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Have you ever heard of the 80/20 rule? The 80/20 rule, you know, 80% of the effort generates 20% of the outcome, okay?

It’s an anecdote that can be applied to many parts of your life. And look it up, look it up. There’s tons of examples about the 80/20 rule.

Today we want to talk about how it applies to your brewery. And what I’m proposing here is that 80% of your profits come from 20% of the products that you actually sell. 80% of the profit comes from 20% of the products.

So if we look at all the products that we sell in wholesale, in retail, you’re only telling me that 20% are actually generating me profit?

That’s exactly what I’m saying to you.

And the first step in determining the 80/20 or applying the 80/20 rule is to divide your business units. Okay? Divide your business units into wholesale and retail. And we really need to see: Can these business units stand on their own? With all the revenue and all the expenses applied, are we profitable or unprofitable?

What we have found for most of our customers is, retail? Highly profitable. Very, very, very well run, highly profitable. Wholesale is break even or a loss. When you net the two, that’s when you either get an overall loss for the year or you get slight, a slight bit of income for the year, a slight positive for the year.

But bottom line is, is in order to establish, to begin the 80/20 process for your brewery, you really need to split the units.

Another application for the 80/20 rule. Let’s look at it in wholesale, right? How would we apply it to wholesale? And this is for your self-distributing breweries, right, if you’re self-distributing.

Okay? You’re self-distributing to 300 active accounts. We define an active account by someone who is ordering at least every 30 days.

300 active accounts. 200 of them are high-touchpoint, high-effort, low revenue. They’re getting a case, they’re getting a sixtel, right?

They’re not really singing your praises and not helping move the cause. Whereas 100 of those accounts are high-revenue, low touchpoint. We love high-revenue, low touchpoint, right? We’re able to service more of those breweries that way and really focus on the product.

The goal is to identify this 80/20 split and slowly begin pushing some of those 80% guys over to the 20% pool. Okay? That would be one application of wholesale.

On the retail side, 80/20, want you to look at your menu, look at your point of sales.

What are your highest selling items, right? So in a taproom, it’s going to be a pour size. It’s going to be a pour size of a style that’s going to be your highest selling items. And we’re constantly analyzing this for our customers and looking at this because we can see trends and patterns with the purchasing style and then we can then go back and work on some pricing, right?

If we’re talking about a full pub, then you can really get creative with the menu items and see what’s our most profitable app, what’s our most profitable salad, entree, and then begin to elevate those items through situational training, through selling, through focused training on how to get these items sold more often. Hopefully with a beer pairing, right? You want that beer to follow with the food.

So, think about how the 80/20 rule applies to your brewery. I’d love you to try to validate it and reach out and let me know if you have any questions on how to calculate it or what your findings are.

I’ll talk to you tomorrow.
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