Taproom and Brewery Metrics to Monitor

Key metrics measure the most important things in the brewery. Things like sales growth, margins, profits, and cash flow.

When identifying key metrics, the first step is to measure what matters.

Start with one problem you need to solve or one opportunity to take advantage of.

The next step is to build a dashboard of key metrics.

Identify one company goal, one KPI that is critical to watch, like cash flow. Then build up the KPIs for each department that support the company goal. 

Key Topics

• How to use lagging indicators, leading indicators, process goals, and outcome goals
• Best practices in choosing key metrics
• Example scorecards, templates, and dashboards
• How to align compensation and KPIs

Resources

• Learn more about the Beer Business Finance Association

Ready to transform financial results in your beer business? Learn more about the Beer Business Finance Association, a network of owners and managers working together to build more profitable companies.

Transcript

Kary Shumway: 0:00

Today on the podcast is another solo episode. I'm going to talk about taproom and brewery metrics to watch. So we're going to go through your KPIs, your key performance indicators, kind of give you an overview of what they are and how you can track, measure, monitor, and improve them. And then some best practices, some things to think about as you're building your dashboard of key metrics. I'll also have some example scorecards, templates, dashboards. I'm going to talk these things through, but also give you a link so you can download these for yourself and also watch the video version of this presentation. And I'll wrap up with a discussion of key metrics and compensation, really how you can tie the compensation of your staff towards the achievement of certain KPIs and key metrics. Really, the goal is to align pay with bottom line company objectives. So for now, please enjoy this conversation, this presentation on Taproom Brewery Metrics to Watch. Welcome to the Craft Brewery Financial Training Podcast, where we combine beer and numbers to provide you with tips, tactics, and strategies so that you can improve financial results in your brewery. I'm your host, Carrie Shumway, a CPA, CFO for a brewery, and a former CFO for a beer distributor. I've spent the last 20 years using finance to improve financial results in our beer business. Now I'm helping other craft breweries to do the same. Are you ready to take your brewery financial results to the next level? Okay, let's get started. Just a quick note, and we'll be right back to the podcast. I want to let you know about a new network for beer industry professionals. It's called the Beer Business Finance Association. It's an organization of financial pros, just like you, looking to improve financial results, increase profitability, connect with your peers, and share best practices. So I'd love to tell you a little bit more about this. If you are interested in learning more, please email me, Carrie at Beer Business Finance.com. That's K-A-R-Y at Beer Business Finance dot com. Or you can visit BBFassociation.org. That's BBFassociation.org to learn more. Hello everybody. It's Carrie Shamway here. I'm the founder of Craftery Financial Training and the Beer Business Finance Association. I want to talk to you today about taproom and brewery financial metrics to follow. Metrics, KPIs, key performance indicators. We think about these as financial shorthand and measuring the most important numbers in your brewery business. So I'm going to move kind of quickly through the information. Obviously, it's available for rewatch, but if you're interested, I did put together a free mini course on key metrics for your breweries. There's lots of scorecards, templates, best practices, and key questions to help you identify your key metrics. Because that's usually the first start is you know, we want to measure what matters. So first we have to kind of identify what that is. So if you want to scan the QR code, you can grab this free KPI mini course for yourself. So here's what I'm going to talk about. Number one, key performance indicators, starting points, basics. Where do we begin? Next are best practices. You know, how do we think about KPIs? How do we think about using them, implementing them? And when we track, measure, and monitor these, what are we going to get out of this? What kind of result are we going to see? I'm going to share with you some scorecards, templates, dashboards that you can use. And then I want to talk a little bit about how key metrics and compensation can go hand in hand together. So for example, you're thinking about compensation. You know, how do we incentivize folks to do things that are in alignment with our bottom line company goals? So how do we kind of tie those measurements together? We think about bonus plans, incentive structures, and things of that nature. How can we use KPIs to help advance that cause? So, first of all, what are KPIs? These go by different names, critical numbers, key metrics, key performance indicators. I just think of them as a quantifiable measure that you can use to evaluate the success in your organization. More simply put, these are numbers that measure the most important things in your business. So we want to identify what they are, we want to track them, measure them, see how we're doing, set goals using them, and ultimately do that to improve our financial outcomes. So KPIs are important because they help you identify and measure the more most important numbers. And it's I think it's true. Often we don't know what those most