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Yoooooo, what’s up? Here we are in week three. But before we get started on week three, I gotta give a shout out.

I gotta give a shout out to my boy Bob Fifer. [Chris shows book] See? Bob wrote this book: Double Your Profits: In Six Months or Less. And a lot of the suggestions that I used from last week came from this book, Double Your Profits: In Six Months or Less.

Now, I just took Bob’s suggestions as guideposts, and I was able to apply our deep industry knowledge to his general suggestions.

So, if you would like to learn more or understand a little bit more of where the suggestions came from, and he’s got a whole lot more than just four or five suggestions — let me tell ya. I recommend you getting a copy of Bob’s book. It’s on Amazon, it’s a super quick read, very easy to consume. I think I read it over a weekend, and I’m not a heavy reader.

Okay, without further ado, let’s get into week three.

[Cut to Chris’s daughter who says the following] “Week three, a slaaaaay!”

Ha! That’s my daughter, and guess what, we actually are going to slay week three, you know why?

If you had to guess what would you say was missing from last week? Just a big general topic that may or may not affect your money going out?

Labor, exactly.

Week three is all about labor, and labor is a biggie, right? Labor is a biggie, and what we’re going to do is we’re going to use the SBS principles to break down each of the labor departments day-by-day and within those days we’re going to follow a very simple framework because that’s what I like to do. I like to take complex topics and break them down into simple, digestible frameworks. Ok?

So, as most of you know, in SBS we break down the labor in your brewery into four or five departments. Regardless of your size, regardless of your age, location — we don’t care. It’s admin, it’s outside sales, it’s production, it’s taproom.

Now, most of you are running full kitchens these days, we will sub out front-of-the-house or back-of-the-house or kitchen or restaurant for taproom. And that’s a whole new set of benchmarks that we follow. But long story short, this week we’re going to dedicate a day to admin labor, we’re going to dedicate a day to outside sales, production, and taproom.

And within those departments, we’re going to follow a very simple framework. Ok, we’re going to define the department. We’re going to let you know what our benchmark is for a 50-50 brewery (50% of the revenue coming from taproom, 50% coming from wholesale). We’re going to share the successes of that department, and we’re going to share some pitfalls with that department. May or may not be in that order, but you get what I’m saying. You get the order and what we’re trying to accomplish.

So today, the first day of the labor week, we’re going to look at admin labor. What is admin labor? Admin labor is anything, any position on W2 payroll, anybody on your payroll that you pay every other week, weekly, that isn’t making the beer, and isn’t selling the beer.

So that could be a marketing person, that could be an HR person, that could be a graphic design person, that could be a label design person, that could be a social media person, it could be an accountant, it could be a lawyer. They’re not physically making the beer, nor are they physically selling the beer.

Admins are a weird position for most breweries that are small because this position is absorbed by leadership and ownership. Primarily ownership, right? It is overlooked. And in most cases it needs to be absorbed by leadership or ownership. The business isn’t big enough to warrant its own HR person, its own accountant, its own legal, etc., etc., most of the stuff is outsourced, right?

But for breweries that do have their own admin, we want to target around 3% to 5% of total beer sales as a benchmark. So take your beer sales over six months or a year. Multiply it by 3%, multiply it by 5%, and compare those numbers for that same period to your admin gross wages. And If you’re in that range then that’s an acceptable range to hit your profit and your EBITDA numbers, right? What we’re typically seeing is we’re seeing some breweries that are going over that benchmark because sales have slowed down and sales have fallen off but the labor hasn’t.

So, some pitfalls with admin is being over our benchmark. Alright. Another pitfall with this is looking at it from the perspective of “Ownership should not be doing this.” Right? “Ownership should not be absorbing these tasks because we haven’t done it in many, many years.”

Well, we’re in a bit of a different time period now where ownership really does need to look at absorbing those. So those are two examples of pitfalls.

An example of a brewery doing this really well would be the inverse of what we just described. And that would be keeping a lot of these admin tasks. Either repurposing them for people that are already on the staff or ownership taking these tasks on.

It’s pretty simple. Most people don’t go over when it comes to admin but we do see it from time to time primarily when there’s a beer revenue drop off.

Just a quick recap. Admin doesn’t produce the beer, they don’t sell the beer. They indirectly affect the beer. 3-5% of beer sales.

Breweries that are doing it really well are absorbing the admin tasks. Breweries that are struggling continue to pay admin tasks over our benchmark and are unwilling to take these back.

Hope this is helpful. Talk to you tomorrow when we visit outside sales.
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