A Strategic Plan is a combination of a ten year financial plan that forecasts expenses and sales, and includes a Threats and Opportunities Assessment. When writing this plan, start with where you want to be in ten years. Then, look at what is happening locally and globally and what impact it will have on your winery. If you have ever written a business plan, you will find a strong correlation between the business plan and a Strategic Plan.
Ask yourself some questions:
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.
The idea of this plan is to be a tool that informs your decision making. So, include all the things that will impact your future decisions. At minimum this should include:
If you are planning on raising outside funding for capital improvements or expansion you should also include a Balance Sheet.
Now look at the Threats and Opportunities that can affect sales and expenses. This is difficult and often overlooked in organizations because you are looking at things over which you have little to no control. But, you can still layout a strategy for dealing with them. With forethought you can turn threats into opportunities, The key is to concentrate on those that will have the most significant effect on your winery, and be brief.
Start with the broad picture and work towards local issues. Pay the most attention to those things that 1) will have the most effect on your business and 2) that you can mitigate in some way.
I could continue to give examples, the list of threats and opportunities can be long. The key is to concentrate on those that you can plan for and not get caught up in the details.
Now that you have the Strategic Plan, take some time to assess what the data actually means for your business. You now have a lot of data. But, data is only good if it is used to inform your decisions. I recommend you put some of the data into graphs and charts so that you and your team can have a visual of what the numbers mean. Your next step is to create the written plan to put your Strategic Plan into action.
The hardest Strategic Plan you make will be the first one! The next one will be much easier. If you are a small organization you should look to revise your plan every two or three years. If you have a large organization you should consider revising this plan on an annual basis.
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.
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.
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.
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.
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.
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.
You’ve got a great idea! It’s new and different! You can do this better than anyone else! You’re excited and ready to go! And then, someone mentions a business plan…. It’s like watching a balloon deflate.
You don’t want to write a business plan? Well, you’re not alone. Business plans are not the fun and exciting part of starting a business. If you google “why not to write a business plan” you will find a slew of articles and books that give reasons why business plans are a waste of time. Some of their reasons are valid, but there are some very compelling reasons why writing a business plan will help you succeed.
1. It helps you define what is success to you.
2. It gives a fact based estimate of how much time and money is needed start making sales.
3. It acknowledges the risks and rewards in the venture.
But first, let’s look at what a business plan is and is not.
A business plan is a reality check on your idea, it is not a road map to follow without deviation! Business is no different than the rest of life. There will be unexpected, unanticipated issues and costs that will cause you to reevaluate your plan. What your business plan is, is a structured way for you explore both the exciting and the mundane aspects of your venture. If at the end of writing the plan you are still jazzed, then go for it! If not, it’s time to reevaluate. The business plan forces you to put down on paper why your idea is the next best thing and why you are the perfect person to do it, right now! You will also put on paper the top roadblocks in your way, how much it will cost and what you need to do to get your successful outcome. For many people, this is their first time thinking about the business side of their idea. It can be daunting and there are a lot of pieces to a good plan. Always give it a shot, then decide if you have the expertise to write a useful plan or if you need help. If you decide you need help there are different avenues for you: you can hire someone like me to help you, or you can download a template from an online resource. The online resource I recommend is from Score – US Small Business Administration.
The most important thing a business plan does is clarifies the worth of the business. It defines success for you and your partners. It doesn’t answer the question: Can you make this (whatever this is) better than anybody else? It answers the question: Can you make enough money selling this to make the project a success? The definition of success is unique to you. For some, it means the project will pay for itself. For others, it means it will generate enough to replace their current income. Spend some time determining what will make the venture a success for you and the other people involved. Ask your business partner, your domestic partner and your investor about their expectations. You may be surprised by their answers. Once you have your definition of success, you’re ready to work on your expenses/sales forecast (otherwise known as the dreaded spreadsheets). So, instead of forecasting how much money you can make if everything works perfectly and there are no surprises, forecast what it takes to be successful for all participants. If you can make that work, everything else is gravy!
