Standing on a solid financial situation is a goal for many breweries, but it can often seem elusive, given all the RISJ that can come from running a small business. However there are small steps breweries can take – at any time – to strengthen a financial situation and build towards a better tomorrow and into retirement.
Michael Faircloth has nearly 2- years of financial industry experience “serving craft brewery business owners and their team members who want the clarity and confidence that sound financial planning and retirement planning can bring.”
According to his official bio, before founding Brewprint Advisors, he was vice president, senior financial advisor and senior portfolio manager at Merrill Lynch and a financial advisor at Citicorp Investment Services and Citigroup Global Markets; and a financial advisor at Morgan Stanley.
He joined the California Craft Brewers Association (CCBA) years ago and spent time listening to the needs of brewers and working to offer practical solutions.
Faircloth spoke with All About Beer editor and ProBrewer contributor John Holl about ways to improve your financial situation.
John Holl: First off, what should brewers be thinking about when it comes to their long-term financial situation and goals?
Michael Faircloth: The real simple answer that is, a lot of times they don’t think about it at all. It tends to be so much about just trying to get through the next quarter or the next project without really putting a lot of thought, I believe, into how does that fit into any type of overall long-term purpose. The only time I really see a business owner, especially in the craft beer space, it seems like really kind of try to put together anything from a planning standpoint, it’s usually just to try and get another round of funding.
If you’re starting a business you’re doing it because you love the business, hopefully, especially in our space, if you don’t, if you don’t love craft beer, you’re not going to be in business very long.
[When I joined the CCBA] the thing that stuck out the most was that at that time, say, 98% of breweries didn’t have any type of just basic retirement planning for the owners, let alone the employees. And from a planning background, that was a panic for me.
You have no plan at all for what your future looks like, other than just trying to get through the next quarter, the next cycle, the next hop contract, whatever maybe it is. And so that’s how I got in this space. And I worked with the CCBA to create an aggregate retirement program that any size brewery could join at a discounted rate.
And I’m not going to get too far into that. I don’t want this to seem like an advertisement, but you know, so that’s that’s how I got into the space and started connecting with more and more breweries.
The thing that still remained that most owners were just looking at getting through the process of either getting the brewery built or getting the next equipment funded, that type of thing, and not much beyond that and that, that I think is a mistake. I think that whenever you’re approaching anything, especially from that scale that is so capital driven, you have to think, “Okay, how does this also fit into my life?”
Because now it’s become your life.
John Holl: Is it as simple as asking that question some point early on? To just make that a line item in your in your business plan. Is that oversimplifying it?
Michael Faircloth: I think that there’s some true to that. Sometimes we overcomplicate things, right? But if you make it just part of your regular process, your regular review, looking at the long-term I think that you’re going to also probably assess each step along the way, that much better.
John Holl: What about for current brewers, ones who have been in this for five years or 10 years. Is it ever too late get started?
Michael Faircloth: Absolutely not. I’ve had more conversations because of the current atmosphere of the brewing space, because some people are wanting to assess what they might be doing wrong, or could be better at, or asking if they can even keep going, or if a business model should be changed.
It’s never too never too late, if you will, to take a good look at what this means for the ongoing, existence of your company and, or your brewery and, and whether or not you want it to be long term yours even, right? In the craft beer space, sometimes we shy away from the fact that at some point, maybe there’s going to have to be a succession plan, but that’s a realistic thing to consider as well.
John Holl: I’m glad you brought up succession plans. That always seems so far away but it strikes me as something that should be legally and financially squared away even before somebody opens the doors.
Michael Faircloth: Absolutely true. And it’s one of those things that I can almost guarantee you, if you went around and talk to some of the existing breweries that you have known and know, the people in them, you’d be surprised how many of those existing, longer-term breweries still don’t have something correctly put in place.
John Holl: So as far as long term planning go, three years out, five years out what’s a realistic long term financial goal that you encourage folks to be thinking about?
Michael Faircloth: I don’t always put it in terms of years. I do think that you have to drill down into quarterly, and then build off that. Try and get an idea of what the seasonality of your particular company is going to look like, so that you can start actual tracking numbers and how they do at different times, et cetera.
Then I like looking at a one year number. I think you always must have a one year out, just because that keeps you on track with where you’re trying to be, and that also allows you the flexibility to reorient yourself. I like to use an analogy for planning, that it’s a lot like trying to sail across Atlantic back before we had GPS. You have an idea where you want to go, and so you hop into your ship, and you the wind takes you off, and you look at the stars, and you think you’re on the right path. One week later, you could have a storm, whatever the case may be, and you’re off path, right?
So how often are you reorienting yourself that should be every six months to a year to kind of drill down to that level.
Then I think that you have a five-year goal. What do you want to see in five years. There’s nothing wrong with having a three-year goal as well. I don’t know if it’s as necessary, but then I always think that you must have an end goal as well.
People don’t like to think about that, but you must consider that in the overall way that you’re building things out. Otherwise you miss things, I think early on, that make that whole process work better and probably make you more successful.
If you’re planning like it might just blow up anyway. Are you just operating like that? Are you going to be as careful? Are you going to be as prudent? But if you’re always planning for the worst case, which sounds horrible, you’re probably going to be pretty good off.
John Holl: When it comes to planning out a financial future, people can still start off small, right? It doesn’t need to be all or nothing.
Michael Faircloth: You can start doing some yourself. If you track down somebody like me who can help you out with some of this, they should have a really simple process that they can show you as far as what they have available to help you out. You don’t have to start off big. There’s usually levels of service, or levels of ways that you can approach it.
We’re at an influx in the economy, and we are thinking about how that affects the beer industry. It’s kind of the ongoing thing where it still affects us, but there’s some immunity, because people will still drink, even when they are running out of money. But it’s important to not stick your head in the sand. This is the time to look around and to see what you need to know.