{"id":1179,"date":"2018-07-03T01:50:15","date_gmt":"2018-07-03T01:50:15","guid":{"rendered":"https:\/\/craftbreweryfinance.com\/oldversion\/?p=1179"},"modified":"2022-09-15T14:24:37","modified_gmt":"2022-09-15T18:24:37","slug":"how-to-create-a-painless-operating-budget","status":"publish","type":"post","link":"https:\/\/craftbreweryfinance.com\/oldversion\/how-to-create-a-painless-operating-budget\/","title":{"rendered":"How to Create a Painless Operating Budget"},"content":{"rendered":"

\"\"\u201cA budget tells us what we cannot afford, but it doesn’t keep us from buying it.\u201d William Feather
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Do you need to create an operating budget for your brewery? Of course you do. Let’s start with a budget pep talk.<\/span><\/p>\n

I have created hundreds of budgets over my career and\u00a0I still get anxious when starting a new plan<\/strong>. It\u2019s a big job, and there is a lot of work involved. Further, there is a lot of pressure to get the budget right. People are counting on the numbers to be accurate in order to make good business decisions that impact the brewery.
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There\u2019s a lot at stake when building a budget.<\/strong><\/span><\/p>\n

A budget can feel like an overwhelming task. So many numbers. So many unknowns. So many changes that come up unexpectedly and turn the whole business upside down.\u00a0How can you be expected to predict everything that will happen<\/strong>\u00a0accurately and get it all down on paper?<\/span><\/p>\n

Short answer: You can\u2019t.<\/span><\/p>\n

A famous guy once said that plans were useless but planning was indispensable. This holds true for operating budgets. Although I believe a good plan is achievable, too.<\/span><\/p>\n

The process of planning – talking with your team and dreaming about the future of your brewery – are the fun parts of budgeting. That\u2019s why I recommend writing out the plan in words first. Don\u2019t worry about the numbers in the beginning. Just write down your goals, objectives and strategy in words. The numbers will come easy after that.<\/span><\/p>\n

Take a deep breath and read on. I believe in you and I believe you can do this. A beautiful operating budget for your brewery is within reach.<\/span><\/p>\n

Painless Budget Basics<\/span><\/strong><\/p>\n

The good news is that once you create budget, you\u2019ll have a template to use the next time around. This saves time and aggravation.\u00a0<\/span><\/p>\n

The operating budget involves five major pieces: the sales forecast, gross profit plan, operating expense plan, capital budget and debt schedule.
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You can have more pieces if you like, but these are the major building blocks. These pieces can be as simple or as complicated as you like. In most cases, I vote for simple.<\/span><\/p>\n

Below, we\u2019ll dig into each of the budget building blocks and give you some tips to get started. Use these ideas in connection with the budget templates and you\u2019ll be well on your way to creating a (painless) operating budget for your brewery.<\/span><\/p>\n

Sales Forecast<\/span><\/strong><\/p>\n

The sales forecast is simply a projection of how much beer you will sell. It should show the sales by customer, by brand and by month.<\/span><\/p>\n

If you sell through distributors, start by making a schedule of who you currently sell to (and who you plan to sell to). Include the historical sales for the past 12months, and the year over year growth for each distributor.<\/span><\/p>\n

If you plan to open new markets with new distributors, that should be included in the schedule. If you have self-distribution sales and tap room sales, include the figures for these as well.<\/span><\/p>\n

The Sales Forecast template provides a starting point for this exercise.<\/span><\/p>\n

With a sales forecast, the trend is your friend. If growth this year was 20% but you project 100% next year, make sure you know where it will be sold.<\/span><\/p>\n

Ask questions. Challenge assumptions. Build an achievable plan.<\/span><\/p>\n

Gross Profit Plan<\/span><\/strong><\/p>\n

Let\u2019s begin with some simple math:<\/span><\/p>\n