Craft Brewery Financial Training Podcast
Craft Brewery Financial Training Podcast
How One Brewery Raised Capital, Opened a Second Location, and Built a KPI Culture
What does it really take to scale a brewery without losing your soul or your margins?
We sit down with Nicole Smith, co-owner of South Lake Brewing Company, to trace a path from high school sweethearts in Tahoe to a two-location operation balancing community, cash flow, and culture.
Nicole shares the unvarnished story of opening a second taproom and kitchen, why owner presence matters, and how to avoid cannibalizing your original location while still growing revenue.
We cover the small set of numbers that matter most—revenue versus forecast by channel, prime cost for food and beer, and labor as a percentage of net revenue—and how those guardrails drive daily scheduling, purchasing, and promotions.
From handling brutal seasonality in the shoulder months to embracing a kitchen to meet guest expectations, Nicole offers a field manual for independent breweries navigating a slower market.
If you want concrete tactics for expansion, community funding, and profitability without compromising what makes your brand special, this conversation delivers.
Connect with Nicole, nicole@southlakebeer.com
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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.
Today on the podcast, we hear from Nicole Smith, co-owner of South Lake Brewing Company. Nicole speaks about their challenges of brewery expansion, opening a second tap room location, and sharing lessons learned and best practices from that experience. Nicole also talks about their brewery funding through community engagement and their experience raising funds, really how they did it and how you can do it too. She talks about strategic planning and the importance of core values and balancing key metrics along with a human perspective. So for now, please enjoy this conversation with Nicole Smith from South Lake Brewing Company. 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 Shemway, 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 Beerbusinessfinance.com, or you can visit BBFassociation.org. That's BBFassociation.org to learn more. Hey Nicole, welcome to the podcast. It is good to see you, and I'm excited for our conversation today. So for folks who might not be familiar with you or your brewery, why don't you give them a little bit of background?
SPEAKER_00:Yeah, I co-own with my husband Chris a Southlake Brewing Company. We've been open for eight and a half years. We have two locations in South Lake Tahoe, California. That's very important. And we're on the California side of the Lake Tahoe Basin. Um and yeah, we now we do over$3 million in revenue a year, which is fantastic. Um and we have again the two tasting rooms. One has a kitchen, one doesn't yet, at least. Uh and we've always just partnered with food trucks. Um, and then the original location, uh it we have a fairly large production brewery. We're going to do over 2,000 barrels a year this year. Um and in the past it's been, you know, hovering just under 2,000 barrels a year for so many reasons. Um and then I think you wanted me to kind of like tell our story, right?
SPEAKER_01:Yeah, well, I think a lot of people are, you know, everyone has an interesting origin story. You know, if you think of like superheroes, like always a backstory. And I just I find it interesting and maybe informative to say, like, oh, well, why did you guys start it brewery? What were your thoughts, thought process going into that? So yeah, what is your origin story, you and your husband?