important numbers are, so we need to start with that. So we want to focus on numbers to achieve the goal. And what does happen is things come up, distractions happen every day. We talk about different ways to help prioritize your day. And you may have heard of the Eisenhower matrix where you think of a grid, and within that grid you've got things that are urgent and not important, urgent and important, not urgent and important, not urgent, not important. So basically these quadrants and where we want to operate are working on, spending on time on things that are important but not urgent. And very often it's the exact opposite. We deal with things that are not important but very urgent. You can think phone calls, emails, fires that happen in your brewery every day. Um so the KPIs are really there to bring you back. Um it's almost like meditation, right? You have something that you're focused on, and then oh, something happens to take your focus away, and you're off, drifting away from your most important thing. But meditation would say, just come back. It's okay. Let those thoughts go and come back to the most important thing. KPIs can be can be kind of like that. We're gonna get distracted, uh, but KPIs can help bring us back. And I think they're number these numbers are important too because it allows us, and if we think about the focus and turn it into an acronym, follow one course until success. So measure what's most important, track it, follow it until you achieve and exceed your goals. When we think about KPIs, they're measured in different ways. These are just some categories. We think about lagging indicators, these are things that have occurred in the past. We're looking historically, leading indicators, and what are the things that we can measure today that are going to help us kind of predict or inform the future, like what's coming? Uh we think about process goals. Those are things that are largely within our control. It's like, what are we gonna do in order to achieve a certain outcome? What kind of things can we, you know, what kind of action steps can we take? And then there's outcome goals, which are the measurables, you know, did we achieve sales growth or not? So we're obviously trying to line up process goals doing certain things with outcome goals, what kind of result did we get? And then there's benchmarking. How do we kind of stack up against our peers? We like to look at industry benchmarks. So KPIs, you know, who are KPIs for? I'm a big fan of saying everyone in your business should have a number, whether it's your head brewer, your tap room manager, or the person who's paying the bills in the office. Anyone in your business that can help achieve the most important thing should be using some form of KPI. And I do do believe at a minimum it's every department manager, and I think you can even push that down to every staff member in your organization. Because ultimately, what it is is we're doing work every day, and we want to know where we fit into the organization, and key metrics can help you do that, kind of tie what you do to the numbers, the results of the organization. And we're going to go through lots of examples of what numbers you might think about for each of your department managers. So, first, some best practices, some things to think about. First and foremost is we want to measure what matters and ultimately what makes a difference. So we want to try to identify what those numbers are. Next, keep it short, one page, sometimes even one number. There's a great book called The One Thing, which is really kind of just drilling down on this concept of how important it is to try to identify that one thing and then focus on it until you've you know you've you've completed it. So keep it short, one page. I I generally would say everyone has a number, uh, but probably no more than two or three key metrics that they're watching. We want to share our goals that we want to accomplish and provide regular updates. So when we give people a number, how are they gonna stay on top of that? How are they gonna get the data to see how we're doing? For example, if it's your head brewer and your key metric might be labor hours per barrel brewed, um, do they have the information to calculate that? What's the goal? What are they shooting for? What are the historical numbers on that? How do we track it? Where does where do we uh how do we update this information? So, what's our goal? How do I get the data to see where I stand to the goal? What levers can I pull to try to hit and achieve the goal? Benchmarking against past brewery results. Um, I kind of like this too because we often will get the question like, how does my brewery, you know, I I brew, you know, 800 barrels a year, um I live in this geography. How do I compare against other breweries? Insurance is you you probably don't know because every market's different. Your strategy, your business strategy is different, your customer base is different, um, your portfolios, you know, everything's different. Um, so it's awfully hard to say, well, you know, you're out of whack because of we can we can usually give benchmarks in terms of ranges of where you should be. You know, and often we'll talk about, you know, what should my taproom payroll expense be compared to others? You say, well, you know, it I we see a range, 15% to 30%. So if you're somewhere in that 20% range, okay, you're in the range. So the real question is, are you making any money? Is you are you cash flowing? Because it doesn't really matter what someone else is doing if you're not achieving the bottom line financial goals. So