This article originally appeared July 6, 2020 in Spirited Magazine.
As an accountant serving clients in the wine and craft beverage industries, most of my recently received client questions are about one thing: What can I do to COVID-proof my business? Obviously, it’s going to be impossible in many cases to completely COVID-proof one’s business; some factors are just out of our control. But there many things businesses can do to stave off the worst effects of COVID. Tax and corporate structure-related strategies, for instance, are a perennial way to save money. But as far as immediate COVID-related tips, I would ask winery owners to consider at least these two tactics: First, get your PPP funding; and second, leverage financial forecasting for your business through COVID-19 and beyond.
Utilize PPP loans; apply for loan forgiveness
COVID’s effect on the wine and craft beverage industry is both far-reaching and nearly instantaneous, impacting—in many cases, closing—tasting rooms, offices, warehouses, and other key operations. Naturally, many winery owners became excited when applications for Paycheck Protection Program (PPP) funding opened up. But after funds quickly disappeared, many small- and medium-sized businesses were put off.
Adding to this disillusionment is uncertainty about the rules and requirements of the program, as well the SBA’s complex forgiveness application process that places burdensome requirements on borrowers.
All that is to say I completely understand if you’re skeptical about PPP. However, the situation has improved significantly. First, the second round of funding Congress passed last month (May) is still accessible. While it’s true wineries across the country are already reopening, it’s not too late for PPP funds to make a difference. Even with government restrictions eased, outlooks for tasting rooms and associated experiences are likely to be depressed for a while.
The new law also extends the covered period from eight weeks to 24 weeks, loosens rehire requirements and pushes back the date for rehiring employees to December 31, 2020.
Remember, PPP does not have to just be used on payroll. Thanks to recent legislation, as much as 40 percent of the forgivable amount can now be spent on rent, mortgages, utilities, and certain other business expenses. And every business—wineries particularly so—has those bills to pay.
Enable decision-making with economic forecasts
I’m always surprised by how many businesses (of all sizes) don’t regularly use economic forecasts as part of their overall business management strategy. How can you make the right decisions to grow, or even maintain, your business if you aren’t preparing for what’s next?
I’m not talking about predicting the future—that’s impossible. However, it is possible to create a range of the most likely scenarios to impact one’s business based on past events and management insight.
Here are the basics of forecasting. First, take inventory of all the potential economic variables that could affect a business. From there, determine which could actually have a direct impact on the business. For a winery, variables might include consumption of wine, industry employment, and the cost of grapes and production, among others. Then, using historical data and current trends, predict how those variables are likely to change over a given period. Finally, combine those projections and analyze, using statistical methods, their interplay. The result is a range of economic scenarios your business is likely to see over a certain period of time.
In this way, forecasting helps leaders make informed, data-driven decisions rather than relying on one’s “gut” or responding to, say, alarmist press coverage about where the economy is headed. Now more than ever, winery owners should think hard about how they make key business decisions as the ongoing COVID crisis continues to drive anxiety and uncertainty among business owners.
Michelle Ausburn is a partner in the Assurance practice at BPM, a California-based public accounting and advisory firm ranked among the Top 50 in the country, where she also leads the firm’s Craft Beverage Industry Group. Specializing in GAAP financial accounting and reporting, she serves middle-market, privately-held, family owner-managed, and institutionally-owned wineries and other businesses, as well as publicly-held companies.