Small Brewery Finance

A Certified Public Accountant, Maria Pearman founded Radix Accounting in 2012 to provide accounting expertise and a deep operational knowledge to the alcohol beverage industry. Pearman has also taught for CPA review courses and within beer business programs at Portland State University and the University of Vermont. She resides in Portland, OR.

TABLE OF CONTENTS




Foreword

Acknowledgments

Preface



1. From Dream to Reality: A Craft Beer Business Journey

2. Introduction to Financial Management

Basic Financial Statement Introduction

Accounting: General Structure of Transactions

Accrual Accounting versus Cash Basis Accounting

Chart of Accounts

Internal Controls

3. Balance Sheet and Income Statement

Balance Sheet

Assets

Inventory

Fixed Assets (Capital Expenses)

Liabilities

EquityKey Ratios: Balance Sheet

Current Ratio

Quick Ratio

Accounts Receivable Days

Accounts Payable Days

Inventory Turnover

Industry Benchmarks for Key Ratios

Income Statement (Profit and Loss)

Cost of Goods Sold (COGS)

Accounting for Inventory and COGS

Gross Profit

Operating Expenses

Interest Expense

Depreciation

Net Income versus EBITDA

Key Ratios: Income Statement

Gross Profit

EBITDA

Net Income

4. Cash is King!

Cash Reserves

Statement of Cash Flows

Format of Statement of Cash Flows

Steps to Calculate the Statement of Cash Flow

Cash Flow Forecasting

5. Interpreting Financial Statements

Chart of Accounts

Every Statement Tells a Story

What the Balance Sheet Shows

What the Income Statement Shows

Generating Relevant Reports

Monthly Financial Review

Interpreting Financial Statements

Period-over-Period Growth

COGS

Gross Profit %

Payroll %

NOI %

EXERCISE

6. Finding Breakeven and Costing Beer

Breakeven

Finding the Accurate Cost of Beer

Brewpubs and Taprooms

Labor

Taproom COGS

Tools for Costing

Planning and Start-Up Phase

Adolescence

Maturity

7. Options for Growth

Self-Distribution versus Third-Party Distribution

Retail versus Wholesale

8. Operating Budget

Types of Budgets

Sales Budget

Production Budget

Administrative Budgets

Other Budgeting Approaches

Conclusion

9. Sources of Capital

Debt versus Equity

Who Should Invest

Four Must-Have Documents When Working with Investors

Term Sheet

Pro Forma Financials

Operating Agreement

Subscription Agreement

How to Manage Investor Expectations

Annual Investor Meetings

Quarterly Updates

Investor Distributions

How to Prepare Pro Forma Financial Reports

EXERCISE

10. Business Life Cycle

Start-Up

Early Stage

Adolescence

Maturity

Exit

Employee Stock Ownership Plan (ESOP)

Appendix A. What to Include in Your Business Plan

Executive Summary

Company Description

Products and Services

Market Analysis

Strategy and Implementation

Organization and Management

Financial Plan and Projections

Conclusion

Appendix B. Sample Chart of Accounts

Brewery

Brewery with Restaurant

Appendix C. Sample Full Budget Spreadsheet

Appendix D. Ten-Week Budget Calendar

Appendix E. Sample Term Sheet for XYZ Brewing Company, LLC

Appendix F. Choice of Entity/Significant Tax and Other Considerations



Glossary

Index