you might have pretty good numbers, eh? We're on 20%, but you're still not making money. So that might still be you know too high to achieve your financial goals. So benchmarking against your past brewery results is really tracking out like where have we come from from? You know, what was our percentage of payroll as a percentage of sales, you know, last month, six months ago, 12, 18 months ago. What does that trend look like? Is it going up? Is it going down? What are the things that we can do uh to try to improve that? You know, i.e. growth sales and reduce the percentage of that payroll expense. And then lastly, avoid creating metrics that are difficult or time consuming to calculate. Uh, because there's there's a real tendency to overcomplicate these key metrics. They don't necessarily need to be. So really be mindful of that as you're as you're putting putting them together is you're going to want to kind of calculate these and communicate them on a regular basis. So I advocate for keeping them simple where you can. So first and foremost, you know, measuring what matters is a little bit of takes a little bit of introspection. Look in the mirror, what keeps you up at night, what's an opportunity, or you want to take advantage of a problem that you need to fix. Um for me personally, cash, cash flow, it keeps me up at night, running out of cash, not having enough, you know, deploying the cash in the right way. Like, what should I so I set up a bunch of key metrics around cash and cash flow so I can watch it. It doesn't mean um it's gonna solve the problem, but at least I know I'm addressing it, I'm watching it, I've measured it, I'm doing what I can, and I'm keeping it first and foremost. Um there's an interest interesting quote that's something to the effect of you know, we are what we focus on. So if we want to improve cash flow, for example, um, we got to focus on it, and KPIs can help us do that. We think about our whole business and how to figure out what's the most important number, um, you're gonna have sort of these top-level objectives. Like, what are the most important numbers in any business? It's cash flow and net operating income, because without it, you just you can't survive, you can't take care of any of these other things. You know, marketing is irrelevant, and processing quality doesn't matter if we can't pay the bills. So I would strongly suggest that we think about creating KPIs that have top-level goals, let's say cash flow and net operating income, and then cascading KPIs that support those. You know, what are our marketing plans? What are the metrics that we're gonna monitor in order to support, say, top-level sales, processing quality? What does this look like in terms of you know the quality of our beer that's going on? What metrics are there that are gonna support our underlying financial goals, operations, and people, the same thing? So I'll give you some examples. The matrix here is really just a visual to kind of get you thinking about how to address all aspects of your business and ultimately assign um that one number to every department manager so everyone has a number. So it might look something like this if you do the KPI matrix and you've got these four quadrants, and these aren't the only quadrant, you could think about your business differently, but the financial quadrant, process marketing, operations in people, and you can develop uh different KPIs for each one. So financial, for example, might be that profit and cash flow and sales growth. Process and quality could be you know data related to the brewing, packaging, lab, marketing could be, you know, obviously social media events and so forth, and operations and people could be any number of things, but maybe it's working on employee satisfaction or reducing turnover. So you can do this sort of off-the-shelf, what should I be tracking? Where you can again kind of use those questions, you know, what keeps me up at night, what's a problem I need to solve, how can I quantify that and improve it. Here's an example of how you might think about everyone gets a number, KPIs by department. So brewing the number for your head brewer might be what's our yield percentage? You know, what how are we doing there? Packaging could be labor hours per barrel. Inventory might be something like days on hand. You know, what is our inventory now? How does that relate to what we need to produce into the future? Do we have too much inventory, too little? Do we have the right mix on hand? Tap room, lots of good stuff through the tap, and it might be, you know, what's the average check size that's coming in? Is that going up? Is it going down? So you can go on and on with these things, but you can start with just outlining how many departments you have and department managers, and then figuring out and asking that question, you know, what's a problem to solve within this department? And then thinking about how to align that with your top-level company goals of cash flow and net operating income. So I would ask you how do you choose your KPIs now? Do you have KPIs? And how did you go about choosing them, or how might you think about selecting them? Uh, because there's really no shortage of KPIs that you could use. We've done lots of workshops on this, and we probably got hundreds of different things you could uh measure and manage, but we really want to be thoughtful about how we select those. It's really about kind of curating the ones that are really going to make a difference. And that's the key takeaway is if you're going to take the time to measure and manage towards these