Improving Brewery Profitability with Derek Smith from Small Batch Standard

Episode Overview

We're joined by Derek Smith, a Brewery Consultant with Small Batch Standard, to discuss profitability for breweries in 2024 and beyond. Derek and his team are doing incredible work helping breweries break down their finances into specific "business units" and then analyze profitability from there. This conversation is packed with valuable insight into how that works and other trends for maximizing profits. 

Derek and Small Batch Standard are also giving you a FREE 2-page Business Unit Breakdown report. Just head to sbstandard.com/hop to take advantage. 

You can also connect with Derek on LinkedIn at linkedin.com/in/dereksmith9/ or by emailing him at derek@sbstandard.com. 

Learn more about Small Batch Standard at sbstandard.com 


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Intro/Outro Music by ComaStudio from Pixabay 

Episode Transcript

(AI-Generated, please forgive any typos)

[00:00:00] Chris-AI: Hello and welcome to the get optimized podcast. This is a show all about marketing your craft beer business growth and all those fun things. My name is Chris overlay. I am your host. And today we've got a special guest for you. I got a, one of my colleagues, I convinced him to hop on the line with me and, and chat a bit about profitability.

And a super important one for all of us, really, and everything we talk about is like the whole idea with marketing and growth is like, yeah, that really kind of means profitability, right? Like if you're not growing profitability, increasing your margins or maintaining margins as you scale, then it's kind of not good, right?

And a lot of what we talk about is like, you know, tactics to bring in new business and increase dollars with your existing customers and all those things. But. I think it's also really important to look at the finances, the books and your accounting operation. That's so much part of it as well. And by no means am I super qualified to talk about that.

So I got to bring in the pros and, uh, I'm going to give you a little bit of an intro to the person you're going to listen to, and then I will turn you over to the interview. So let's do that. So you're going to hear a conversation with myself and Derek Smith, From small batch standard. Derek is a brewery consultant over there and a whiz when it comes to this stuff.

He's been with small batch standards since 2020. And uh, if you don't know, small batch standard is a great industry resource. They've been around for quite a while. These guys are pros when it comes to accounting and bookkeeping services and thought leadership on that front. And Derek is part of that team.

And like I said, really, really great guy. Him and I have been working together and collaborating on. a few different projects over the last, I don't know, uh, several, I don't, it's the last year really we've been chatting. Um, time flies, man. But I finally got him on the podcast and say, hey, look, let's talk about some of the things that you guys are really talking about right now.

When it comes to profitability, cause I really liked that stuff. Let's chat. And what you're going to hear, part of what you're going to hear during the conversation is, is this bit that they, they, uh, talk about, about business units and pay really close attention to that. Cause that stuff is really, really neat.

And in fact, uh, small batch standard and Derek were nice enough to offer a free business unit breakdown to everybody listening to our podcast. So if you're looking at this podcast. On like one of the platforms, right? You should see a link there to this breakdown. But if you're listening and you can remember it's sbstandard.

com slash hop so sbstandard. com slash hop that will get you the free two page business unit breakdown. And I highly recommend that you do that. Again, it's a free thing, but it's super valuable to have this done in the way that small batch standard and Derek are helping breweries look at their business with these units is, is really smart.

It lines up with the way we're talking about running marketing campaigns as well. And, uh, again, it's just super valuable stuff. I highly recommend that you go. Get that downloaded. And, um, yeah, so other than that, I think it's a great interview. I think you should get a ton of value from it. I will get out of the way and get us into the conversation with Derek.

Enjoy.

All right, Derek, what's up, dude. Thank you for being here, man. 

[00:03:46] Derek: I'm pumped, Chris. 

[00:03:48] Chris-AI: I'm excited too. Uh, you know, this is going to be a fun conversation because this is a like mega important topic. And one, we've been talking about a lot with our clients. Um, and it's profitability. That's really the, I think the big theme of the conversation today.

