Now is your opportunity to get access to an exclusive report of over 50 charts, summary analysis and detailed responses of wine industry metrics and trends. You can use these numbers to benchmark your own performance. But hurry, the portal closes on Friday, October 15th.

Each year Rob McMillan and his team at Silicon Valley Bank prepare an annual report called the State of the Wine Industry Report. This is a thorough report that discusses micro and macroeconomic trends that affect the wine industry. It is also a really fun read.

One of the key components to the report is information and metrics submitted by wineries through the Annual Survey.  As a thank you for your time, only the folks who submit replies to the survey will receive the charts and graphs. These are only available to folks who participate in the survey. Everyone else only gets to download the final report.

To make it easier to complete the survey, I made a video to show you how to pull the reports so you can answer the financial questions. Of course, these reports assume that you have set up your QuickBooks file using our Fundamental Five.

Here is the link to submit the survey Submit SVB Survey

Download these questions to the survey so you can prepare your answers SVB Survey Questions

This video will walk you through how to pull the answers to the financial questions

If you are tired of the COVID and mask debates, then turn your attention to another set of laws and regulations that varies from state to state and even county to county: the liquor license guidelines. During the 13 years of the great experiment called Prohibition, the debate du jour was over the personal liberties that were impacted by prohibition. Fun fact: Last year (2020) was the 100th anniversary of the passage of Prohibition.

The deal the politicians struck to end Prohibition gave each state the right to establish its own rules around the sale of alcoholic beverages. Thus we now must navigate over 50 different sets of rules (not unlike today’s mask rules that vary state-by-state).

That is one of the consequences of repealing Prohibition. However, there is an unintended consequence that was not part of the official legislation. According to Tom Wark, what actually unfolded was a whole set of rules around the three-tier system that now limits out-of-state sales through the distributors. This layer of rules is not part of the 21st Amendment yet they continue due to the economic and political power of the distributors. Read Tom’s article here.

Frankly, today’s mask debate seems pale in comparison. If you have a choice between wearing a mask or not being able to buy an alcoholic beverage, which would you choose?

Note: I am not a CPA. My comments are a summary of the article published on www.Forbes.com by Alan Gassman and his team, which includes CPAs and attorneys. Please consult with your advisors to confirm how this program applies to your business.

Link to Alan Gassman’s August 5^th, 2021 Article: Newly Issued Employee Retention Credit Guidance Punishes Owner Employees if they have Living Family Members

On August 4^th, 2021 a full 226 days after the last major update in December 2020, the IRS issued a Notice that states the wages of owners and their spouses of S-corporations who own more than 50% of the business are not eligible for the ERC.

In the bill that Congress passed last December, close family members were specifically excluded from the ERC, because they apparently didn’t want small businesses to pad their payroll with Aunt Sally and Johnny-the-couch-surfing-brother-in-law. Congress seemed to be OK with allowing the wages of the owners and their spouses to be counted as eligible wages. However, the IRS interpreted the rules differently and excluded owners and spouses if they have ANY living relative.

According to Alan Gassman “Only orphans that have no children are able to get the credit, while it is people with large families who need the credit to support their families. This is anti-family, unamerican, and utterly without logic or justification.” Furthermore, Alan anticipates that Congress or the President will fix this problem.

If you are the majority owner of an s-corporation (more than 50%) and you have any living relatives, here are your options:

1. If you have already filed a 941X to claim the ERC and included the owner’s and spouse’s wages, go ahead and let those forms process as is without amendment.
2. If you intend to file additional 941X forms but have not yet submitted the paperwork:
   1. Wait a few months until this gets resolved, then file
   2. If you really need the cash, file now without the owner and spouse. You can always amend a second time.

Remember if you are in California or any region that had a state or local agency mandated restrictions where you could not serve 100% of your pre-pandemic occupancy, then you automatically qualify for the ERC. In California, the wages paid from mid-March 2020 until June 15^th, 2021 are eligible wages. You might qualify based on other guidelines through Dec 31, 2021. If you received a PPP Loan, you cannot count the same wages for both programs. Despite this limitation, the ERC has resulted in significant refunds from the IRS.

If you have not take advantage of this program, please contact me HERE.