How much money, and how much time will it take to start your business? These are questions your business plan needs to answer. While it’s tempting to start by looking at how much you can sell, and consequently, how much you can make, I suggest starting by estimating how much it will cost to get started. Once you have that, forecast what it will take to get to the success point. Start with the bare necessities, but use market rates and costs unless you are certain you can do it yourself without sacrificing quality. Forecast your expenses out several years, but not more than five. For some industries, like the wines and spirits industry, you will need to pay for one to three full years of expenses before you start getting any revenue. For a restaurant it may take 6 months before you’re doing more than just covering costs. Can you afford it? If not, what are your solutions?
Determining how much time it takes to start your business entails more than looking at your personal time for the project. Many businesses, like wineries, have a yearly cycle for operations and sales. You need to know what that is and where you are in the cycle. If you start now, are you going to be ready for harvest, or the holiday season, etc? What happens if you miss the peak sales window? When are the trade shows for your industry? How long will it take to get all of your licenses? Answering these questions will give you a better understanding of the business and make it easier for you to adapt when the unexpected happens. Because it will.
There is no sure thing. Even the best businesses involve risk. A business plan helps you honestly assess the risks of your proposed business. The “risks” part of your plan highlights what you know and do well, while acknowledging your weaknesses and the information and resources you will need for success. This is often the most difficult and underutilized part of the business plan. You should layout what you think are the most likely risks and roadblocks to success. Objectively analyze your competition and highlight what you will do better or differently that gives you a competitive advantage. And, layout what you will gain when this project is successful.
If you are seeking outside funding, this is a crucial piece of your plan because you are being transparent of the financial risks involved in the venture. After writing this section, if you are still confident in the success of your project that’s a sign to move forward. If not, you should reevaluate your financial commitment to the project. Can you afford to lose the money you will spend based on your projections? And, what is the likelihood of that happening?
After writing the business plan you should have a clear plan forward. You have looked at the risks and the rewards, determined the capital and time needed and clearly defined what success will look like for you. Now you have something to share with friends, family and potential investors that is well thought out and clearly explains why this project is a great idea! Use this plan as a working document. Make changes as needed and keep track of how closely your forecasts lineup to your reality. When you look back, you’ll find that writing the business plan was well worthwhile.
As I sat down to write this blog I realized IT’S BEEN A YEAR! It’s hard to believe that it has been that long, the year went fast. So, what have I been doing this last year? For the most part I’ve been taking care of a new baby. Matteo was born in July. He’s a wonderful little boy, who has also been very needy. But, now that he’s 8 months old, it’s time for me to go back to work. I’ve missed it.
So, here is the first installment of the New Year.
Russian River Barrel Tasting Weekend is upon is once again, this weekend and the next. The next two weekends will bring scores of wine tasters to the area, rain or shine. They come to sample the new wine in barrel, taste the new releases, get sloshed, party and hopefully even purchase. It’s always a question for wineries – Is barrel tasting weekend worth it? On the one hand sales are up during the event. People do come and buy wine, both current releases and futures. For some wineries this will be the sales peak for the winter. But, it comes at a price. Even the smallest winery will pour though several cases of wine each weekend, food will be provided, extra staff will be on hand, barrels will be opened. And, as always happens, at the end of the day there will be a barrage of fairly toasted consumers looking for that last place to land for a final drink. So with all the cost and frustration involved is it worth it?
Barrel tasting weekend is a great time to reconnect with consumers you haven’t seen in a while. For some consumers this is the seminal event that brings them back to wine country. So, this is the time to reestablish those relationships that keep your customers coming back time and again. It’s also the time to make new relationships. If ever there was a time to get emails and sign people up for your mailing list and newsletter – this is it! So, how do you do that with the scores of people coming in? Have a raffle! Everyone loves to win something, so raffle off one thing every day. While it is a bit tricky to raffle off wine (technically you can’t give it for free) you can be creative. Have a designated greeter at the door and hand a raffle card to every person that comes in. The card needs to ask for their name, email and phone and should include a box to check if they want to receive emails from you and your newsletter. Don’t use this as an opportunity to spam. You will be surprised how many sign ups you do get. Then, and this is really important, FOLLOW UP with an email after the event. Send an email thanking people for coming to your winery. Send them a special discount for wine and start building the relationships that will turn them into long term customers.