But I know there's a lot to unpack with that. And I'm excited to talk to you cause you're a pro in this neck of the woods. And, um, maybe I'll pick your brain a little bit and try to spin off some of these ideas and, and how it works for marketing as well. But, uh, like I said, this is going to be, uh, an interesting one for sure.

[00:04:20] Derek: I love it. And that's, um, that's what we talk about all day, every day at small dash standard is profitability and the craft space and how to get there. And once you get there, how to stay there. 

[00:04:33] Chris-AI: Yeah. And that's, that's like, why, again, why I'm excited to talk to you, because like, ultimately what we do on the marketing side is like, yeah, we're, we want to drive, you Results for you and drive profitability.

But there's so much that goes on, uh, below that and above that and to the side of that, and, you know, it's not just marketing that makes you more profitable, even if you brought in more customers and, uh, put more through the pipe, if you're, if you're piping isn't very efficient, then. You know, you're, you're kind of not getting anywhere as you're running on a treadmill.

Right. And I imagine that's very frustrating and, uh, and, uh, hard to deal with for birds. I mean, I guess that's the first question I have for you is like, do you feel that there is like frustration with brewery owners that get to this point where they're like, man, you know, I'm making more dollars, you know, I'm working harder than I've ever worked, but like.

I'm still not seeing it. Uh, is that, is that something you commonly see? 

[00:05:28] Derek: We see that quite a bit and we encounter many breweries that come to us and say, we're selling every drop of beer that we can produce through our system. Our tap room is full all the time, but I still find myself transferring money on occasions from my line of credit or.

I see where I'm having to pay or I'm see where I I've got a situation where which bit bill do I pay this month and which do I wait a couple of weeks and which do I put on the credit card and these people, these brewery owners come to us and say, we just don't get it because we're selling everything we can.

What's the, what's the hole here. 

[00:06:08] Chris-AI: Yeah. What the hell? And, uh, it's especially frustrating a bit because a lot of these folks, at least that I talked to there. They're running the brewery. They're wearing multiple hats. That's long hours and, um, you know, if you're not seeing the margins at the end of the day, it's like, why did I even get into this?

And again, why I think what you do is so important because, you know, you're, you're shining the light on the things where it's like, all of a sudden this is going to be rewarding and it's going to pay off. Um, and maybe, you know, a direction we go here first is to maybe take a quick history lesson You know, things the way they looked five years ago, pre COVID, um, to now, and, and what is profitable and how breweries operate and how they make money now is a very different landscape.

And I wonder if you could speak to that and kind of give us. Like what was going on then? What's different now? It's what's it really look like, uh, for profitability now? I'll 

[00:07:03] Derek: go back even 10 years ago. So we look at it in four distinct periods in the last 10 to 15 years. And the first of those was between 2012 and 2015.

And that's the period that we talk about as the big bang in craft brewing. And this is the time. Or breweries are opening up all the time and everyone's excited about craft brewing and it's in the news and tap rooms are full and we've got line culture and brewers are really excited during this period and they're excited because they have cash in the bank and they're excited because they have bars and restaurants coming to them saying, I've got to have your stuff on tap.

I'll pay whatever to get your keg. And so what we had during that big bang period was a problem of not being able to produce enough beer. And that's kind of a fun problem to have because you get to be creative. You don't have to worry about making the next payroll and it's just a fun time. But after the big bang period, as some of that craft growth slowed, We moved into a period that we call the plateau.

And that's when, you know, you might've opened up first in town and you may have had your run of a thousand customers. Let's just say for example, and then someone else comes in and now you're splitting those thousand customers. And half, and now you only have 500 customers and then let's say two more come in and now you only have 250 customers and where you were having the bank account increase month over month and you showed profit all the time.

Now it's a little bit harder to come by. And if you are one of those that said, I can't produce enough, I need a bigger space, I need more tanks, I need better brewing equipment, I need more And you took out loans for that during this plateau period, you really started to feel the effect of all those improvements.

