Top 5 Questions

Today we’re launching something new and rather exciting.

Starting today, at the end of each month in 2024, we’ll be sharing the Top 5 Questions we received that month along with our responses.

This new series will give you a peek into what other brewery owners are curious about and explain the reasoning behind our answers.

There’s no specific formula for selecting these questions. They all go into a hopper, and our consulting team picks the five they believe will be the most valuable to share.

What kind of topics will we cover? It could be taxation, debits and credits, strategy, labor, or benchmarking.

So, without further ado, here are the Top 5 Questions SBS received in May 2024 and our responses.

Hope you enjoy.

I am selling my distro rights. Is that money taxable?

Selling distro rights can result in a big pile of cash in your bank account. It also means a big pile of taxable revenue. A sale of distro rights usually is structured with a lump sum followed by payments over time. The cash coming in for your rights should be categorized as other income on your P&L.

Selling your rights is revenue to the business and should be recognized based on your tax basis. If you are cash basis for tax purposes, the revenue will be recognized at the time of deposit(s). If you are on an accrual basis for tax purposes, then you need to report the revenue at the time the contract is signed.

Should I adjust the hours I serve food to keep my Back-of-House labor down?

Customers expect consistent hours of operation when it comes to food. Before you reduce food hours, consider a targeted marketing campaign to boost attendance at your location. This campaign should highlight the food you serve, your space and the experience. Once you cut hours, you essentially begin to cut the trust of the customer.

Should I expand into 19.2 oz cans?

Expanding to a 19.2 oz format tells me one thing…you have an “in” with C-stores. This is the only sales channel where I have seen the 19.2 format work. Some chains are starting to bring them in, but they are designed for the C-store. IMO, C-stores are harder to crack into than chain grocery stores, because that cold box is so limited and valuable. A Sales Order from a C-store is the only way I would start packaging in 19.2oz cans.

We are currently paying full cost for everything. Raw Materials, Packaging, Chemicals, etc. How do we know if there are cheaper alternatives out there?

Our suggestion here is to speak to one of the buying groups and explore what savings they are providing for the same materials. The purpose of the buying group is to negotiate the best pricing on raw materials and packaging for its members. A very active buying group is the Independent Brewers Alliance. They have amassed a large number of members and affiliate breweries who can take advantage of their buying power to get the best pricing available.

Where do you classify Owners compensation on the P&L?

Regardless of what the owner does day to day, their compensation should be separated from the rest of the team. A typical brewery will have the following accounts on their P&L: Production, Admin, Taproom, Sales. Owners compensation does not belong in any of these categories because including it would fictitiously increase or decrease these accounts. We also do not want to include owners compensation in our benchmarks.

How much should owners pay themselves?

Ever heard me say the “owners eat last?” I wholeheartedly believe this statement and would say that most brewery owners do too. I also believe that when the business is profitable that the owner should aim for being the highest paid person in the company. You took the risk, you are doing most of the work, you should be compensated for this. So the answer is, an amount that the business can sustain with the goal of being the highest paid.

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