SPEAKER_00:Yeah, so our origin story is sweet. Um we're high school sweethearts, Chris and I. We met um really early on, like our freshman year of high school. Um, I had just moved to Tahoe with my family from the East Coast, and um, Chris had, you know, grow up there. And uh we we the high school is literally less than a half a mile down the road from the brewery. So it's like kind of cute. Like our origin story started like within a less than a mile radius. Um and then we went to college together on the Central Coast of California at Cal Poly, we're both engineers. Um, and originally we weren't thinking, oh, like, you know, we'll just get engineering jobs. I know I knew I didn't want to move to the Bay Area. I didn't necessarily want to move to like a bigger city than San Luis Obispo. Um, but pretty soon after we got married in 2012, we were dreaming about how to move back. Like anyone that's grown up in a small town, and especially an amazing town like like Tahoe, uh part of you always wants to, you know, go back. And at the time, you know, engineering degrees, we just knew that that wasn't necessarily possible with our current uh you know education and everything like that. And I have very much haven't like entrepreneurial spirit. I got a business minor in college, and I was just not not wanting to do the normal nine to five for very long. Like, and then Chris was always extremely hands-on. Um, he got into homebrewing right when craft beer was booming. Um, and our local watering hole had these 40 beers from around the world, kind of not necessarily punch card, but you know, if you drank all 40 beers within whatever time frame, you got a t-shirt and you got bragging rights. And so he did that. He we got really in the craft beer, just absolutely loved everything that it brought community-wise. Um, and just just seeing that craft beer community. He's like I said, he started homebrewing, he started working for Firestone Walker actually, with to this day, I think it's the coolest job title ever. But Firestone Walker employed these people called beer revolutionaries. And essentially, beer revolutionary was a, you know, you you um put on and poured beer at off-site events. So he would be pouring beer at, you know, the weekly music in the park or at any beer festival for Fire Zone. And he just like continued to get the bug, right? Um I started a career at a plumbing manufacturer um in Paso Roblace, and um, you know, really started, I was in Excel like all day, every day as an inventory analysis. First, then became inventory manager, then regional inventory manager, then um eventually left the company six years later to start the brewery. Um, but I was a continuous improvement manager, internal consultant. I would go to all of the distribution centers. Um, and I really got my hands in not only, you know, how to manage inventory levels and like manage that cost to the business, but also more into the strategic planning or um, you know, setting overall like company goals. Like I knew a what a KPI was within my first year of my career, right? Um, and so just speaking that language of this constant, like continuous improvement, and how do you align a company with certain goals? And um so all of those things like came together. Both Chris and I were like, we want to move back to Tahoe. There wasn't a what there wasn't anything more than like, I think two brew pubs at the time where we officially decided, well, this is what we're gonna do and this is how we're getting back to Tahoe. So um there was only a couple brew pubs in Southlake, and there wasn't a production brewery with tasting room business model that didn't focus at the time on food. And we thought at the time, you know, that that food kind of, you know, stifled the community, stifled the potential to, you know, gather together. If you're going to a restaurant and you're sitting down, like you're most likely just gonna be like sitting down with your group that you came with. Um, so we didn't want to do that. We wanted a community hub. Um, and at the time there was really nothing besides like the casinos where people and locals specifically could gather. So, you know, fast forward to um after we decided that we were going to open the brewery and come back to Tahoe and start this, um, it took about five years of planning. Um we had to, you know, obviously fundraise, but you know, even starting prior to that, we had to come up with a brand, a name of um, you know, I read and reread like Dick Cantwell's uh How to Start a Brewery, you know, I ran read Sam Kelly owns um Brewing Up a Business. And just being really inspired by the whole industry as a whole, like we attended CBC, we attended the CCBA California Craft Beer Um Association uh summit, you know, and it was just like going to Disneyland. And I'm like, I want to do this, right? I want to bring this to Tahoe and start this. And so it, you know, there's so many milestones that we had to accomplish before we actually opened our doors, um, you know, bootstrapping the construction part of the building, you know, finding the landlord to begin with, um, that was willing uh to, you know, rent to a strappy couple that didn't, you know, have any experience actually opening a brewery. Um you know, we finally opened our doors in April of 2017. So we just had our um eight and a half year anniversary, and it was like one of the best nights of my entire life because not only did the entire community come, it was like over 200 people, but we were we were only open for like five hours. We had three beers on tap, and it was B Y O C bring your own chair. Like we didn't even have our furniture in the tasting room, and it was, you know, our smallest beer, our bartending team ever. Um, like myself was pouring beers, Chris, my dad, my sister, and then like two bartenders and our brewer. And it's just like just the coolest night. Um, and I will always remember it. And it, you know, just always puts a smile on our face. And then, you know, now eight and a half years later, we opened another kitchen um and tasting room here where I'm sitting, um, closer to State Line, which is the tourist kind of heavenly gondola area, if anyone's familiar with South Lake Tahoe. Um, we opened this location in two and a half years ago or so. Uh, and you know, running a restaurant is totally different than running a production brewery and tasting room, and just had to, you know, teach ourselves how to do that. Um we have around 35 employees, a little more in the summer. Um, and they are the company's like best asset, like most invaluable asset, um, in my humble opinion. Um, it we're only where we are today because of our team. Um, so very, very thankful for them. Um, yeah, I think I feel like I covered most of it. We do do self-distribution um in Northern California, mostly the uh Lake Tahoe Basin area, but a little bit in Sacramento. There was a time and day where we thought that maybe driving five hours to Santa Cruz would be worth it um to for that additional revenue, but kind of looked at the cost and that capacity and decided to dial back. And then just this year, in the last nine months, we've um started partnering with a Nevada distributor. So yeah, we have a lot going on. Um but that's our that's our origin story in a nutshell. Tried to tell you about it as fast as I could.