And so what we see, what we saw in the plateau period is a bit of an oversaturation, especially in the older markets, the ones that started craft. And what we saw is someone, someone wasn't going to make it during that period and breweries were going to close. And so we were creeping along up to the end of 2019.

Someone was gonna not make it, maybe the one with the tap room that wasn't the coolest, or maybe the one that wasn't staying up to date with beer trends. But someone was going to close and then we had all this COVID money. And so that's a period of time that we call the rescue because all this government money came in and save these breweries, allowed them to continue to operate.

But then all that money ran out. And so now we're in this period that we're calling the reckoning where we still have those problems. from 2018 2019 of oversaturation and high overhead, but there's no more government money coming. So, four kind of distinct periods and we're in a bit of a tough one right now.

[00:10:33] Chris-AI: Yeah, and you know, I'm, there's a, A brewery here in town that I saw close, um, great beer, you know, you'd go there and drink their beer and it's, it's fantastic, but, um, they even mentioned in their, in their public posts is that it's, we ran out of COVID money. And that story isn't unique. Like you said, you know, you see this in, in towns across the United States.

And, um, you know, the perspective there it's, it's interesting. It's like, yeah, we kind of got this bailout to keep us going. Post 2019 and now, uh, you guys get credit for the awesome terms, terminology for the time period. It's the reckoning. Um, do you think that, you know, the shrinkage of, If you could call it shrinkage of breweries that are out there, there comes a point where that levels out, you know, and then we start to see things change from there.

I mean, it's impossible to say when that's probably going to happen. Everybody wants to know that. So I'm not going to ask you that question, but. There's got to be a level out period at some point in the future, right? 

[00:11:35] Derek: Yeah. We think craft beer is going to be a forever thing, but we don't think it's going to be at the 2012 level.

And so I think there is going to be a right sizing or at least a better way of looking at, at their businesses to say, what is sustainable for me and how can I make this a long term endeavor. 

[00:11:58] Chris-AI: Well, you know, and sometimes do pressure, uh, creates, or I'm looking for the right words, pressure on a business or pressure on a person can generate really cool things.

And what I'm thinking of here and where I'm headed with this is that the financial pressure, the economic pressure that happens right now on the businesses that can survive. Now they're, they're forced to get into the nitty gritty with, you know, their finances, with their books, with their costs, with their execution, with their marketing.

And, uh, You know, ultimately, that could be a good thing, right? It's how you got to actually look at this stuff and, and, and fix it. Um, and you can be very, very successful. I think that's where, uh, you guys come in and I want to ask you, like, what does that look like now? You know, now that you know, you don't have like infinite demand and, you know, all this potential for supply.

What are you looking at? What are the key areas to look at to make your business profitable? 

[00:12:51] Derek: So it's really understanding, for us at least, it's understanding the profitability of each revenue stream or business unit as we call them. So craft breweries are complicated businesses because you, most breweries have a tap room and most breweries are doing some kind of distribution.

You also have production that functions somewhat as its own business. Um, we've got some e commerce going on. We've got some contract brewing going on. And so sometimes understanding how each of these things fits together and how they roll up together and How profitable you are in each of those revenue streams is kind of hazy.

[00:13:46] Chris-AI: Yeah. And I really love, you know, what you've talked about before and what your team has talked about is almost like siloing out, like you said, these units and looking at like, okay, what's your cost of goods sold for this taproom and your cost of goods sold and your marketing costs for distribution.

What's that look like for DTC and e commerce? Cause that's becoming a thing, uh, moving forward. And when you silo it out like that, you know, you can, like, it seems like a huge light is going to be shining. It's like, oh, that portion sucks. Our margins are terrible right there. What can we do to fix that? And then now you're actually on a path towards a solution rather than, I don't know what's going on.

Right. 

