, etc. Cash flow is the lifeblood of your brewery. Just like caring for your health, a bit of preventative maintenance and careful ongoing attention can keep your breweries revenues healthy and strong.

  5. Track Your Spending - A cash flow forecast spreadsheet puts these together, breaking down incoming and outgoing cash by week, month, or quarter. A simple forecast would have entries showing cash on hand at the beginning of the period, expected expenses during the period, as well as expected receipts during the period. If the total at the bottom of any period's column is negative, a cash flow crunch may loom and action should be taken to avoid running out. Ideally, your cash flow should be managed to avoid these shortfalls and reduce borrowing costs in the long term.

  6. Watch Your Cash Flow - Know how much you can afford to spend and when by creating a cash flow projection. Pay attention to your accounts receivable and payable before you make a big purchase. If possible, wait until you have been paid to make commitments to others. Monitoring what you are owed and what you owe will help ensure you remain cash-flow-positive as your business grows. Money management can make or break a brewery. Regular cash flow monitoring will help ensure you have money to pay bills on time and that you can make arrangements that are agreeable to all sides if the time ever comes when you can't.

  7. Excess Cash Flow - Make sure your excess cash flow is really excess… and determine how much of it you have. While the exact answer will vary depending on overhead and burn rate, at a minimum, you should have enough cash on hand to meet short-term expenses, such as wages and rent, for a couple of months. The amount over and above your short and intermediate term needs could be excess cash. Excess cash flow can be used for growth; R&D, expansion, hiring, advertising, marketing, etc.

  8. Keep an Eye on Your Debt Profile - When assessing how to fund growth, it's essential to calculate how much debt you're already carrying and your comfort level adding to that debt. If you have sizable debt, additional borrowing could have a negative impact on your credit rating, which is never a good position for a small business. And your ability to secure a loan and get favorable terms will be partly dependent on existing debt as well as other elements of your financial and business profile. If you're carrying a manageable amount of debt and can secure a loan or line of credit at competitive rates, then credit may be the best option. However, if your debt level makes you or your lender uncomfortable, then perhaps establishing the discipline of using cash to methodically fund growth of your business could make the most sense.

There you have it, 8 Craft Beer Cash Flow Strategies to Boost Revenue & Gain a Competitive Edge. Have questions about managing cash flow, or obtaining it? We can help!