Are you one of the 6.5 million folks who earned a PPP Loan but have not yet filed for forgiveness? Congratulations, you are in good company, because over 50% of folks who received a PPP Loan have not filed for forgiveness. The reason there are so many of you is quite simply because the process is complicated. Pick any combination of these reasons:

• The PPP program rules keep changing
• The words and terminology don’t seem to apply to your situation
• Every bank uses a different process. (I have filed over a dozen forgiveness applications, and I got stuck somewhere on each one.)
• Basic procrastination

I don’t want to encourage more procrastination but know that you can file for forgiveness anytime until you pay off the loan. HOWEVER you will need to begin making interest and principal payments 16 months after you received the funds (technically 10 months after your 24-week covered period).

If you received your PPP Loan in mid-May, then expect to begin making payments around August 30th.

Here’s a tip: once you submit your forgiveness application, you won’t need to make any payments until you receive a final determination on forgiveness. So do yourself a favor and do it now. For all loans below $150,000, the process is simple. The SBA opened their own portal (finally) to speed up this process. The SBA calls this the Direct Forgiveness program. If your bank has signed up, then the process is even simpler.

Check if your bank is participating by clicking HERE. This list is updated regularly. These tend to be the smaller banks that didn’t have the staff to manage the loans or build portals. If you don’t see your bank, give them a call, and ask if they plan on participating.

Here is the new SBA Portal

As always, reach out to us HERE if you need any assistance. You will sleep better once you get this handled. Promise.

Micro wineries have often joined forces and partnered to share a tasting room. According to the San Francisco Chronicle, five new tasting rooms that are collectives of several micro wineries opened in Sonoma and Napa Counties in the last year. CLICK TO READ THE ARTICLE. It’s a great way to share the cost of opening a tasting room. However, it is also a great way to make a mess. Of course, we love micro wineries, but they are the least likely to sit down and write procedures. Here is a checklist of the things to figure out:

1. What is your goal? Is it Wine sales, Club signups, or Reservations for a vineyard tour? For example, if your goal is Club signups, you might be OK with running this program at a net-zero profit. However, it would be best if you had a goal to monitor whether the cost is worth your time and money.
2. How are you going to record the sales of the tastings and wines? The most common situation is for the tasting room to use one POS program and send reports to the partners. These should include a reconciliation of the funds collected.
3. How are you going to collect email addresses? Do you collect them yourself or through the tasting rooms POS program?
4. How are you going to track the wine sent to the tasting room? As we discuss in Step 5 of our Fundamental Five, “Track the samples and pours,” what is your procedure to track the bottles used for tastings and given out as freebies.
5. How are you going to track the other tasting room expenses, the rent, and other fees? First, you want to be able to review the total revenue against the total costs.
6. Do you have the cash flow to support this program until it gains momentum? We always recommend that you forecast your cash flow. This step is critical to micro and larger wineries.
7. Who is going to represent your wine? Do you need to hire someone? Are you going to be there, or will the crew from the collective handle this?

I don’t want to discourage you from joining a collective. However, be aware that you need procedures in place, and you need to monitor whether you are benefiting from the time and expense of joining the collective. Learn more about the Fundamental Five Course and our Silver Club Winery Management Program Good luck!!

In a recent blog post, Rob MacMillan wrote this headline “Wine Demand is Turning Negative, Defying Good News” READ ROB’S POST. The gist is that despite the pivot to the online sales channels last year and the expectation that with the economy doing well and restaurants opening back up, wine sales growth, continues to decline for the same reasons he listed in 2017 when he first reported on the declining sales trend.

This graph from SipSource shows wine depletions declining from January to April 2021.

Here’s the thing: this is a national trend across all wineries. However, the wineries that have the greatest impact on these numbers are less than 1% of all the wineries in the US. According to Wine and Vines, 300 wineries produce over 90% of the wine sold in the US. Thus only those 300 wineries out of 11,053 wineries have any impact on these figures. BUT THIS DOES NOT HAVE TO BE YOUR TREND. You and your friends and neighbors may actually have a very different result, but the combined impact of the small wineries doesn’t move the needle to change “the industry-wide” trend.

To understand the scale of those 300 wineries: the winery with the smallest production on that list bottles 6,250 cases of wine each week. Gallo at the top of the list bottles 8,000 cases every minute, 24/7.