[00:14:27] Derek: Yeah. And we're also in an industry with kind of some, I mean, a lot of the breweries we talked to, they were hobbyists first. Whether they came from an engineering background or a business background or whatever they came from, they weren't business people first. There are the exceptions out there, but without that business backbone, that business knowledge to understand how to look at these things.

Um, the real drivers of your profitability can kind of get lost in the weeds. And you're left in a spot where you say you're pulling the wrong levers to be profitable. 

[00:15:10] Chris-AI: Yeah, I think, uh, I've run into it too. I love talking to the breeze. That's why I got into this industry. Cause the people that run it are amazing people.

And, uh, so many of them are, are scientists and engineers. And like you said, they didn't go to business school. Um, so when you start talking about things like. Cogs and cost efficiencies and pricing. And, uh, you know, pricing is one that is, is really funny because in business school, it's like, yeah, you know, take the emotion out of it, increase prices.

If you, as you need. And I want to ask you, like, I think there's this hesitation to deal with prices, like, well, you know, I've got to be competitive, you Prices is like this thing, I'm being a nice guy. I don't want my customers to feel bad, but it's like, should you pull yourself out of it? What is your thought on prices?

Should you increase prices? 

[00:15:53] Derek: So the way that we look at things is at least on the taproom side, you were selling an experience and the craft beer drinker isn't particularly. Price sensitive, as long as that experience is right. So if you've got a great place for people to come hang out, Then you have a lot more pricing pressure that you can apply.

So you don't want to be 25 percent above everyone in town, but you have a lot more pricing flexibility because it's so experiential in the tap room. 

[00:16:28] Chris-AI: That's a great point. And I think an extreme example, uh, Is Las Vegas. I always think about this. Uh, you think about experiences and you go to loss, you go to a club in Las Vegas and you're buying a bottle of like absolute vodka, which is not an expensive body.

You can buy that for like 20 bucks or whatever at the grocery store. That same bottle costs like a thousand dollars at the club or more because you're not really paying for the alcohol. You're paying for the ambiance and the music and all this stuff that's going on around you. Um, now I'm saying charge 1, 000 for a craft beer, but I think this is an extreme example, but I think you're saying the same thing is like, look, you are providing an experience that has to be quantitated into price.

And, um, for those that are looking at, okay, cool. I need to raise price. Like, is there like a. A way to look at how you increase price or how do you factor these things into like, you know, should I just raise by a quarter or what am I looking at for benchmarks? I wanted to have a quick, a couple of tips on, on building a formula for, for pricing.

[00:17:28] Derek: Yeah, our benchmark for taproom pricing is to make greater than 1, 300 per barrel. And then on the cost side of it, your cost of that beer going through your tap room should be between 5 and 11%. But for most, that 1, 300 per barrel isn't that hard to achieve, and we see some up to 1, 700, 1, 800 per barrel.

[00:17:53] Chris-AI: Excellent. And if you kind of work this back towards your, your unit, uh, idea here where you've got the tap room distribution contract brewing. Excellent. Do you apply it that way too? So it's saying, look, our prices in each of these units have to be, uh, adjusted to meet this benchmark. 

[00:18:12] Derek: Yeah. And on the distribution side, sometimes you have a lot less control over that.

Um, sometimes you're at the mercy of. whatever distribution partner you're with, but in a distribution model, we still expect breweries to, to achieve greater than 300 per barrel. If they're going to be, if they're going to even have a chance of success in that business unit. 

[00:18:39] Chris-AI: Yeah. What is your thoughts on the trend of like, you know, leaning more tap room versus distribution?

Uh, I've had several conversations over the last couple of months with, with folks facing this issue and saying, well, do we just double in on the double down on the tap room and kick distribution of the curbs? It's not as well, or, or do we double down over there? Like, what's, what's really the answer? I'm sure it's very situational, but I'm curious of, of your opinion overall, like on this, this teeter totter of distribution versus tap room lately.