SPEAKER_01:I love it. No, no, that's that's really helpful. Tell me a little bit about you know, a question that does come up a lot is like, when do I know that it's the right time to open a second chapter? So you guys just went through like what was the thought process? Yeah, tell me what led to that.
SPEAKER_00:Um, well, I've been talking to people that are like still in the trenches or like in the decision making of opening a second location. And my number one piece of advice is unless you yourself are willing to move to that city, like don't do it because you're never you're not going to find a GM like right out of the gate. And like unless it's another business partner and you're at the same level, unless you are partnering with this amazing like head chef um that is going to spend the time at that location's like boots on the ground for a year plus, like you yourself are going to have to move to that other location, in my opinion. Like, I mean, I'm sure there's people that have done it, but you really are, you know, you're branching off and you're like cloning yourself in a way, but you have to make the other location like unique enough where you're not cannibalizing the existing business either. Um, and and I would say like once you're not seeing like the original location grow enough um year over year, uh then yeah, then it's probably time. Um, and we all know that you could expand with wholesale and distro, but you're gonna make so much more money if you just expand it with a retail location and uh you know a tap room or restaurant location. Um you just are gonna be able to sell like your beer for a lot more at those locations across the bar than you are going to in wholesale, you know. Like obviously wholesale is like a volume game. And I think we've we've definitely learned in just this past summer because our wholesale business grew by 30% year over year, which is like nuts and like super thankful for that. But if we're sacrificing our beer inventory for wholesale versus tap room, then we're definitely in like not doing the right thing for the company, right? Because we can just again make like so much more profit. Um, so I could go on and on. We could literally talk the whole podcast about opening in the second location and kind of lessons learned. I think long story short, I'm glad we opened the second location. I wish it had taken a shorter amount of time because it's basically double the time, double the money. Like any new project, you can budget and forecast as much as you want to and your heart's desire, but it's going to cost double the time, double the money, um, no matter what, hands down. Um so as long as you're funded correctly, you know, that's one of our big lessons learned is that we financed this location incorrectly, and we're still paying for it, you know, with excessive credit card debt, or, you know, we talked about we could talk about the loans right now, but you know, like I what I should have done is is done the the equity raise like prior to opening the second location, but then it's like you don't have enough to show, like, look at me, look at me, mom. Like, look whatever what I did, right? Um, and so yeah.
SPEAKER_01:So yeah, yeah.
SPEAKER_00:Does that answer a question?
SPEAKER_01:It does. No, that's great. Because I think a lot of people are thinking, so I like, I'll just kind of go back and underscore a few things that you said. First, you know, when was it right for you guys to open a second location? It was kind of like, well, you know, sales are kind of tailing off a little, and I don't even see the growth. And then second, you know, I think this is a great point that you make, and it's probably not brought up enough, is that if you open that second location, you've got to be there. Ownership has to be there. Oh, I'll hire a GM, it's like, man, nah, it's not gonna it could work, but it's kind of a low, low percentage. Nobody's gonna care as much as as you. And then yeah, let's talk a little more on on the financing equity. So because that's a big step too, right? It's like, okay, these are these are great uh sort of benchmarks to think about. Oh, and your your other point was, you know, it's gonna cost more. You know, that is cliche, and it's often true, is it's gonna take twice as long, it costs twice as much. So plan for it. So talk about your equity raise and how you approached it recently, what that looked like, because a lot of people are like, Yeah, I need to raise some money, and I don't even really know where to start. So, how did you think about it and how'd you approach it?
