Issue link: http://winesandvines.uberflip.com/i/602988
December 2015 WINES&VINES 29 BUSINESS sion rate (how many visitors make a purchase), average order value, average discount rate (are consumers only buying what's on sale?), wine club conversion and attrition rates, payroll/ tasting room sales ratio and others. Felando provided an excellent example of the benefits of using granular data collection to solve a mystery at a different (and unnamed) winery where she worked earlier in her career. Their tasting room sales revenue and profit- ability had decreased over a few months, even though it appeared the tasting room was as busy as usual. Author's note: I have worked at companies where this would have been met with, "You idiots need to learn to sell!" or some other demotivating comment worthy of a despair.com poster. Some digging into the data showed the number of visitors and sales of most wines were on plan, but their very profitable flagship reserve wine wasn't selling much at all. The sales decline coincided with the deci- sion to stop offering the reserve wine for tasting. Pouring it cost money, but not pouring it cost more. Having a plan in place and comparing actual results to plan resolved the issue. Second author's note: This story vali- dates my marketing-centric view that pouring your most expensive wine is a marketing "investment" that should provide a return, rather than a "waste of good wine," as many cost accountants would argue. Felando feels it is critical that every win- ery—even small ones—have a business plan. As a first step, she urges companies to get buy- in from all departments. Second, have the bookkeeper provide templates for budgeting that show previous year spending by expense class. Department managers should own their budgets, so ask them to create drafts of annual budgets and goals, and then review them with CEO/owner. Felando points out that the first year will likely be a learning curve toward clean data, as expenses are often miscoded. She also rec- ommended that a winery benchmark with other wineries and said it is worth investing in a consultant to facilitate the process, as the payback will likely be significant. Judd's Hill: 'our family's livelihood' Holly Finkelstein is the CEO of Judd's Hill Win- ery, with 11 years of wine industry experience. Based in Napa, Judd's Hill has been making wine since 1989, and it currently produces roughly 3,000 cases, according to Wines Vines Analytics. The winery's Custom MicroCrush unit is well-known for producing artisan-qual- ity custom-crush lots for growers and emerging wine brands, offering quantities down to a single barrel, if needed. The Finkelstein family owns the winery. Finkelstein notes that planning is hugely important. "This is our family's livelihood. We don't have other businesses, so we need to make sure we are successful and profitable," she says. Judd's Hill has both a five-year and one-year plan. The five-year plan sets bigger goals such as production and profitability levels as well as capital needs. From this five-year perspec- tive, Finkelstein knows where Judd's Hill wants to be in 2020, and she works backward from there to create a map to that point. Finkelstein believes in including the entire management team in the process, so that it's not just the owner's vision. They have an an- nual daylong retreat to complete the business plan. "I like to think it's a collaborative pro- cess," she says. Every department works on their budget and brings it to the retreat, and then it is locked in for the year. The winery's planning has become more sophisticated and more important over time, as they have grown and added employees. The planning process makes the business run better at Judd's Hill, "because it's collab- orative and we set goals together," Finkelstein shares. "It's transparent, so it makes people aware of why they are doing something. People feel ownership and commitment because they are part of developing the plan and making it successful." The plan is helpful for setting production levels for the year—even when weather and crop size impact the results. Harvest will be short this year, and putting this into the plan informs what the next year will look like. "We can see now what we will need next year to make up the difference," she says. Judd's Hill compares plan to actual on a monthly basis and has created a dashboard to simplify the process. Finkelstein feels this is essential and is very proud of the rigor. And she notes that their lender "really appreciates the amount of planning we do." Finkelstein has the following advice for small wineries: "It doesn't have to be complex. It can be an evolution." There needs to be a process to bring sales and winemaking together, as they tend to have different perspectives, and to get your CPA's opinion about the tax implications of your decisions is important. Judd's Hill brought in consultants to help them facilitate the process. "That was definitely a good investment," Finkelstein re- members, noting, "There are some really good people out there." Ceritas: from $10,000 to 3,000 cases in 10 years Phoebe Bass is the co-owner of Ceritas Wines along with husband, winemaker John Raytek. Ceritas started in 2005 on a custom-crush basis, and the company moved to its current home in a "humble Healdsburg warehouse" in 2015. The winery produces 3,000 cases annu- ally, according to Wines Vines Analytics. Bass and Raytek provide a wonderful blue- print for a successful wine brand start-up, as they began 10 years ago with just $10,000 and no outside investors. They had a long-term plan to get to 3,000 cases and have their own facility. While there was no business plan in the early years, they knew the key was (and still is) to build a mailing list. A few years into the process, they started forecasting and plan- ning more. Business planning allows the couple to an- ticipate every expense and sale while managing both wine quality and cash flow. Bass notes that winemaking is a really creative process. It's hard to mix business and creativity, which