2017 Oregon Wine Symposium - Scion Advisors 2017 Oregon Wine Symposium 2 Approach...

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Transcript of 2017 Oregon Wine Symposium - Scion Advisors 2017 Oregon Wine Symposium 2 Approach...

  • 1

    2017 Oregon Wine Symposium

  • 2

    Approach – 90 minutes DEB – SETTING THE STAGE KEITH - WHAT DRIVES VALUE IN DIFFERENT BUSINESS MODELS? DEB - KEY TIPPING POINTS: WHAT HAPPENS WHEN I GROW? PANEL

  • 3

    Who is in the audience? 1.  Who is over 5k cases? 2.  Who is going through transition? 3.  How many would like to become more

    profitable?

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    Sobering but provocative headlines ‘About 28 percent of Oregon wine producers said they were in poor financial health, compared to 16 percent for the industry overall.’ MATEUSZ PERKOWSKI, CAPITAL PRESS

    ‘A quarter of winemakers say the financial health of their operations is poor, and many are considering exiting the business. More than 40 percent of Oregon winery owners say they may sell in the next five years.’ PETE DANKO, PORTLAND BUSINESS JOURNAL.

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    WHAT is keeping you up at night? 1.  Understanding how to drive cash flow. 2.  Concerned about profitability. 3.  Understanding whether we are spending enough. 4.  Establishing realistic sales goals. 5.  Do we have the right people in place?

    WHAT does a healthy business look like?

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    3 KEYS to success 1.  Proactively drive revenues and contribution

    margins – with 3 levers: ü Cases Produced/Sold + Price + Product/Channel Mix

    2.  Optimize metrics before trying to grow. 3.  Develop a detailed and well capitalized action

    plan, before growing.

    “IF you understand these keys, you can move from breakeven to a sustainable business at any size.”

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    “IT’S NOT WHAT YOU MAKE, IT’S WHAT YOU KEEP”

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    What drives value in different business models? Keith Meyers, Perkins & Co

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    Shift to running your business (rather than having your business run you)

    1.  Understand the dynamics of 3 scenarios. 2.  Case premise:

    ü  Applying best practices ü  ‘What a winery of a certain size and composition can

    achieve when they are driving sustainable results.’ 3.  ‘Doing it with purpose.’

    ü  OK to have cash flow or profitability constraints IF you understand key cost drivers in different models

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    5,000 Cases

    Metrics Average Revenues/cs 234$ Breakeven cases 4,221 Average COGS/cs 106$ Revenues 1,171,350$ Average GP/cs 129$ Gross Profit 643,017 Gross Margin 55% Operating Profit 100,179 Operating Margin 9% Net Cash Flow 89,741$

    Return on Equity 11.2% Return on Assets 6.9%

    Grape Costs 19%

    Production 26%

    Selling Costs 25%

    Overhead 17%

    Owner Comp 4%

    Interest 0%

    Taxes 1%

    Profits 8%

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    5,000 Cases - - Maximized

    Metrics Average Revenues/cs 260$ Breakeven cases 3,721 Average COGS/cs 106$ Revenues 1,301,500$ Average GP/cs 155$ Gross Profit 773,167 Gross Margin 59% Operating Profit 197,792 Operating Margin 15% Net Cash Flow 153,190$

    Return on Equity 19.1% Return on Assets 11.8%

    Grape Costs 18%

    Production 23%

    Selling Costs 25%

    Overhead 15%

    Owner Comp 4%

    Interest 0%

    Taxes 3%

    Profits 12%

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    10,000 Cases

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    20,000 Cases

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    Summary: 3 scenarios

    5k Baseline 5K Max. 10k 20k Revenues 1,171,350$ 1,301,500$ 2,429,467$ 4,511,867$ Gross Profit 643,017$ 773,167$ 1,372,800$ 2,398,533$ Operating Profit 100,179$ 197,792$ 388,317$ 655,923$ Net Cash Flow 89,741$ 153,190$ 285,294$ 475,600$ Channel mix: Case Volume 5,000 5,000 10,000 20,000 Wholesale/National/FOB cases 2,500 2,500 6,000 14,000 DTC 2,500 2,500 4,000 6,000 Key Metrics Average Revenues/cs 234$ 260$ 243$ 226$ Average COGS/cs 106$ 106$ 106$ 106$ Average GP/cs 129$ 155$ 137$ 120$ Gross Margin as % of sales 55% 59% 57% 53% Operating Margin as % of sales 9% 15% 16% 15% Return on Equity 11.2% 19.1% 19.7% 18.3%