SPEAKER_00:When we originally opened the brewery in 2017, we raised uh$350,000 um in equity and then an additional about$150,000 to maybe$200K in private loans. Um, because obviously brand new business, banks wouldn't give us the time of day. It would have like we would have had to be in the industry already with at another location, I think, if banks would have even like had that conversation with us. So, like we knew that it wasn't possible to raise the funds without the private equity, at least from our you know, perspective. Like we aren't inherently wealthy individuals. Like we were kids that were just had graduated college, like you know, a couple years after we or a couple years before we even decided to open the brewery. Um so like we didn't have any money. So we knew that we needed to go to our friends and family. Um, and I recently heard somebody, uh, oh, I've just absolutely in love with the book Unreasonable Hospitality. Um, and Will, the author, he talks about how they raised money to buy 11 Madison Park. And he just sat down with his customers and he said, Hey, do you know of anyone that would be willing to invest in this restaurant? And usually if they say no, then but they'll say, Oh, but I know somebody else. And so, like the equity raise that we did back in 2017 to start the company was almost the same methodology that we did this year to raise additional equity. And, you know, we actually raised more than double or almost double than what we raised back in 2016, 2017, um, with another, you know, 10 individuals. And so just having like the current investment group support and the current board support that equity raise was one thing. You know, obviously you need people rooting you on and being aligned with um your strategy. But the other thing was is, you know, everyone knows somebody, right? And it's just being willing to put your self out there and you know, really just be able to effectively like sell the sell the company in terms of, you know, here's our amazing team, like here's our here's the strategy for the next like two years, here's what we're gonna even do with the money. Um so I didn't go as far as to have this like fancy pitch deck. Because I have seen other companies do that. Obviously, like, oh, you need a deck, you need to sit down with these potential investors in your your suit, and like you have to be all formal and everything, but really just it all boiled down to um we actually for this round, we have this membership club called the Bear Society, and we've always had it like ever since day one, even before we opened the doors, we started selling memberships. Um and it's it's like a mug club without the mug. I'm not gonna keep the keep the mugs at our location because it's kind of gross. Sorry. Anyone that does still do that, apologies. But um, so I went to you know, a handful or more of our Bear Society members that I knew have been members since day one, and that they're really like advocates for the company. And I called them or emailed them or sat down with them over some beers and I said, like, hey, we're raising money right now. Here's the deal, like, you know, here's potential ROI, here's everything that we're gonna do with the money. Um, and yeah, we were able to raise um$675,000 in less than six months. And I think it really all just boils down to like we have an amazing team, products, um, and we had a plan. Like we knew what we were gonna do with the money.
SPEAKER_01:So yeah, well, those I you know, we were talking before we hit record, like that you said, I think you said, like, hey, when we did our equity raise, we didn't reinvent the wheel. And I said, Well, you know, most people don't even know that there's a wheel or what it looks like in terms of equity raise. So I think what you described is actually really great advice. It's like so I so I'll just kind of unpack it. It's you had your bear club, bear society members, and so you already had sort of a pre-built set of fans, right? So that's great. Yeah, but then you sat with them individually. I'm I'm guessing.
SPEAKER_00:Yes, yeah, lots of conversations. Yeah.
SPEAKER_01:Such a great way to do it, you know. And and then uh you had a very clear, you didn't need a fancy pitch deck, but you basically said, hey, here's what we want to do, here's here's our team. You're they're already fans, uh, here's what we're gonna do with the money. So I mean, that's all people really want to know.
SPEAKER_00:Right.
SPEAKER_01:So that's that's great. I love that. And so tell me whatever you're comfortable with in terms of how to because a lot of people, the next step would be like, well, how do you structure the equity? Like, how do you figure out like if you're gonna pay it back or or if you're not gonna pay it back, or what are how did you guys think about like the the deal?
