Mind the Gap – COGS

When I visited London as a teenager I still remember seeing “Mind the Gap” everywhere. Street vendors and tourist shops were filled with merch plastering the words on hats, shirts, bags, etc, etc, etc

Looks like that might still be the case today…


So it’s been a week since I’ve asked you to book a call…and my phone has rung exactly ZERO times.


If you won’t come to me, I’m coming to you baby.

The gap between Revenue and Profit is made up of expenses. It’s typically split up into two sections:

  1. Cost of Goods Sold
  2. General and Administrative expenses

This week let’s focus on the Cost of Goods Sold section.

Shall we?

Cost of Goods Sold is exactly what it sounds like. It is the cost of the items we sell.

While we do have a recommended chart of accounts that you track in COGS, I really don’t care what your chart of accounts looks like.

Wanna know why?

Because COGS should be a reflection of revenue. COGS should track revenue.

If revenue goes up, so should COGS. If revenue goes down, so should COGS.

Follow me?

In my world COGS are the accounts that help make your product. Some examples would be:

  • Cost of the finished product (broken out wholesale v. retail)
  • Cost of any losses in the brewing process
  • Excise taxes
  • Brewery expense

So it would only make sense that the value in COGS, each month, track proportionately to revenue, right?

Here is a visual of what I am talking about:

This is a Rolling 12 and something I look at very closely when I am analyzing a brewery’s performance.

Check out how the gray line moves with respect to the green line. While I’m not going to get into the details here, this is a masterclass Revenue to COGS show. Since the beginning this brewery has really understood the importance of the COGS concepts.

What’s the bottom line here?

You’re obsessed with revenues, I’m telling you to start becoming obsessed with expenses. We covered COGS today.

Revenue – COGS = Gross Profit

We need Gross Profit….BAD.

Gross profit is what we use to pay all the other bills (expenses) which I will cover next week.

Give me a call.


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