Our Winery Profit Planning Tool

You can always use the most recent calendar-year period, but another option is to use a “rolling-12 month” period. Using a rolling-12 month period gives you a full year’s worth of data, but the data is more recent and relevant than last calendar year. For example, if you are using this calculator in November to plan for the upcoming year, you can look at your depletions, revenue, and operating expenses for the period November 1 in the prior year through October 31 in the current year.

Note that rolling-12 data does not work so well if your accountant is making large adjustments to your books on December 31. In the best case scenario, your financial statements would be squared up monthly and not just annually!

Many wineries have other revenue streams besides bottled wine sales. This can certainly complicate a back-of-the napkin calculation such as this calculator provides. This calculator is built on the assumptions that your main source of revenue is wine sales and that most of your operating expenses are related to wine sales. If a large portion of your revenue or expenses are from bulk wine sales, custom crush, restaurant operations, lodging, rentals, events, or some other revenue stream, you may need a more sophisticated analysis than this calculator can offer!

This calculator assumes that your revenue per case will stay the same.

That said, raising prices is one of the fastest ways to increased profit, as raising prices does not affect your cost of goods sold nor your operating expenses! You get better gross margins immediately and this translates directly into better operating margins.

If you are able to achieve a higher revenue per case, you will not need to sell as many cases to meet your revenue goal. If you end up with a lower revenue per case (perhaps due to selling more into distributor channels and less DTC) then you will need to sell more cases than projected to meet your revenue goal.

If you are able to lower your production costs, then you will eventually lower your cost of goods sold per case and most likely be able to realize better gross margins.

The issue with wineries and their 2-3 year production cycle is that it also takes 2-3 years for decreased production costs to show up on your profit and loss statement as better gross margins! When looking at profitability, it is best to use your most recent gross profit margin number, as this is typically the best indicator of near-term results.

That said, decreasing your production costs will result in an immediate favorable change in cash flow, and the impact of this should not be overestimated!

If you have financial statements, you can generally use the numbers directly from your Profit & Loss statement for the purposes of this calculator. Gross profit margin percentage is determined by dividing your gross profit by your revenue. Gross profit is determined by subtracting your cost of goods sold from your revenue.

If you are doing a thought experiment from scratch, we would advise using a gross profit margin between 60% and 80%. Use a number on the lower side (60%) if you are using full-absorption costing–i.e. If you are including overhead costs for your production facility, production labor and associated costs, and depreciation on barrels and winery equipment in your costing, along with your raw materials costs (grapes, bottles, corks, etc). Use a number on the higher side (80%) if you are only including raw materials costs in your cost of goods sold.

Warning: If you are posting all of your winemaking purchases directly to the cost of goods sold section of your profit and loss and not posting a calculated cost of wine sold, then your gross margin may be drastically off. That said, you can still take an average cost of goods sold for the past 12 months or prior calendar year and get a decent result from this calculator— with one caveat: if your winery is growing quickly, or shrining quickly, this cash-basis cost of goods sold calculation will change drastically from year to year and will not be an accurate predictor of future results. If this is your situation, this is probably a good time to call your accountant.

Typical operating expenses include: sales and administrative labor and related payroll taxes and benefits, marketing, tasting room and wine club operating expenses, tasting room rent and other occupancy costs, office expenses, business excise taxes, insurance, licenses and permits, professional services, and travel and meals.

For the purposes of this calculator, all of these expenses are considered “fixed”--that is, they do not change when your revenue or sales volume changes. While that is not entirely true of course, it’s a useful construct for this exercise. You can choose to include significant expenses that vary directly with sales (like merchant fees) in your cost of goods sold to increase the accuracy of this calculator.

Book (or GAAP) depreciation is also included in operating expenses.

You will see this term used in different ways, but here’s what it means at Northwest Wine Accounting: revenue minus cost of goods sold minus operating expenses. Operating profit does not include bonus depreciation taken for tax purposes, interest expenses, non-operating income or expenses, one-off or unusual transactions, profit distributions to owners, or distributions taken to pay taxes on behalf of the owner.

You may also hear operating profit defined in this way referred to as “EBIT”--earnings before interest and taxes.