SPEAKER_00:Yeah, what's the exit strategy? So um uh to be perfectly honest, the the exit strategy for our investors is that hopefully no more than 10 years down the road, because again, like we've been open eight and a half years now, um, that we the company would be in the position to buy back those shares. I really want to buy back those shares ultimately, uh you know, obviously a higher dollar value than what they originally bought. Um we have had such a financial, you know, profitability or lack thereof profitability journey. Um there's so many, you know, things that I could get into as to like why we haven't yet shown long-term sustainable profitability. And I think it boils down to most recently, we have not figured out how to like combat that seasonality. Um, and I was telling you earlier that we're in Tahoe right now is like the lowest peak of our or the lowest um valley of you know that silly, like unfortunate, very challenging seasonality of our business. Like October of what's today? October 23rd isn't probably one of our lowest points, right? And throughout the entire year, um, beginning of November. Uh again, like really low, low points in just natural organic revenue. Um, because there's just no one here, right? And so it's starting to combat uh that seasonality with um controlled budgeting and payroll costs and you know seasonal shifts and the schedule. And I could get into so much more with that. But uh, you know, what you asked, well, what's the end game? And you know, that I'll just go back to my original answer is I would really like to buy back those shares. Yeah. Um, obviously, we just did the equity raise, and so all of our investors know that they're in it for the long haul. Um, and that this isn't a quick, quick money. Like you're not gonna get your money anytime. You know, like it's not just a quick fix. Uh like we have to show long-term profitability. Um, and you know, trying to get the team to always constantly focus on that too is really important, in my opinion.
SPEAKER_01:Yeah. That's great, Nicole. Thanks for sharing all that. Hey, I want to I want to pivot back to what you'd said earlier. This was funny that you said you work for a plumbing company and you're an inventory manager. But I like so that I'm always interested in what we learn from other industries because sometimes our industry gets to be an echo chamber and we're like regurgitating the same ideas. I know. You know, you worked outside of it and you said inventory manager, continuous improvement, strategic planning, setting company goals. Yeah. Maybe speak a little bit more about what you learned and how you've applied that to your current business and what you want, or just kind of bounce around amongst that group.
SPEAKER_00:Well, um, you know, also answering another kind of question in the same breath is what is our biggest win in the last 12 months? And it all goes back to we have had multiple strategic planning meetings, whether that be like all day, you know, off-site with the team, because we've had two of those in the last two years, or just kind of mini sessions, mini brainstorming sessions. Um, we've been really using that cadence. And that goes back to my time at ZERN. Um, and we would have those strategic planning meetings. Like we would, you know, prior to their fiscal year was it was so odd. I think it started in May and ended at the end of April. I don't know why. It's the only company I've ever experienced that doesn't have you know their calendar year as the fiscal year. But um, I guess it was just like beneficial for them and their industry. But we would always sit down, you know, in like March timeframe, maybe even earlier, and and plan out like what are the you know, less than five goals for your department for this next year? And then Billy, we would talk about roadmaps and we would talk about and then really the cadence of the weekly or even daily when it came to manufacturing, um, you know, daily KPI um meetings, like right at the beginning of the day, uh, what metrics are uh in the red, right? And then what it's the countermeasuring process. And so taking that back to SLBC, I still always have my team, you know, we have weekly KPI meetings, and lately they've told me that, you know, we're we're too much about the numbers and we need to talk more strategically. And so we have kind of recently involved those KPI meetings to not just a report out of the metrics, but each department head kind of picks one thing that they want to address with the rest of the core management team, and they give us a red, yellow, or green status and they tell us, you know, where where do or we talk about like where we need help um or where they need help or you know, new ideas. And even just on Tuesday, we we always have them on Tuesdays, even just on Tuesday, our GM was like, well, the to-go can sales isn't, you know, um isn't close enough to the forecast of where we need to be. So here's what we're gonna do. We're gonna do a Halloween can sale. We're gonna um, you know, continue to ask that question of appropriate upselling. Would you like um beer or merchandise uh to go? So I could, yeah, again, I always talk, sorry, I talk in like tangents and go off into rabbit holes. But yeah, I think that's the biggest thing that I took away from Zern was that overall higher company level um way of managing and constantly improving and evolving as an entire team is like what is your strategy? Like, do you have your strategy on paper? Because I think some businesses they created that strategy back when they needed to fundraise, right? And they never go back to it. It's like you need to, you need to go, that needs to be a living document. That needs to be a living list of milestones that you need that you want to achieve, right? And like these smart goals or whatever. So I've taken so much away from um from my time at Zarn, and it was literally just it was six years. So, but I think it just all goes back to that continuous improvement um mentality.