[00:19:10] Derek: You have a lot more profitability potential in the tap room. We see tap rooms making somewhere around 18%. operating income compared to, um, revenue. So that means if I sell a hundred dollars through my tap room, I'll keep 18. Whereas in distribution, what we see is 5%. So if I sell a hundred dollars through distribution, 5 of that goes to my bank account.

If I'm doing it right. But that's kind of where you max out on distribution. And so you do have a lot more leeway in the tap room and a lot more opportunity to be profitable than a distribution. 

[00:19:56] Chris-AI: And as you mentioned before, part of that is that the price sensitivity in the tap room is, is a totally different game than when I'm, you know, at the store and I'm like, Oh, I want to buy like 12 beers.

What am I going to spend my money on? And. Uh, the difference between beer selection on the shelf is, is way different in that environment. And the, um, the buyer behavior and the price sensitivity there is way different as well versus the taproom, right? 

[00:20:22] Derek: Yeah. And what we've seen is you have a lot more ability to influence the taproom than you might in distribution.

If you are, especially if you're in a state where you have to go through a distributor, Then you're sometimes at their mercy. And if they've got a book of 50 different IPAs, you're going to kind of fall through the cracks unless you're in top 5 percent of their portfolio. That's really the only time that you're getting that distributor love.

And so the tap room, you have a lot more opportunity to pull some levers and say, Well, I can actually do something to bring more people in, and I can have more influence on that pricing when they're here, and I can run programming. I can team up with someone like get optimized to drive that traffic to my tap room.

And you don't have as much control when you're working in distribution. 

[00:21:21] Chris-AI: Yeah. Um, you know, similar, uh, similar conversations, similar vibes on our part. We look at the marketing programs that we run and, and try to figure out, you know, what the true ROI potential is with those, and, um, there's, there's different ceilings for different stuff that you do, and, um, that really breaks down in the taproom too.

It's like, you could have a small event or a big event or. Uh, you know, something that's really going to sell a ton of seats or a ton of beer. And that is where your marketing dollars go. And if that's in the taproom where the margins are better than, okay, we have more room here for marketing spend for marketing companies come in and design as collateral on the flip side.

The margins are less with distribution, but the ceiling to me seems higher. And I think that's where the, the kind of grass is always greener thought comes from. It's like, well, you know, Yeah, Mars is a smaller, but I can sell way more potentially and, and hit volume. And, uh, you know, maybe that's a little bit of hangover from the previous.

section of time frame here with the breweries, because it's just, it seems like a really tough game, uh, distribution wise, unless you're really already established and set and you've got shelf space and relationships and all that, but, uh, I don't know exactly where I'm going with this other than like, you know, trying to figure out your, your game plan based on where your ROI potential is ultimately.

[00:22:42] Derek: Yeah. And I would say that, I mean, it's kind of a trap that a lot of brewery owners fall into is that. I have this potential to sell so much more in this market without really thinking about the margin consequences. My, my beer going through the tap room is at a 90 percent margin. My beer going through distribution is somewhere around 60%.

And so I have to sell a lot more beer through distribution than the tap room to make that those numbers make sense. And a lot of breweries that we've worked with, they can't, they just can't sell their way out of this issue, whether by capacity constraints or other things like their, their markets potential, they can't sell their way out.

And so you really have to understand. Margins and pricing and cost of goods sold and how they all relate. 

[00:23:41] Chris-AI: Yeah, it's real tough. Um, especially on the distribution side to, to influence customer customer behavior at that level. Um, you know, and you look at the people that do a really good job of it and they're mega corporations like Kellogg, Coca Cola, these guys are experts at influencing behavior and getting their stuff off the shelves and it costs.

Billions of dollars to really make that happen and make a celebrities and all these things. And not necessarily the case for every product. It's different. Um, but you know, if you're going to, if you're going to try to influence someone to buy more beer off shelves, it's a different, it's a different game.

