Brad Post:
When most people think of working in a winery they probably conjure images of the winemaker, the tasting room attendant, or someone out in the vineyard tending the vines. And for large winery operations it's probably a valid conceptualization, however, for most of us in the wine business, those of us in a small-to-mid sized winery, we wear many hats.
In 2005 I began playing around with making wine and shortly thereafter enrolled in an enology (wine science) program. By 2008 my interests took me to a local winery where, until June, I volunteered to learn winery operations and gained a great deal of knowledge. With my shiny new wine making credentials in hand and my college teaching baggage behind me, I sought full time employment.
The wine gods must have been smiling on me because, in short order, I found myself up to my neck in a job, whose making was my own. You see in these parts of the country it isn't often a guy can find full time employment in a winery, frankly because most operations are small family-run enterprises, but I was lucky.
Understanding wine from the perspective of a winemaker, and as a vocal advocate for a regional wine industry, was a bonus as I began my new endeavor. As the External Relations Manager, a fancy new title that captures everything from public and social media relations, writing and editing, to my main focus - strengthening and building a wholesale program, I wear many hats.
Some days I visit potential wholesale/retail accounts, other days I deliver wines, many days are filled with scheduling my volunteer wine ambassadors monthly wine tastings. There are days when I work behind the tasting room bar serving guests, while other times I shoot a short video and post on YouTube, but all times I am thrilled to be part of a growing local wine industry.
I'd like to think that I am somehow special in this way but I know I am not. I meet many colleagues who wear the same hats, perhaps in different ways, but we are all trying hard to do it right.
The days become weeks and weeks blend together too quickly. The Summer events are now the snapshots I visit on my Facebook photo album, and our harvest, which began in late August finally reached its zenith last week with the delivered Cabernet, Merlot and Zinfandel. I rode shotgun during the fermentation while the winemaker took a week-long vacation. Another hat. Working in the cellar doing Punch Downs and Pump-Over operations was enjoyable and brought me back to my wine making roots. I've missed that.
Can't help but wonder what's in store as the next year approaches and what style of hat I'll be wearing.
Cheers, my wine friends!
~Brad
Showing posts with label wine business. Show all posts
Showing posts with label wine business. Show all posts
Sunday, November 27, 2011
Saturday, October 9, 2010
Two Easy-to-Use Financial Analysis Tools for Mid-West Wineries
Terry post:
Over several glasses of Traminette the other evening my brother and I discussed the decision-making process that is used by winemakers: What grape to plant? Should I buy more hardware? Do I host social events in the vineyard?
That conversation got me to thinking about the low-cost tools which are readily available to assist the winemaker in making business decision.
Two powerful tools are Net Present Value (NPV) analysis and Return on Investment (ROI). Both are quite simple to create and evaluate but don't let their relative simplicity stop you from using them.
Net Present Value is a good tool when you need make one choice from a series of options. Let's compare a situation where you have three options: Option 1 provides for a unifo
rm series of increased profits. Option 2 provides for a large immediate profit followed by no additional profits and Option 3 provides for no profits in the near term with a large profit in the out-years.
rm series of increased profits. Option 2 provides for a large immediate profit followed by no additional profits and Option 3 provides for no profits in the near term with a large profit in the out-years.Net Present Value does not simply add up the values in the cell - it discounts the value of future cash flows by a user-defined discount rate. (Note: I always use 4.25% in any NPV analysis as this rate is a historical average from 1929 to the present.)
Using the NPV workbook function in MS Excel (=NPV(Interest Rate, Value1, Value2, Valuen)) you are able to evaluate the PRESENT VALUE of all three cash flow streams. In this case, Option 1 turns out to be the most profitable choice among the three choices. Option 3 is the least advantageous as its payout is deferred the longest and the impact of the discount is the greatest.
Return on Investment is a way to calculate the profitability of an investment. In order to calculate the ROI you need two pieces of information: 1) Total Return, and 2) Cost of Investment. Let's use the numbers in the NPV calculation and add the following information: the cost of investment for all three choices was $450.
The ROI calculation is as follows: ROI = ((Total Return - Cost of Investment)/ Cost of Investment).
The total return for Option 1 is $552.75 and the cost of investment is $450. Working through the equation we have ROI = (($552.75 - $450)/$450) or 22%. For Option 2 it is ROI = (($525.68-$450)/$450) or 16%. For Option 3 ROI = (($448.60-$450)/$450) or -.03%.
In this example Options 1 and 2 provide a positive rate of return with the ROI with Option 1 having the best return over the 5 year period. Choose Option 1.
Bottom line: Both NPV and ROI provide powerful insights into business decisions with a few simple steps.
~ Terry
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