SPEAKER_01:Yeah, I like that. And so, all right, let's dig in a little bit on this because I I again another topic we've touched on here that I don't think gets enough airtime, strategic planning. Yeah, we do strategic planning. Nobody really like knows exactly what it is, like to your point, like, oh yeah, we had a strategy, but that was for our original deck and we opened up and I don't remember what it is. Yeah, we can lose our we can lose our way so quickly um without that strategy, those guiding lights, those north stars. Tell me so you guys do regular Tuesday meetings, and then it sounds like there's a blend of um you know all day offsites, longer offsites, or is there a regular cadence to it, or is it like do you feel like we have our regular Tuesdays and then we need to do an off-site planning?
SPEAKER_00:How do you sort of decide when it rises to the we've we've only done two offsites and they're always in January or the end of January um after the holidays because it's just nuts here during Christmas, New Year's time. So we make sure that it's during a slower time for us and the company. But yeah, we've had the so the last offsite was I think it was January 29th or something of this year. And we and that like literally gave me enough ammo to not only finish up the budget, which one of the other big accomplishments that we've done in this calendar year is I finally have like the most robust, you'll be so proud of me, Carrie, robust PL that I've ever had. And then that PL and budget and forecast helped me, you know, raise the money with the investors. So I always I started last strategic planning meeting with a deep dive into the financials, right? And I think for the most part, it's it's like your eyes glaze over after a certain amount of time when you're looking at a spreadsheet, right? But it's the things are starting to click. Finally, this calendar year, I think it's pretty safe to say that I have a very financially literate core management team. Um and we the original strategic planning meeting that we had in 2024, we actually took the time and didn't even dig into the finances or like full on here's the plan, but we defined our core values and I reiterated the mission statement. So the mission statement has always been the same um since day one or prior to that. And it is to um, I pretty much have it memorized, but I'm gonna read off of it. So the mission of South Lake Brewing Company is to create and share the highest quality craft beer products and experiences inspired by the beauty, adventure, and community of like Tahoe. Um, so that's our business in a nutshell, and that is our North Star, like you said. And it's just it's so important for me as a leader within the company to always emphasize that with my team constantly at every single meeting, you know, any single official meeting, you know, we had an investor meeting, we had a mini strategic planning meeting last week, we'd always start with that mission statement. And then tagging onto that, our core values are like if we do something or make a decision that goes against our core values, like what's the point, right? Like we need to stick with the core, you know, moral compass of the company. And I love acronyms. So I asked my team to put our core values into Chat GPT and like come up with the best acronym that we could think of or that the robots could think of. And it came back with um basically CARSIC. So our core core values, and you know, anyone that's listening to this on my team would probably just cringe at the fact that I called use the acronym CARSIC, but the core values are community, adventure, resilience, empowerment, sustainability, integrity, and quality. And um, you know, I could take the time and define all of those for us today, but we don't have enough time. But really, uh it all boils down to like we're a community hub. We've always wanted to be a community hub. If we stop being a community hub, then we're doing the wrong thing, right? And a venture living in Tahoe, working on Tahoe, being a part of the Tahoe community. A venture is like so key for us and our brand. Um, resilience, we've, you know, we've survived through COVID. We've survived through a massive wildfire that caused an evacuation of our town back in 2021. Um, we've survived through massive amounts of snow. Um, like we just have to be resilient. And now the industry, you know, obviously is not booming. And so that's our next challenge of how do we stay resilient through uh this economy right now and the state of the industry. Um, and then sustainability is not only like environmental sustainability, because that's very important, but also uh business sustainability and like how do we stay sustainable with our profitability, our our cash flow, or how do we stay in business? Um and then integrity integrity and quality kind of go hand in hand. But if we're not, you know, I'm I hope that in everything that we do and everything that my team does um day to day, like we're always, you know, doing that as trustworthy individuals, um, you know, and respecting each other. And then quality is obviously a given. Like we have to make the best beer, we have to make the best food, we have to have quality, genuine experiences. And um yeah, hopefully this is resonating with you um and is good to focus on and talk about. But yeah, just if you can't like keep on evolving and changing for the better if you don't have some type of uh, like you said, North Star. Um, and so just always keeping that mission statement in mind, always keeping the core values in mind with like everything that we do, I think it's really important.