These are the graphs from some of my clients.

Even though they both had negative growth in 2020, they both had their most profitable years ever. Growth and Profit are separate issues. Frankly, many small wineries don’t want to grow their case production. (However, they should still grow their gross profit.) Granted, not everyone had these results, and a few suffered from a lack of inventory due to fires 2 seasons in a row.

The point is: don’t take these reports about the industry as a fait accompli. Small wineries are nimble. Their customers are real people and not a demographic. Small wineries have true authenticity that the large wineries try to copy. Yes, pay attention to the fact that the boomers are “aging out”. And pay attention to how you are making the tasting experience inviting to the next generation.

I offer this challenge to the small wineries: Beat the industry trend.

And sign up with Silicon Valley Bank so you will receive an invitation to participate in their surveys. The small wineries are under-represented. Let’s show them what small wineries can accomplish. SVB WINE DIVISION

Sonoma State Wine Business Insitute posted a nice 10-minute video on digital marketing. The last year showed us that folks will buy wine through this type of marketing.

SSU Wine Biz – Digital Marketing in an Altered Landscape

So why should a bean counter, moi, care about sharing marketing ideas with you? It’s because your bottom line is directly related to your top line. I hate to break it to you, but your revenue is not directly related to the quality of your wine. This means: if you make better wine, you will not necessarily sell more wine. Sorry.

I am sure you can think of wineries that make mediocre wine (in your opinion) yet have a strong business, and at the same time, you can also list wineries that make dynamite wine (in your opinion) yet struggle to sell it. The successful wineries have a marketing and sales program that finds folks who will buy the wine that they make. Furthermore, the cost of those programs is such that the winery makes a net profit on the sale of the wine.

Are you able to make a connection between the cost of a marketing program and the sales that it generates? That’s where useful financial information comes into play. Over a hundred years ago, marketing pioneer John Wanamaker said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” The main reason we recommend the DTC sales channels be split into different segments (tasting room, club, website, events, etc) is because you will use a different marketing program to stimulate sales in each segment.

If you can calculate the cost of your marketing program with the sales, you can start to identify which half of your marketing is working.

The team at Silicon Valley Bank has called for folks to complete the survey for the annual Direct to Consumer Wine Survey Report.

The deadline to submit the survey is Friday, March 18th.

You can download the questions HERE.

When you are ready, enter your answers on the SVB SURVEY PORTAL

To help you complete the financial questions, in these videos I walk you through pulling the reports in QB Desktop & QB Online. If your file is set up using out Fundamental Five, pulling these reports will be quick and easy. But … I cannot guarantee if it is easy to pull the other reports from your POS program.

QB Desktop

 

QB Online

The team at Silicon Valley Bank released the annual Direct to Consumer Wine Survey Report.

Last year’s report was canceled because the surveys were due just as the pandemic hit and the shutdowns began.

Thus there was no surprise when this year they discussed the tectonic shift in the winery operations. I particularly enjoyed the comments by a VP of Marketing of a 10,000 case winery in Virginia. Of course, Rob McMillan, Paul Mabray, and a VP from The Family Coppola all had valuable insights.

To watch the replay and download the slides go to THIS PAGE

It’s a full hour and a half. So pour a glass of wine and relax. Yes, there are lots of graphs. Some of the topics I found interesting that are scattered throughout the discussion were:

• Reservations vs Walk-in and how the conversion rate for Club signups is almost double the rate for Walk-ins
• Reservations are a good Wine Club retention tool
• Finding qualified staff for the tasting room has been a challenge because so many people moved
• A key to a successful virtual tasting is collaboration with other wineries
• How to price a virtual tasting
• How to price shipping fees

Remember the problems with Illinois a few years ago? … Michigan is now setting up stings.

According to the North Bay Business Journal, Michigan is suing three wineries because they didn’t have a “direct shipper” license.

Compliance issues are very complicated, and these issues at all levels. You might be compliant for one issue in a state but out of compliance for another issue.

• State & TTB Winemaking
• Distribution shipments
• DTC shipments
• Local and State sales tax
• State and Federal income tax
• And more ….

Do you have a Compliance Specialist on your team?

Read the entire article here