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    Key Tipping points: what happens when I grow? Deborah Steinthal, Scion Advisors

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    16

    I.  Entrepreneurial – ‘working IN your business.’

    II.  Formalization – ‘working ON your business.’

    III.  Maturity – ‘developing a team of leaders.’

    Tipping points…

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    Cousin partners Sibling partners Controlling Owner

    Entrepreneurial Expansion/ Formalization Maturity O wn

    er sh

    ip S

    ta ge

    Business Stage

    WHAT STAGE ARE YOU IN?

    82%

    11%

    2%

    Cristom Adelsheim

    PONZI

    Bethel Heights

    Brittan Vineyards

    Bergstrom

    Sokol Blosser

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    Key decisions: 5,000 growing to 10,000 cases Strategic

    1.  Plan with 5-year horizon 2.  Sales plans driving

    consistent revenues 3.  Timing of key personnel? 4.  Capital expansion trade

    offs + timing!

    Operational

    1.  Banking relationships 2.  Simple cost accounting

    and COGS reporting process

    3.  Simple sales reporting

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    Key decisions: 10,000 growing to 20,000 cases Strategic

    1.  Cash flow and higher returns

    2.  Strong brand and customer experience

    3.  Optimized investments to build scalability

    Operational

    1.  COGS and financial reporting

    2.  Strong banking partnership 3.  Agility in sales 4.  Culture of accountability

    through management team

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    Take aways about growth 1.  Hire the right people and develop your own

    leadership skills. 2.  Focus brand and build a sales machine. 3.  Manage complexity at every stage. 4.  Embrace analytics before making key decisions.

    The more you have at risk, the more costly the mistakes!

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    Beware of growing pains ü  Increasing production capacity ü  Expanding into new markets ü  Cash drain from inventory build-up

    NEED FOR CAPITAL!

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    Q&A - Panel: 60 minutes

    3 Panelists 1.  Deb Steinthal, Managing Director, Scion Advisors 2.  Erik McLaughlin, Director, Exvere Inc. 3.  Gary Mortenson, President, Stoller Family Estates

    How to build sustainability at each stage? Moderator: Keith Meyers, Perkins & Co.

  • 23

    Questions?

  • 24

    Vision Incentives Skills Resources Action Plan CHANGE

    Incentives Skills Resources Action Plan Confusion

    Vision Incentives Resources Action Plan Anxiety

    Vision Skills Resources Action Plan Resistance

    Vision Incentives Skills Action Plan Frustration

    Vision Incentives Skills Resources False Starts

    Managing growth: What is the organization feeling?

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    Approach – 70 minutes DEB – SETTING THE STAGE

    KEITH - HOW DO YOU KNOW YOU HAVE A HEALTHY BUSINESS?

    DEB - HOW TO ASSESS THE HEALTH OF YOUR BUSINESS?

    Q&A

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    Who is in the audience? 1.  Who is over 5k cases? 2.  Who is going through transition? 3.  How many would like to become more

    profitable?

  • 5

    Sobering but provocative headlines

    About 28 percent of Oregon wine producers said they were in poor financial health, compared to 16 percent for the industry overall (surveyed by Silicon Valley Bank, a wine industry lender), BY MATEUSZ PERKOWSKI, CAPITAL PRESS

    A quarter of winemakers say the financial health of their operations is poor, and many are considering exiting the business. More than 40 percent of Oregon winery owners say they may sell in the next five years. By Pete Danko, Portland Business Journal.

  • 6

    WHAT is keeping you up at night? 1.  Understanding how to drive cash flow 2.  Concerned about profitability 3.  Understanding whether we are spending enough 4.  Establishing realistic sales goals 5.  Do we have the right people in place?

    OWA 2017 Symposium

    How do I know I am healthy?

    2017 Oregon Wine Symposium 6

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    “You can’t measure what you have until you know what you want!”

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    Core concepts •  What is your goal or vision? •  What will it take to sustain it? •  How to measure your progress?

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    “IT’S NOT ABOUT WHAT YOU MAKE, IT’S WHAT YOU KEEP”