It's about awareness and repetition and, and long standing expenses in order to reap that kind of, uh, um, awareness in the marketplace. If you can't sustain that, then it's, it's, uh, It's it's ultimately a losing game for you. I guess another way to maybe turn this on its head too, is since the margins are lower there, and maybe this applies to the taproom too, is, is there an opportunity to change the beer and.

What I mean by that is there are certain beers that are more expensive to make like a super hoppy IPA is an expensive beer, but one of these loggers that uses less ingredients, cheaper ingredients. Is that like something that breweries should take into account here and consider in making a cheaper product?

Or what do you think? 

[00:25:01] Derek: We make our clients aware of their margin for every beer that they produce, if that's something valuable to them. But when you start talking, um, let's say I'm getting that my costs for a light logger are super cheap, then I still don't have, I mean, I still can't produce it at a cost where I can really compete with some of the bigger guys.

And if I, I mean, even, even something like Montucky, like if I'm going up against that, I still can't bring my price point down to the point that they can, where I really stand out there. 

[00:25:42] Chris-AI: Yeah. 

[00:25:43] Derek: Additionally, like people are still wanting craft IPAs. That's, that's kind of the trend that we're seeing. And so there's only so much you can do in the lager space in that grocery store or liquor store capacity.

[00:26:01] Chris-AI: That's a great point. And I'm, I asked, cause I was curious, you know, I go and I'm, I'm a beer consumer and I'm like, well, you know, man, I'd really love personally. I'm like, I like these, this craft lager movement, you know, maybe it's because I've been drinking beer for so long. I'm like, I'm over the super hazy, dank, crazy stuff.

I'm occasionally sure, but. You know, at the point you made, is it, can you still, even if you could make it, you know, cheaper for this batch, could you produce it at a volume that makes the truly makes the difference. And then you've got all the other shelf distribution factors that come into play with it.

Right. Um, excellent, excellent point. It's always caveats, man. And it's like, well, yeah, you know, dream scenario. Sure. But let's actually break this down and look at it. Again, this is where you guys come into. Coming to play in such a great way. Um, so thinking about this, like the, my next steps here is someone's listening to this and they're like, man, this makes a lot of sense, but like, where do I even start with this stuff?

I mean, if I'm trying to make some changes and make steps forward, what am I, what should I open up? What should I review first? Um, how should I go about breaking this down? 

[00:27:09] Derek: Yeah. So the first thing we want these operators to know is. Their profitability by each of those revenue streams. And in order to do that, our method for that is we take a profit and loss from our accounting software and we download it in Excel.

Then we figure out how many barrels were sold through the taproom and how many were sold through distribution. and find the percentage for that. And then we start going down line by line on the profit and loss and saying all of these, all of this income is for the tap room. We're going to put it in this bucket.

All of this income is for distribution. It's in its distribution bucket. Then any costs that we can directly allocate to those buckets, we're going to do that. The harder part is some of those shared costs. So if I look at production labor, Well, how do I split that between my tap room and distro? The way that we do it is we take that percentage of barrels.

So let's say I've got 10, 000 in production wages. And 25 percent of my barrels went to the tap room. I'm going to give the tap room 2, 500 of that 10, 000 in production labor. Whereas there are some other expenses that we separate more on a percentage of income basis. So if we find that a cost or expense is more tied to the percentage of income in each of those business units.

We'll break it down that way. And so we work down the profit and loss and give each bucket, its share of the expenses until we come up with a bottom line. And that's where we can say, okay, well, actually I was showing a loss this month, but if I look at my tap room as a standalone business, it's very profitable.

Whereas I'm looking at my distribution business. And Hey, there's the problem. Here's where I lost my money and it was somewhat propped up by my tap room. 

[00:29:21] Chris-AI: No, I think that's brilliant. Um, I just have so many ideas because it's like now with that report, you can take action much clearer, you can literally see and say, well, what is causing so much costs or is there more revenue potential that I'm untapped here truly, and be honest about it.

