Guy Carl, of Alliott Group's Napa Valley based accounting member Brotemarkle, Davis and Co. LLP., provides advice to the wine industry on how to make 2010 a vintage year for their businesses.

Another year has gone by, and 2010 has begun. New beginnings tend to get everyone thinking about the future. What’s in store for me in this new year? Will it be a good one? Or at least better than last year?

In the business world, the future has never been less clear. Some say the economy is rebounding, while others think we have yet to hit the true “bottom.” Most experts agree it will be a slow climb out of this major recession. In any case, the new economy emerging will bear little resemblance our recent roaring past.

In the wine industry, companies are looking at repositioning their brands for this new future. Some who found success in the past based purely on ratings and word of mouth are not finding the same warm reception for their new releases. Sales are going down, and inventory is piling up.

Many are asking themselves the dreaded question: will my winery still be around when the next new year rings in?

It’s times like these when every business should take a close look at its business plan. Certainly the next year is critical, but a longer view is no less important to ensure its sustainability.

It all starts with the top line – sales. Are my products properly priced to sell in the current market? Can I sell all of my new releases at these prices? What should I do with my older releases that didn’t sell? These are some of the key questions a business should be asking itself right now.

A winery business has additional complexities related to the length of time it takes to manufacture its product. It’s critical to understand what a significant financial investment occurs over this long period of farming, aging and bottling, especially when deciding whether to “clear out” old product through discounting or price reductions.

Estate-grown brands also must contend with the variability of each year’s harvest, which will directly impact how much product they will have available in the future. Many saw very poor harvests in 2007 and 2008. When those vintages are ready for sale, the cash flow coming in will decline simply because there is less wine to sell. It might be nice to have in reserve some of those past vintages to help bridge the cash flow gap, instead of selling them off now just to get them out of your warehouse.

Available financing is great in troubled times, but don’t get so leveraged that your business can’t support the monthly payments. That’s exactly what got our economy into this mess in the first place!

A good business plan will take all of these factors into consideration. And it’s important to resist creating the “perfect world” scenario, but rather build the plan for the current state of the economy.

With careful and thoughtful planning, your business can enjoy excellent health and prosperity in the new year, and in the new business world.

For more information, please contact Guy Carl guy@bdcocpa.com

Article Date: 1st February 2010

Author: Ed Cagawan