With a record number of craft breweries opening across the country, a common conversation I often have involves the compensation of brewery owners and staff. Take a complex topic, add a fast growing industry and the answers can be difficult. I do not claim to have all the answers, since compensation levels will vary from state to state, region to region. However, I will share some insights on how to build, compensate and retain your team.
To begin, I am a firm believer that the success of your brewery comes from the team you build to run the business. I understand this is your idea, money and recipes, but at the end of the day, it’s the people who help you execute the day-to-day work that will determine your success. If I was writing this to a group of lawyers or engineers, I would weigh more of the accolades of success on the owner, but in a brewery there are too many moving parts to give the credit to one or two individuals.
When you started up, chances are the compensation topic was a bit of trial and error. If you needed a brewer, you would interview a candidate, ask him or her what the compensation package needs to be and then pay it. In the beginning, this single employee would handle most of the brewing tasks. Now that your business is growing, you will specifically define brewhouse roles. A few things to consider while developing a new position is:
- How does this position fit into our plan?
- Do we have the resources to hire now?
- Are processes in place to make this position transferable?
- What would the manager of this position look like?
A new canning or bottling line is being delivered in one month. Does your brewery have a champion for this new piece of equipment? It needs one, and the planning for this addition should have budgeted in the proper amount for the personnel to operate it. Will this champion be operating the line in six to eight months or will they oversee operations? Should we identify a candidate who could manage others in the process?
The compensation portion to this will be a learning process: You may not get it right the first time, but after a while, it will feel right. Depending on where you want to hire within the company’s management level will determine the compensation package. If you need to bring on an experienced packaging manager from a vertical industry that can manage people, troubleshoot and make repairs on the fly, then this is going to cost you. The alternative is bringing in an entry-level employee who will learn slowly from the owner as they transition out of his or her role. Some things to consider when defining compensation:
- Candidates experience;
- Candidates expectations;
- Candidates learning curve; and
- Overall package.
When looking to fill a higher-level position, I suggest slowing the process down. This individual will oversee process and people; they must be a good fit. Ask to speak to someone at his or her current place of employment — the closer you can get to a manager or employer the better. This suggestion always gets me a funny glare. This will separate the job-jumpers from the people who want to be at your brewery. Simply asking for professional and personal references is not appropriate for these higher-level positions.
Additionally, I always ask candidates about their salary expectations. This gives me an idea of what the market is paying. If they do not answer or deflect the question, they usually don’t make it to the next interview. At some point, you will begin to know what is industry average. If you are speaking to a candidate with experience at many different breweries, pick his or her brain as to what each brewery paid and what the incentive packages were. This will give you a deep dive into their awareness above and beyond running a piece of equipment.
Given my complex process of hiring, this clearly cannot be done overnight. This actually stresses the brewery to be in a constant state of recruitment.
When budgeting for staff around the brewery, follow this formula as a total cost of employee:
- Wages — Agreed upon salary or hourly rate for work performed.
- Payroll Taxes — Employer matching portion of FICA, Federal & State Unemployment.
- Health Insurance — If you have a small group plan, you will be responsible for at least 50 percent of the health insurance premiums. This amount can not be pinned down to an amount or percentage.
- Retirement Plan — Same as Health Insurance, this will vary depending on plan type. Your CPA or financial adviser can guide here.
- Fringe Benefits — Auto allowance, Promotional Account, Cell reimbursement to name a few.
Hiring and compensation is not a learned knowledge, it’s an art. The best CEOs are able to assemble a team and define a culture to allow the team to thrive. This should be your goal as a brewery owner.
Brewery owner compensation
Some cop-out advice: For what a brewery owner should be paid, I often hear, “What would you pay someone else to do your same job?” Funny, I know. The reality is, you are performing 100 tasks a day for a reason — because you can. The operating owner(s) should be the highest paid team member, period. I am OK with owners paying themselves a lesser wage than a prize hire for a short period (emphasis on “short”). If this is the case, the immediate goal (30 to 60 days) should be to get the owner back up to the highest paid employee in the company.
If the brewery is producing over 3,000 barrels (bbls) per year and the owner is not the highest paid employee, there are some major problems. I am a stickler about this topic because owners sometime de-value themselves and justify a lesser wage now thinking they will make it later. Throw in expansion plans and pushy investors and next thing you know, the owner is working for free.
Owners get paid for the work they do, at the time they do it. We love preparing cash flow “what-if” analysis for brewery owners to justify a salary increase. Last word on an owner’s salary amount — it boils down to what the brewery can sustain. I am certainly not advocating the brewery be negligent about ownersship salary resulting in undue cash stress to the company. We simply promote that the owners get paid for the work they do.
Chris Farmand is the founder of Small Batch Standard, a CPA firm helping craft breweries across North America. Chris has more than 10 years of tax and accounting experience, with the last four years dedicated to the craft brewing industry. Small Batch Standard believes brewery owners should have reliable financials while focusing on what they do best, making beer. He can be reached at [email protected].