Right. You know, non dream scenario, take the dream scenario hat off. Let's be real. Well, how can I generate that revenue? Um, is it filling more people in my taproom? Is it selling, you know, and this is where we come into marketing. You're like, well, let's do, let's sell more to go beer out of the taproom.

Let's get that ticket dollar per ticket revenue amount up by doing XYZ by attacking our merge to go whatever. And that, or is it, Hey, we need to sell more distribution. Let's do some activations. Let's get out, do whatever. Um, or is it, Hey, we need to cut this stuff. And my point, I could ramble on this forever, but my point is like, now you have the vision.

On this. And, uh, that is invaluable. Um, we've 

[00:30:20] Derek: seen a lot of customers trying to pull the wrong levers to turn things around. So they may just be looking at the PNL on its own and say, well, my tap room. Labor looks high. So I need to focus on my taproom labor, or I just bought too many supplies for the taproom.

So I need to get that under control. Those are great things to do. But when we break it down this way, and if that scenario said, well, actually, your taproom is profitable, then all of that energy spent on reducing stuff specific to the taproom is kind of wasted energy. If we see that the real barrier to profitability lies in our distribution business unit, all of our focus has to go to that and turning it around.

[00:31:09] Chris-AI: So coming back to something we talked about at the beginning of the conversation was like seeing this frustration in, in, uh, these operators and brewery owners and managers at the beginning of this process were like, I don't know, I'm frustrated. I'm not making money. By the time you work through this process and you show them and just imagining this like total change, it's like, Oh my God, I've actually, I can do this, there has to be a different emotion there and it has to be exciting.

Right. 

[00:31:34] Derek: It definitely excites some people and saying, now I know what the problem is. It also, it's still a scary proposition because. Sometimes their thought, again, was just sell, sell, sell. And it comes down to more than just sell, sell, sell on the distribution side. It comes down to the margins. It comes down to the sales overhead and the sales labor and.

How much production labor you have involved in that. So I think there's a lot of relief in seeing what you have to do to make things profitable, but it's still, it's still a hill to climb. 

[00:32:15] Chris-AI: Well, then you got to do all the work. 

[00:32:17] Derek: Yeah, 

[00:32:18] Chris-AI: but I think 

[00:32:18] Derek: they feel a lot better about doing the right work instead of just.

just work. 

[00:32:24] Chris-AI: Oh, that's, I mean, dude, speaking as a business owner myself, if you're not beating your head against the wall and you actually see the path, it's so much better. I work on stuff like that all the time. Um, as you guys do too. So, you know, you help folks go through this process and doing the initial reports, and then you're there moving forward to kind of help guide and consult along the way.

I imagine. Is that how that looks? Yeah. 

[00:32:47] Derek: Yeah, so we have about 25 people at Small Batch Standard right now, and that's made up of a team of book, bookkeepers and accountants. We've got a killer tax team that's saves breweries all kinds of money and their tax wizardry. And then we have a team of consultants and we're the ones that take the books and say, here's where you're really strong.

Here are some ways you can improve this. Here are some models for you to look at for you to say, this is how I get to that profitability. Here are action steps that I can take to turn this thing around. 

[00:33:23] Chris-AI: Again, super invaluable. And, um, and by the way, you know, you probably heard this at the podcast, but like, if you're really curious about this stuff, you know, there's a link on the show notes to go get, uh, I'm super pumped.

You guys are doing this, like the free. Business unit breakdowns. We talked about this business unit thing. And if you follow this link, there's a video on that page that is great, that really explains this in a lot more detail. And then you can have Small Match Standard do a version of this for you and kind of break this stuff down and show you this process for your brewery.

And they're doing it for free, which is super nice of you. Thank you, Derek and the team. We're 

[00:34:02] Derek: happy to do it. We've been, we've been going around the country the last three years. six months, six to eight months talking about this different way of looking things, providing this insight. And everywhere we've gone, we've said, we're also going to provide this two page business unit breakdown to give you more insight into your brewery.