SPEAKER_01:I I would agree with you. And it's you know, I it's funny your teammates said, Oh, we're focusing too much on the numbers and you know that we can skew too far left brain or right brain sometimes. So the nice blending of the two, because people do need you know, KPRs are great, and we, you know, you and you and I can agree on that. Um however, we gotta add a little bit of a human side to it too, and which is I I need uh I need some words. Give me some words. So I like the acronym, it's easy to remember. Um so I think that's a great way to kind of blend the two because if you're doing these things acting in accordance with the core principles in your mission, um it stands to reason that it's gonna correlate back to results, right? And then it's and then it's a nice virtuous cycle, I think, there. So I like that. Yeah, but I've got since I said the word keep KPIs in or you did too. And I've seen your I've seen your dashboards, but I want you to maybe tell people like how do you like what are your most important numbers? What metrics do you look at regularly? How do you and how do you sort of make sense of all? Because that's the other thing too, is like, oh my gosh, there's so much data. What do you guys do?
SPEAKER_00:Um, what we've always done is revenue. Um, comparing actual revenue to forecast, that's always like the first metric that we'll talk about. Um and we have gotten so good at it that I've been able to, you know, update our forecast on a more than twice a year basis with every single product line, every single location, every single month, because again, we're we are very seasonal. So if we're not trending in the right direction with the where does the actuals for the month need to be compared to the forecast for the month, um, then we'll definitely discuss that. Um, and then we also look at year-over-year trends. I'm a big fan of just benchmarking off of yourself. Like your brewery and business is unique to you and your location and your brand and everything about you. And so, really, if you're not, you know, trending in the right direction compared to last year's sale than the same month, then you got a problem, right? Um, or if if that particular product line is declining year over year, you have to ask yourself why and like how can we move that in the right direction? So it's always been about revenue because you know the profitability is so difficult to measure in the moment. Um, but I have to give you kudos for your webinar a couple of weeks ago when it came to um food profitability. Um, taking that concept of prime cost has been huge for us. Um, even just like since you taught us that group about it. Um, so you know, cogs as a percentage um of the revenue, material cogs, plus um labor to produce that revenue, I think is just like so key. And again, if your prime costs are a hundred percent of your revenue, then where's the money for the overhead, right? Not gonna work too. No, it's not. You're not gonna be making money on that particular revenue stream. Um, so yeah, prime cost has been something really new for us that I want to thank you for um teaching me about. Um, and then the last thing, uh, really the name of the game when it comes to even having a chance of profitability and controlling costs is wages, gross wages as a percentage of um net revenue has been an extremely important KPI for us in the last year because not only is payroll my largest cost and our business's largest cost, but it's also the most controllable. You know, you have you, you're fixed, your your your cogs is essentially fixed for the most part when it comes to like a certain recipe of a beer, or like there's only X amount of yield that you can get from a double IPA, right? It's like you could, you know, try to move the needle and improve the cogs in that way, like try to make you know, beer faster or um beer cheaper without sacrificing quality. But what you can really truly do is control the amount of uh people that are staffing your tasting room every single day, um brewing the beer. Um you can control your management um, you know, payroll when it comes to I think efficiency, right? Is your like before you add another head, can you just improve the efficiency of the existing team, right? And produce more revenue and control the cost, like with the existing team. Um, or you know, hate to say it, but like, can you automate something or can you do time