Posted: Tue 28th Apr 2020
When we opened our new brewpub just under one year ago it was without doubt the highpoint of our business so far.
We'd identified a business model we felt had real strength and longevity. Selling the majority of our beer via our own taps, reduced the distance between production and our customers' glass and minimised the costs involved in distribution.
The trade at our brewpub Left Handed Giant has been epic over the last nine months. Busier than we could ever have imagined. In January, I really felt like we had passed the danger growth area in our business and had finally established ourselves financially.
Then a global pandemic came along and threw a fairly large spanner into our plans.
This blog really is a log of the impact so far and the measures we've taken to try to mitigate financial losses. As of today, 20th April 2020, this is how the last month has unfolded.
Priority number one has been trying to find new revenue streams after the loss of both our bars and around 85% of trade custom.
Worryingly, very little of the beer we sold on credit through the early part of the year has been paid for. Most bars and shops that have been shut have closed their books and are unable to pay. So, not only have we lost current trade, we are staring at the possibility of losing the revenue generated from sales before the crisis even began.
We are still paying our bills, so we have a hugely negative cash flow; all the money we owed is going out, but very little of what's owed coming in.
So far, of the government schemes available, we are able to access:
The Big Beer Co (Small Bar)
£25,000 non-repayable grant (due to business rates band)
£250,000 HSBC Business Interruption Loan approved (cash not expected for six weeks)
100% Business Rates relief for year 2020-21
100% of employees furloughed
£300,000 HSBC Business Interruption Loan approved (cash not expected for six weeks)
100% Business Rates relief for the 2020-21 financial year for Brewpub
80% of employees furloughed.
Unfortunately, we receive no grant for our Brewpub as rateable value is too high. Our rent has not been frozen on our warehouse buildings or Small Bar, and mortgage payments for brewpub are paused, only kicking costs into the future.
We are being asked to bridge the current losses via loans. These are repayable and as such we are simply robbing future profit and viability in exchange for long-term survival.
The lack of clarity as to how long the bars will be shut and by extension how long we will need to cover fixed operating costs with no income is an issue. The likelihood is that when we do re-open our bars we'll be working under a reduced capacity and income but be carrying the same costs as when at full turnover.
Obviously, we are not just looking to the government to help, and are hugely grateful for the help we have received.
We are looking at what we do and how we do it, and trying to diversify as best we can. Our online beer shop has always had strong trade, but we have put some serious effort into ramping up our efforts in both marketing and fulfilment.
Initially, we began a bike courier service, but quickly realised that the volumes were far higher than was reasonably able to be delivered this way. Now we are using a combination of our own vans (for local delivery) and Parcelforce.
We are managing to generate about 50% of our normal business in this way and are brewing on a 50% of normal production schedule. We hope that we can keep this level of volume up throughout but we have no idea if it's sustainable, has growth potential or will dry up next week!
We also have our trade webshop, which was set up to try to bridge the gap between ourselves and bottle shops around the UK.
We are working on the assumption that throughout this crisis people will want beer so, optimistically, we'll be able to keep this level of sales through both online shops until our bars reopen.
As it stands,our fixed operating costs are minimised as much as possible, but they are still relatively high. We are still servicing the invoices we accrued through February and early March when at full trading, but without any positive cash flow from the invoices generated via sales through this same period.
We are also still paying all wages in expectation of Furlough money hitting our account late April. That does mean that our bank account is being ravaged. Furlough cash is due at the end of April and business interruption loans are not due until into June.
In the short term, we're left to try and keep the wheels turning from our cash in bank and webshop revenue, which thankfully hits our account within days of making the sale.
Fortunately we were in a reasonable cash position when this began. For a change, we had money in our bank and had been in a period of accumulation before moving our brewery at St Philips and re-investing. This would have cost us around £300,000 and obviously will now not happen for some time if at all.
We are using all cash we had accumulated to keep our business afloat and our bills and our team paid. Many businesses will have entered this with very little cash in the bank and I honestly do not know how they are navigating the current situation. My heart goes out to them.
If this happened last July, as we were opening our new brewpub, we would have been caught hugely exposed. All our money re-invested, and then the assets we spent the money on unable to generate cash in return. We owned more money than we had and we would have likely lost our business very quickly.
Other businesses will be in that position right now, through no fault of their own. Reinvestment of available cash is part and parcel of growth. If a crisis like this hits at the wrong moment a great business can be brought to its knees.
We should all try at this time to use our local shops and businesses. Regardless of how strong or established they may look on the surface, you never know the true financial position. If there is a business you love and is still trading in some way, then spend your money with them. Tesco will still be here at the far side regardless, but I fear that many of the small, independent shops and bars that you love may not be.