numbers, when you achieve your goal, you want it to have a material effect, a meaningful difference on the financial outcomes of your business. Alright, next, I want to share some scorecards that you can check out. Um first is our Taproom dashboard. We'll talk about sales, average check size, customer visits. Next, uh taproom trends. I'm really a big fan of trends, and I'll kind of show you what I mean with some of these cut and paste scorecards. Looking at the trails on sales, how many guests are coming in, what they're spending when they do, and then we'll look at a summary PL, an income statement, profit and loss, sales margins, profitability, and a one-pager uh that you can think about. Now, each of the models that I'm gonna show you follows this general outline here. Where across the top we're we're saying, what is the key metric? And then we're gonna say what are the actual results uh that we've achieved in the past. Now, in this example, I'm using just a month and a year. What were the actual results for a given month, same month last year? What's the trend for the current month this year, and what is the goal for the current month this year? And what are some notes? So in the notes section, I want to say, what do we plan to do? What are the action items uh to achieve this goal? So that we've sort of given ourselves the lay of the land, like what happened, like where are we coming from, where are we now, where are we trying to get to, and how are we gonna get there? So this is a dashboard that I particularly like, and it's measuring these five KPIs of total sales, sales growth, average spend per customer, total visits, and revenue per barrel. Pretty simple stuff. Um most of the data is available in your POS system. It may or may not look like this, um, all kind of together, but this is a I think a very useful tool to keep on top of what might be the most important numbers for your taproom. So looking in this case the actual month of last year versus the trend of the month this year and the goal for the month concluded, we can kind of fill in these numbers, and I'll just kind of highlight on you know maybe a couple of these items. First is like what is our sales growth goal? So for the month here, we see our sales growth goal is plus 15. Where are we trending for the month? Now, what I like about this dashboard is I'm not waiting for the income statement to be produced, I'm not waiting for all the financials to be closed. I don't need to. It's like what's my goal? I have a plan, I've set my plan, and what is my trend? So if I'm sitting here, you know, with about a week left in the month, how am I tracking towards my goal? Well, it looks like I'm falling short. What now I know, okay, I'm I'm behind plan, I need to do something. Very simple, but at least gives you directionally like are what am I on plan? Am I behind? We're behind. All right, we need to do something, we need to kick it into gear, we need a sense of urgency because we can see where in if we think about like um you know a sporting analogy, we're losing the game. You know, it's like in baseball, it's it's the bottom of the eighth inning. We won't we've got little time, we've got to get going here. Um so that's sales growth and it's percentages. It's very easy to communicate and think about. Uh, another one might be just the two drivers of your sales are gonna be how many people come in and what do they spend when they do. So, are we tracking that? Are we measuring that? Are we setting goals on how many people we want to have come in and how might we drive more customer visits when they do come in? What are they spending now? And how might we you know drive that number up? What are these levers that we can pull? So that's really where the action items come in is to kind of think. Think about that. This is where you can take this dashboard and kind of explode it. And in this case, we're going to look at just one component. Let's look at our sales dollars. So, what were our sales dollars month over month over month? How does that compare? What's the growth look like? So we can kind of set the context of where have we been, what are what are our trends look like. And we can take this trend approach to how many customers come in. So if we look at it by month, and I would recommend you know looking back, you know, at least a full 12 months, because then we can sort of see 12, maybe 18 months of trends, month over month over month. Are we increasing? Are we decreasing? What's happening with sort of traffic coming in? And then it's the average spend. When people do come in, are they spending more? Are they spending less? How do we know? In months where they spent more, did we do something? Did we have a what might we have done? We brought in new food vendors, or we had a big push on events, or you know, we had our loyalty program kick in, and then months it went down, what happened? What didn't we do? Or what went wrong? So you can't really diagnose without the data. That's the other buzzword these days is you know, we want to make data-driven decisions. Uh, and we generally have a lot of data at our disposal, we just need to look at it and interpret it. And then the last scorecard I'll share here is our summary profit and loss statement with the key metrics. Um, so one of my pet peeves with traditional financial accounting and reporting is that it's really hard to know day to day, week to week, what's actually going on in our business. So, if our most important numbers are cash flow and net operating income, we often don't know until the financial statements are produced at the end of the month, and