Small Brewery Finance

A Certified Public Accountant, Maria Pearman founded Radix Accounting in 2012 to provide accounting expertise and a deep operational knowledge to the alcohol beverage industry. Pearman has also taught for CPA review courses and within beer business programs at Portland State University and the University of Vermont. She resides in Portland, OR.

• TABLE OF CONTENTSForeword Acknowledgments Preface 1. From Dream to Reality: A Craft Beer Business Journey 2. Introduction to Financial Management Basic Financial Statement Introduction Accounting: General Structure of Transactions Accrual Accounting versus Cash Basis AccountingChart of AccountsInternal Controls3. Balance Sheet and Income Statement Balance Sheet AssetsInventoryFixed Assets (Capital Expenses)LiabilitiesEquityKey Ratios: Balance Sheet Current RatioQuick RatioAccounts Receivable DaysAccounts Payable DaysInventory TurnoverIndustry Benchmarks for Key RatiosIncome Statement (Profit and Loss) Cost of Goods Sold (COGS)Accounting for Inventory and COGSGross ProfitOperating ExpensesInterest ExpenseDepreciationNet Income versus EBITDAKey Ratios: Income Statement Gross ProfitEBITDANet Income4. Cash is King! Cash Reserves Statement of Cash Flows Format of Statement of Cash FlowsSteps to Calculate the Statement of Cash FlowCash Flow Forecasting 5. Interpreting Financial Statements Chart of Accounts Every Statement Tells a Story What the Balance Sheet ShowsWhat the Income Statement ShowsGenerating Relevant ReportsMonthly Financial Review Interpreting Financial Statements Period-over-Period GrowthCOGSGross Profit %Payroll %NOI %EXERCISE 6. Finding Breakeven and Costing Beer Breakeven Finding the Accurate Cost of Beer Brewpubs and TaproomsLaborTaproom COGSTools for Costing Planning and Start-Up PhaseAdolescenceMaturity7. Options for Growth Self-Distribution versus Third-Party Distribution Retail versus Wholesale 8. Operating Budget Types of Budgets Sales BudgetProduction BudgetAdministrative BudgetsOther Budgeting ApproachesConclusion 9. Sources of CapitalDebt versus Equity Who Should Invest Four Must-Have Documents When Working with Investors Term SheetPro Forma FinancialsOperating AgreementSubscription AgreementHow to Manage Investor Expectations Annual Investor MeetingsQuarterly UpdatesInvestor DistributionsHow to Prepare Pro Forma Financial Reports EXERCISE 10. Business Life Cycle Start-Up Early Stage Adolescence Maturity Exit Employee Stock Ownership Plan (ESOP) Appendix A. What to Include in Your Business Plan Executive Summary Company Description Products and Services Market Analysis Strategy and Implementation Organization and Management Financial Plan and Projections Conclusion Appendix B. Sample Chart of Accounts Brewery Brewery with Restaurant Appendix C. Sample Full Budget SpreadsheetAppendix D. Ten-Week Budget Calendar Appendix E. Sample Term Sheet for XYZ Brewing Company, LLC Appendix F. Choice of Entity/Significant Tax and Other Considerations Glossary Index