Issue link: http://winesandvines.uberflip.com/i/602988
28 WINES&VINES December 2015 Business W hen you hear the phrase "busi- ness plan," the first thing you think of is: A. Those insufferable, preppy, entrepreneurial MBA types in $200 T-shirts that keep showing up at your tasting room (or that you wish would show up because, though insufferable, they do buy a lot of wine) with their talk of value propositions, exit strategies and Series A financing. B. Hosts on the TV show "Shark Tank," with their incessant references to "I really like/dislike this business plan." (Some of them wear $200 T-shirts as well.) C. Your old job at a large corporation that could have been the set for the 1999 movie "Office Space," which is why you now work in the wine industry. D. That thing your CPA does once a year to make your banker happy but, to tell the truth, you've never looked at once. E. An essential tool for understanding how your wine business works, how you manage financial and human resources, how to monitor results ver- sus plans and hold everyone in the organization accountable. (Note: Your lenders, investors, vendors, employees and heirs hope you picked "E.") I have written and executed many business plans for companies from start-ups seeking initial funding to those in the rapid growth phase and mature companies. Some of these were companies I built (Neocork) or ran, and at others I was a consultant. I put tre- mendous value in a well-conceived, well- written business plan and even greater value in using the plan to build and run a business from inception to succession or sale. Many people think business plans are solely for early stage companies that are raising money from investors and not for artisanal ventures like wineries. I believe every business that uses money— whether it's yours or someone else's—needs a plan. Yes, you might be successful with a business plan of "get high scores" or "I just got offered 18 tons of killer Cab!" (espe- cially if you have rich relatives happy to bail you out every time you run out of cash), but your odds for success aren't high. Yet, a recent survey found that 39% of businesses under $5 million in revenue do not even have an annual budget. For this column I interviewed three winery principals, a banker and a CFO (chief financial officer) services pro- vider. Based on what I learned from these conversations and my own experience, it appears that wineries using a comprehensive, continuous, shared and transparent busi- ness planning process are more profitable, have an easier time acquiring financing or equity capital, have higher valuations and suffer less organizational stress than those that do not. Clos du Val: 'measure everything' Lori Felando is the CFO for Clos du Val. She has 15 years of financial management experience at wine companies including Diageo and St. Supéry, and she was named the 2014 CFO of the Year by the North Bay Business Journal. Clos du Val is based in Napa, Calif., and the company owns vineyards in the Stags Leap District, Carneros and Yount- ville, Calif. The company has been making wine since 1972, and it currently produces 80,000 cases annually, according to Wines Vines Analytics. Clos du Val has a very sophisticated planning process that looks at the long-term and short-term in the form of a 10-year strategic plan and a one-year detailed annual plan. Felando notes that it is critical these two plans be in align- ment. CdV uses its plan to create goals for managers and departments, and the winery uses many sources of data, ratios and metrics to identify areas that are working well and could grow, as well as areas that need some adjustments. Clos du Val measures everything: vineyard farming costs, grape yields, cost of grapes, pro- duction costs, bottling materials and bottling labor. Costs are broken out by department, by wine and by vintage, and compared with the plan and with previous years. Sales revenues and costs by channel (direct to consumer and three- tier) are also broken out. Not surpris- ingly, DtC has the highest margins and the most associated metrics including visitor count, conver- n ANDY STARR Smart Wineries Use Business Plans