then it takes a few weeks, and then we get the information. So we're what we're always operating way behind the curve. So a summary PL like this can be a way to pull the information together and one, see what it's telling us, and two something we can watch on a more regular basis. You know, we can actually create a daily or weekly PL. We bake in a lot of estimates. I know these are really big numbers, and we'd all love to have a business like this, but just for example, this is summarizing sales, cost of sales, margins, expenses, and net income. That's it, five lines. What is it telling us? Turning it into percentages, which is very easy to communicate. So when we talk about what's our goal, you know, you keep saying net income and cash flow. Well, what does that mean? Like our net income goal is 15% of sales. So we all can just communicate. Where are we at? We should be at 15, where are we at? We're at 10. Oh. In this case, we've got what it's actually occurred and what our plan is. So we can compare the two percentages, communicate them easily. What's our goal for margins? What's our goal for net income? And then in this case, you can also layer in other key metrics: payroll, lease expense. What does that look like in terms of percentage of sales? And what is our goal for each of those? So I encourage people to think about what's your favorite KPI? My favorite KPI, cash flow, net operating income. Simple, boring. If I throw in another one, sales growth, we want to throw in another one, it's all of those tapram metrics, and it's really business specific. So if you're only if you're tapram only, obviously that's where we're gonna focus our our metrics and our dashboard. Um, but I always come back to the fundamentals of cash flow, net operating income. And the reason I hammer those is A, it allows you to stay in business, B, it allows you to, once you have those, reinvest in your business and your people, and your community. Um, and without it, you know, unfortunately, we just we're we're out of business. So let's bring it home here with KPIs and compensation. So we want to identify what matters, that's measure what matters, quantify it, tie it to compensation and/or some sort of incentive or bonus structure, and then pay for results that matter most. So where we can get ourselves in trouble with this is we'll create key metrics, we'll tie it to an incentive plan. The key metric is not achieved, but we're like, well, they tried really hard and we pay it out anyway. It sort of undermines the whole concept here is we want to pay for results that matter. So it's just a cautionary tale that once you construct this to maybe resist the temptation of kind of going down that path, because again, paying for results is what this is all about. Now I'll go back to the KPI by department, everybody has a number, and you can may think about how might I use this in order to incentivize my sales team, for example, um, to hit the revenue growth number? How might I incentivize my Taproom team, Taproom Manager to increase the average spend per customer? How can I tie compensation and these KPIs? So it starts with what's most important, identifying it, and then creating that incentive plan to kind of align all of your goals. So to wrap up, give you some next steps, you know, first identify what matters most in your business, what's a big problem you need to solve, an opportunity you need to take care of, how can you quantify that? How can you measure it, track it, and how can you build a dashboard, share that with folks so that you can improve? So those were the questions that I would leave you with. And I thank you for your time. Hopefully, there was something valuable here. If you want these scorecards, templates, best practices, and key questions. Um we go through this a lot slower than I have right now. And it's there for you. You can share it with your team, you can just scan the QR code and get all that information. If you have any questions, you can hit me up here, Carrie at beerbusinessfinance.com. And I would also leave you with this is we've put together a network of brewery owners and managers, and we come together on a monthly basis to do what we're calling a brewery financial round table meeting. So we'll cover a specific topic each month. Uh this last month we did financial planning, how to build your best financial plan ever. What are the key components of that? What sort of scorecards should I use? How do I where do I start? You know, what are the building blocks? And I'll lead that discussion and I'll provide the information that I have, and then we'll have a lot of peer-to-peer sharing of information. Like, how do you do it? You know, it's breweries from across the country sharing ideas, best practices, networking with one another. We've done a number of these meetings, they're all recorded and available for you in our Beer Business Finance membership. So if you're interested in joining that, you can email me here at carry at beer businessfinance.com, or I will put some links in the show notes so you can learn more about that. And if you decide to join our Beer Business Finance membership, I hope you find it profitable. Thank you for listening to the Kraft Brewery Financial Training Podcast, where we combine beer and numbers so that you can improve financial results in your brewery. For more resources, tools, guides, and online courses, visit Craft Brewery Financial Training.com. And don't forget to sign up for the world famous Kraft Brewery Financial Training newsletter. Until next time, get out there and improve financial results in your brewery today.