Planning Strategically

White Chess Pieces on a board

Strategic Planning for Everyone

Harvest is finally over, the wines are aging, the vineyard is dormant and winery visitors are at a low point. This is a great time to think about the future and do some strategic planning. It can be hard to look long term when your business operates on a fairly consistent yearly cycle.  It can also be a bit overwhelming to start writing long term financial forecasts if you’ve not done them before. Have no fear! I’ll layout the basics for each plan here and go into depth on how to execute each plan with as little pain as possible in later blog posts. But, really, there is no substitute for planning for the future.  The time you invest in thinking about the future of your winery is well worth it. If you are not in the wine industry, this still applies to you! My examples are winery focused but are applicable to all industries and products.

Three Financial Plans
  1. Strategic Plan – A ten year plan that forecasts long term expenses and sales and strategically considers opportunities and threats.
  2. Long Range Plan – A three, or four, year plan that is driven by sales and which informs current and future winery production.
  3. Financial Plan – A one year budget that guides and tracks expenses and sales for the coming year.

Strategic Plan

The Strategic Plan is a combination of a ten year financial plan, that forecasts both expenses and sales, and a written plan that looks at the opportunities and threats to the organization.   When writing this plan you should start with where you want the organization to be in ten years. Then look at what is happening in the state, country and larger world that will affect your winery. If you have ever written a business plan, you will find a strong correlation between the business plan and a Strategic Plan.

Where do you want to be in 10 years?  To get started ask yourself some questions:  
  1. What is your ultimate sales or net income target?  For many small wineries this is where the owners salary comes from.  Is it enough to pay expenses and put away for retirement? Will all of the winery debt be covered?
  2. Do you need to make capital improvements, renovations or extensive repairs in the next decade?
  3. Are you considering retiring or selling the business?  How should the winery be positioned so that is can be sold?

Based on the answers to these questions, and previous years sales and expenses, you can put together a ten year financial forecast for the winery.

Now look at the opportunities and threats that can affect sales and expenses.  This is the hardest part of a strategic plan because you are primarily looking at things that you can’t control.  But, you can still layout a strategy for dealing with them. The key is to concentrate on the opportunities and threats that will likely have the most significant effect on your winery. Be brief.  

The hardest Strategic Plan you make will be the first one!  Next year you can update it and look at which opportunities and threats have changed.  

Long Range Plan

The Long Range Plan is a three, or four, year budgetary plan.   I think this is the hardest of the three plans because it is a combination of: how do we get to where we want to be in ten years (the Strategic Plan) and what can we actually accomplish based on our current sales?  This plan should be primarily driven by sales and forward thinking.

How do you decide if yours should be a three year or a four year plan?  

The answer depends on the products with the longest lifecycle.   The plan should encompass the entire lifecycle of the product from your initial contact through sales, and include time to make substantial changes.  

Example:  I make several reserve red wines from estate vineyards.  I barrel age the wines for 18 months and release the wines in the late fall.   

In this case I would suggest the Long Range Plan be a four year plan.  This will allow time to make changes in the vineyard that will affect the quantity and quality of the bottled wine.  If you make primarily non-aged whites, you could shorten the time to a three year plan. If this sounds complicated, I will break it out more in a post on just the Long Range Plan – stay tuned!  

The goal of this plan is to objectively look at your sales and prospective, yet realistic, sales growth and be able to make changes in your initial source – the grapes, vineyard or bulk wine – so that you are producing the amount of product that matches your sales goals.  Yes, this is easier said than done. In the wine industry we often use vineyard production or sales goals that are based solely on the year before. Making a Long Range Plan involves a change way of thinking that is more strategic and less reactionary.

Financial Plan

The Financial Plan is your one year financial budget.  If you don’t make any other plans you MUST make a Financial Plan.  This plan is the budget for your current year expenses and your forecasted sales.  Each department should develop a yearly budget based on targets from the Long Range Plan. These are brought together as the Financial Plan for the organization. This is what you should tracking on a monthly basis.  Quarterly, or yearly, this is used for reporting to ownership.

It is tempting to take year one of the Long Term Plan and call it done. But, for the Financial Plan to be really useful (And frankly if it’s not useful, why bother?) you need to break it down by month.  The reality is that expenses and revenues don’t happen at the same time. In the wine industry sales have peaks: wine club shipments and high season for the tasting room. Expenses have peaks too: bottling, barrel purchases and harvest.  Tracking these together by month will show you how cash is coming in and leaving the winery. This allows you to prepare for large outflows and can influence when you schedule wine club shipments and special events.

The first year you do a Financial Plan you will find that there are certain expenses and sales budgets that are significantly different that the actual expenses and sales.  That’s okay provided: you know why they happened and you use them to make future plans more accurate. The thing to remember is that these plans are not an exercise to take up time or make you look good.  They’re only good if they are useful! These plans should be used throughout the year to inform your decisions and help you plan strategically for the future.

Genevieve Rodgers is a winery consultant with twenty years of experience making wine and helping wineries plan for the future.

Published by Genevieve Rodgers

I'm an engineer turned, winemaker, turned winery consultant.

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