Yes, you can make barrel tasting weekend work for you but you have to be creative and put in the extra work for the long term rewards.
I was at WITS – the Wine Industry Technology Symposium – last week when one of the Speakers in the General Session implored the audience to be “a niche leader.” This got me thinking: What does that really means, and how do you do it?
I decided to start with the definition of niche, specifically niche market which is the business context for niche. Wikipedia defines a niche market as “a focused targetable portion of the market.” Focused and targetable. This is really the key for most businesses. I want to concentrate on focused because I find that many businesses are deplorably unfocused, with only have a vague definition of what they do. This leaves the core business open to interpretation and can lead to poor and scattered use of precious resources. You’ve seen these businesses, they always have a “new project” in the works, but their projects never quite deliver expected results. The problem is that by leaving their business definition vague, they haven’t defined what they don’t do. They end up running after the “Idea-du-Jour”, only to find that their limited resources are stretched too thin. When that idea does not immediately solve the problem as they had hoped, they are on to the next one. The remedy is simple, just not easy.
I recommend starting by answering these questions:
1. What are the strengths of your core personnel, specifically your owners?
2. What can you offer that is unique?
3. What are you passionate about?
4. Are you driven by quality or by price?
Once you’ve answered these questions you should have the frame work of a business definition. Now you need to focus. Think about your resources, both financial and personnel and make a determination of what you can do better than your competition. Are you a great winemaker, a good grower, are you cash strapped or flush, are you innovative or technologically astute? If you need, rank your strengths and focus on the top two or three. Great businesses are driven by their owners’ passion. How can you express that passion in your business? If your passion has no relationship to your business, this is a good time to rethink your business. And the last question, how will your decisions be driven? This is a choice people are loath to make, but it is a necessary one and one best made upfront. I am not saying that quality and price are mutually exclusive, but there comes a point in every business where you must decide which will take precedence, the price (both the cost and the price to consumer) or the quality.
When you have your answers focused into a concise message you’re ready to think about your target market, but that is another post.
In the wine industry we have a tendency to focus on what’s in the bottle and forget about what’s on the bottle. There is a romantic view of wine that’s centered on our experience with the contents of the wine glass. This can lead us to discount the importance of the brand and its packaging. But, wineries do so at their peril. Now, I’m not going to suggest that the utmost of care is not important in making a wine. But, I am going to suggest that as much time and effort should be spent caring for the brand as is spent caring for the wine.
Before I go farther I want to clarify what I see as the “Brand”. The brand to me is everything the consumer contacts that is not liquid. This includes: the name, label, packaging, pricing, press releases, take-aways, the winery and tasting room, the website and the people who represent the brand. All of these go toward the consumers’ image of your brand. Taking proper care of your brand is no small feat, but the rewards are great.
The first step in caring for your brand is determining your brands persona. This is the image of your brand that will dictate all of your branding decisions. Pay special attention to how this persona relates to the owners or key players in the winery and how it speaks to your target market. Is this brand hip and cutting edge, or is it a classic beauty? Is the brand green and eco-friendly, or high end luxury? The brand persona must reflect the values of your target market.
The next step is getting the brand to stick in the minds of your consumers. This is the key to repeat sales. To do this your message must be consistent. Everything in print and on the internet should be based on the same template – the format, colors, font, writing style, logo and slogan all must be consistent. Your packaging should reflect your brands persona. A cutting edge brand has a cutting edge label and can use non-traditional closures, while a classic beauty should have a traditional cork closure and classic label. And, your tasting-room and events should speak to the persona of the brand. All of these combine to make a brand “stick.” If one of them is inconsistent the consumer is turned off and confused.
Your brand is key to repeat customers. A good brand will always be at the tip of the consumers tongue and instead of googling “black cherry, hint of tobacco, great night out with lover” to find your wine, your consumer will be able to google your brand.