[00:34:25] Chris-AI: Again, so valuable because you just don't know what you don't know. And, uh, if you didn't go to school and Learn all this stuff or you slept through that class or whatever business management stuff, then never fear. Um, honestly, accounting for me, the worst subject I had to take accounting, uh, twice. I failed the first time.

And then I, uh, I did the two classes I needed to for my degree. I learned I'm going to hire an accountant and work with people like Derek, because I am not very good at that stuff and it's been invaluable for, for my business too. So, um, right on. Um, I mean, just a couple more minutes here with you. I just want to kind of, you know, talk with you about you, Derek.

I mean, you come from a different background or how did you get into doing this stuff? 

[00:35:11] Derek: Oh, man. So I graduated with a bachelor's degree in psychology. And then I got a summer job. Where I learned how to do bookkeeping and then I was going to go back to school in the fall and get a master's degree in psychology and the owner of that company.

It was a construction company. Gave the classic line of I'm going to make you an offer. You can't refuse. And I said, yeah, right. I'm going to graduate school. And then turns out he made an offer. I couldn't refuse. This was back in Texas. And so in that role, I picked up some bookkeeping and accounting skills.

And then my wife and I moved to salt Lake city and somehow I wasn't able to finagle that experience into a job as an accountant. And from there I went to another firm and. Learn more of the onboarding side of things and cleaning up people's messes and putting systems into place. And then during COVID, I came to small batch standard as an onboarding specialist, and then about a year later transitioned into this consulting role.

[00:36:22] Chris-AI: Wow. It's like just turned accountant. 

[00:36:26] Derek: Correct. 

[00:36:27] Chris-AI: That's, that's a different path, man. And although 

[00:36:30] Derek: you've had more accounting classes than I have, 

[00:36:33] Chris-AI: wow. Okay, great. Well, you've got way more experience on that front, dude. Um, dealing with this stuff. I'm not that way, you know, I'm bored of a, of a operational dude, you know, and obviously I'm in marketing, so I'm with words and pretty pictures and stuff.

But, um, I'm 

[00:36:49] Derek: just, I'm pretty smart and accounting. 

[00:36:52] Chris-AI: Yeah. Well, that's good 

[00:36:54] Derek: to do what you do. Is that your wife is an accountant? 

[00:36:58] Chris-AI: Yeah, she works in accounting and, uh, she has an English, she was an English major and wanted to be, you know, writer, that kind of stuff. And then eventually got into accounting and the travel space.

So she works for a travel agency and all that stuff. So that's her benefit. She likes to travel, but, um, the ways you get into what you do, who knows? Um, you're going to be at CBC, right? 

[00:37:20] Derek: I will. Yep. 

[00:37:21] Chris-AI: Great. Yeah. I'll have to hang out and 

[00:37:23] Derek: say, what's up. Yep. Do you guys have a booth 

[00:37:24] Chris-AI: there? Small batch standard.

[00:37:25] Derek: No, we're just, uh, we just walk around. We don't want to be confined to a booth. We want to meet the rounds and talk to our people and just have fun. Well, you'll be there 

[00:37:37] Chris-AI: and folks reached out and said, Hey, I'm going to be there too. You should say what's up. Get Derek. Yeah, 

[00:37:42] Derek: definitely. I'm sure you could link my email on the show notes or whatever, or our company.

And I'm happy to meet up and have a beer with anyone at CBC. 

[00:37:52] Chris-AI: Sweet. Well, yeah, I'm excited for that. And, uh, I'll get a chance to meet you. And, and again, Derek, I'm, I'm super pumped that you gave the time here. And again, I'll give another plug for it. Go to the link in the show notes and get this free business unit breakdown for your brewery from small batch standard and, uh, and take advantage of that.

Cause it's a, it's a really great offer and I'll stop slinging the promos and say, thanks Derek. It's been good. 

[00:38:18] Derek: Appreciate it.