Expanding Company, Expanding Issues
People keep asking for your product, distributors are romancing you, telling you that there is a ready market for your beer in some far off territory. You begin to think that maybe you can be a regional or even a national player. What does that mean from a capital standpoint? Do you have the stomach to increase the bank loan by THAT much? How many people do you need to hire? How does that change the company culture?
Sales Issues
You can’t be everywhere all the time. That means that you have to start tracking where the product is and how it is doing. You also have to add a sales force. That means that suddenly you may have employees in a different state. How do you understand what they are doing and how your accounts are doing? I have never seen a manufacturer self-distribute outside of their state. That brings out a whole host of issues. Now you are no longer touching your end-customer. How does that affect the brand? You are starting to enter new markets and are now subject to new taxes. Multi-state taxation is a tricky prospect because each state and taxing entity has different ways of doing things. Some transactions that are tax-free in one place are taxable in another.
- Sales Plan - We will assist in drafting a sales plan. Is the goal to become a regional player, a national player? That sales plan will include territory discussions as well as data discussions. Sales decisions are ultimately driven by data. Therefore, it is imperative to setup sales data collection and analysis.
- CRM - Monitoring sales people means utilizing some sort of CRM (customer relationship management). That way you can track the visits to end-user customers and survey placements in each location.
- VIP (Vermont Information Processing - Selling via distribution cuts the manufacturer off from valuable retail data. A VIP subscription will bring that information to your finger tips.
- Forecasting - many decisions are based upon a sales plan. Establishing a forecast is critical to long-term success.
HR
If you open a taproom (tasting room west of the Mississippi), your number of employees are bound to climb. With more employees comes more complexity. Once you start flirting with 50 employees, your company will be faced with complying with a whole host of new laws and regulations. There are some simple things that you can and should be doing to setup a good HR infrastructure. We’ve setup HR departments and know what is needed at what time.
- What is the FTE(full-time equivalent) forecast? Are you going to go over 50 employees(you will be surprised how quickly the tasting room employment adds up)? Now the planning must begin to handle the transition.
- Benefits. Now is the time to do a hard look at our philosophy regarding our employees. What kind of company are we? Do we want our employees to remain with us? Who is our competition for benefits and employees? Most companies at this stage begin to offer a more complete benefits package. Is it time to open a 401k? Perhaps offer vision and dental? How do we want to weather the coming increases in healthcare costs? Is the monthly allocation of beer to employees a real benefit? What about merchandise/food/beer gift cards?
- HRIS (Human Resources Information System). At some point it makes sense to invest in an HR information system. That is a fancy word for cool connected databases and nice employee web login.
Do You Need an Audit?
Expansion financing typically leads an owner to ask me this question. As the company increases debt on the books, the bank will typically want to have some assurance that the financial statements will stand up to an auditor's inspection. Don't panic. You will see the need for an audit two or three years before an public accountant knocks on your door. That being said, there are things that need to be looked at and addressed as you grow from you preparing the financials to a compilation to a review and finally to an audit.
- What do the stakeholders want? With growth come additional stakeholders. As they invest in your company, they will want increasing assurance that the books are records are correct.
- Setting up the books and records for review or audit. Making changes to the accounting system before an auditor knocks on your door will eliminate a ton of stress. We have managed craft brewing audits and know what they are looking for.
- Policies and Procedures. If you have not documented your policies and procedures, now is the time.
Logistics
You probably have inventory in several buildings. What is the best way to ship product? What is the best way to allocate scarce product? Organizing a company to handle the complexity of a multiple location business is very important. If your inventory gets out balance, the whole system is untrustworthy.
- Inventory. One of the side effects of growth is a steady growth of inventory complexity (both counts and dollars). The cost of mistakes also grow. If you have not done so already, create an inventory czar and make someone responsible for mistakes.
- Multiple Location Management. Another side effect of growth is that you will grow out of your space. Most companies then expand into new spaces. Keeping inventory straight across more that one location takes a special skill.
- Warehouse Efficiency Matters See #1. With the growth of sales, the warehouse must handle more trucks dropping off and picking up. How do you know that each transaction is correctly documented? We have extensive experience in setting up warehouses.
- Purchasing Professionals. At some point, every small decision begins to have bigger and bigger consequences. Believe it or not, there are people who spend their lives looking for ways to purchase more effectively.
MRP (Materials Resource Planning)
As the company grows, forecasting what you need and when you need it becomes a bigger and bigger issue. What if there was a system that could tell you exactly when you need to order everything? Such a system exists. Larger software systems have a module called an MRP module. Using your own company’s data, it can forecast everything including the need for purchase orders and how to package your product.
- The materials forecast. Becomes more and more important and also more and more complex. If you have not implemented an MRP system, now is the time.
- Use MRP everywhere. If you have gone to the trouble of adding all of the inputs (so the computer can go its work), then use it as a guide for each materials decision. Whether you are deciding when to release hops or contract for grain or move product, the system can help you make the right decisions.
Coordinated Forecasting
The end of the story is to tie all of the forecasting together for a understanding of the future. You have effectively created a reality that you believe to be true. Then with proper management, you can see whenever the actuals match to the forecast. All of a sudden you have a warning signal and can adjust before your competition has time to react. In this case, time really equals money. This is the secret to becoming a big player in any market.
Long-range Planning
The final step in our journey is to understand where you want to stop. Is there a good stopping place for the company? How do you transition out of the company when the time comes? It is very important to spend time and effort on this topic. Companies live forever. You do not.