studies with a particular individual and ask them like how much truly how much time is this taking? Okay, can we do XYZ to change this process in order for it to take less of your time? Right. Um, you know, uh so I think like labor as a percentage of revenue is like so key for anyone in this industry because it's going to be your highest cost. And if it's above like 45 to 50 percent, like you are not going to be profitable. There's no way, no chance. So, I mean, there was a time and day when we opened this location in particular, that payroll was over 50% of our revenue. And we were obviously too overstapped, our staff wasn't efficient enough, it wasn't, you know, skilled enough. And we like to give us the benefit of the doubt, we were opening a new restaurant and we had no idea. Well, first of all, we didn't even want to be a restaurant. You know, like I think you talk to a lot of brewery owners and they're like, Do I have to be a restaurant? And like, and today and this year and beyond, yes, you have to be a restaurant. Like, so I think, you know, we've just learned so many lessons through looking at those numbers and and like always keeping a pulse on them. But yeah, I think you know, those three like revenue compared to your forecast uh prime costs, I think is huge. And then obviously like payroll as a percentage of those are great, yeah.
SPEAKER_01:Because I I think you're really boiling it down to what's gonna move the needle, right? You gotta have some sales growth or at least maintain it, you gotta understand your margins. Uh and certainly you're right. I mean, labor costs, these are the biggest expenses that you're gonna have. Well, this has been great, Nicole. I have a ton more questions, so maybe in the future we could do a round two. I really enjoyed this conversation, and I think it's really great insights for people. So I really appreciate your time. Um, if people want to connect with you or even learn more about your brewery, like what's the best way for them to do that?
SPEAKER_00:Yeah, our website is southlakebeer.com. And my personal email is Nicole N I C O L E at Southlake Beer.com. So feel free to reach out. Um, we're obviously on the socials too. Um, and uh yeah, just very, very quickly download our app. It's tell us about the app. Yeah, we have an app. Uh Southlake Brewing Company, just you know, Google that on the on the app stores. Um and you can download it for free. And then it's basically, you know, just like a mini uh version of our website. But I love it because there's rewards, there's punch cards, there's you know, the membership. Uh it's also if you don't love or if you have a love-hate relationship with social, um, you know, this is a great way to stay connected like with our company specifically and not have to, you know, scroll through, doom scroll uh to see what we're up to. Um, it's just, you know, a great way to do bite-sized kind of little um about our events or about our new beer or whatever. Um, it's just a great way to, you know, stay in touch, but not have to be doom scrolling, I guess. Because I know a lot of people are getting burnt out with that. Um, sign up for email newsletters, um, the works. And then uh yeah, I'm on the Brewers Association board. Um, I'm in my second year of my three-year term and always love to connect and talk shop. Gonna be at the um craft beer um brewer or California Craft Beer Brewers Association summit uh next month in November. Um they're gonna be in Irvine for the first time in a year and a half, I think was the last summit that they had. So definitely would love to connect there. Um, I'm really looking forward to that event. So I I just love being a part of this community. It's like so great. And people are so collaborative and always willing to, you know, talk through the basically the same challenge. We all have the same challenges, you know, we're all on this island, and uh it's always just so much better to to be on that island with friends.
SPEAKER_01:So that's well said. And yeah, and thank you for sharing your story and your experience and lessons learned. That helps this all just helps the greater good and really appreciate your time, Nicole. Thank you so much.
SPEAKER_00:Thanks, Gary.
SPEAKER_01: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 Craft Brewery Financial Training newsletter. Until next time, get out there and improve financial results in your brewery today.