Award-winning winemaker, consultant, engineer, and professed math geek Genevieve Rodgers of PEMDAS Winery Solutions joined host Ed Mysogland on this episode of How To Sell a Business Podcast. Genevieve gave an overview of the major roles in a...
Award-winning winemaker, consultant, engineer, and professed math geek Genevieve Rodgers of PEMDAS Winery Solutions joined host Ed Mysogland on this episode of How To Sell a Business Podcast. Genevieve gave an overview of the major roles in a winery business, the key elements that impact the winery's success (it's not just about the wine), how wineries get financing, what questions buyers should be asking, how the winery creates value, risk management, and much more.
How To Sell a Business Podcast is produced and broadcast by the North Fulton Studio of Business RadioX® in Atlanta.
PEMDAS Winery Solutions
PEMDAS Solutions offers winery consulting solutions to meet clients needs. Services include: winery business development, design, winemaking consulting, financial forecasting, winery business education and project management.
With over twenty years of experience in the wine industry, PEMDAS Solutions has the knowledge and experience that helps clients create and grow successful businesses in the wine and spirits industry. PEMDAS has worked with wineries, vineyards, cideries and spirits producers from startups to existing businesses.
Their clients are small (less than 1,000 cases) to mid-size (500,000 cases) and span the globe. If you are looking for someone who has experience working in all aspects of this exciting industry, PEMDAS Solutions can help.
Company website | LinkedIn | Facebook | Instagram | Twitter
Genevieve Rodgers, Owner, PEMDAS Winery Solutions
Genevieve Rodgers, owner of PEMDAS Winery Solutions, a winery and business consulting company in the US, has over twenty years of experience in winemaking and start-up winery business consulting. Genevieve brought her engineering and business management background to Sonoma, California in 1997 to help start her family’s winery. She went on to manage the estate vineyard, produce award winning wine and start her own winery before adding winery business consulting to her repertoire.
Genevieve has experience in all aspects of the wine business from vineyard design to sales and marketing and is an award winning winemaker with experience making wines from over a dozen grape varieties. She is fortunate to help people all over the world realize their winery business dreams.
Genevieve holds a Bachelors of Science in Mechanical Engineering from the University of California at Davis, a Masters in Business Administration from Chapman University, California, USA and an advanced, Level 3, Certification in Wine from the Wine & Spirits Education Trust.
Ed Mysogland, Host of How To Sell a Business Podcast
The How To Sell a Business Podcast combines 30 years of exit planning, valuation, and exit execution working with business owners. Ed Mysogland has a mission and vision to help business owners understand the value of their business and what makes it salable. Most of the small business owner’s net worth is locked in the company; to unlock it, a business owner has to sell it. Unfortunately, the odds are against business owners that they won’t be able to sell their companies because they don’t know what creates a saleable asset.
Ed interviews battle-tested experts who help business owners prepare, build, preserve, and one-day transfer value with the sale of the business for maximum value.
How To Sell a Business Podcast is produced virtually from the North Fulton studio of Business RadioX® in Alpharetta. The show can be found on all the major podcast apps and a full archive can be found here.
Ed is the Managing Partner of Indiana Business Advisors. He guides the development of the organization, its knowledge strategy, and the IBA initiative, which is to continue to be Indiana’s premier business brokerage by bringing investment-banker-caliber of transactional advisory services to small and mid-sized businesses. Over the last 29 years, Ed has been appraising and providing pre-sale consulting services for small and medium-size privately-held businesses as part of the brokerage process. He has worked with entrepreneurs of every pedigree and offers a unique insight into consulting with them toward a successful outcome.
Connect with Ed: LinkedIn | Twitter | Facebook
Ed Mysogland 0:00
Business owners likely will have only one shot to sell a business. Most don't understand what drives value and how buyers look at a business.
On today's episode, I had the opportunity to visit with Genevieve Rogers of Pam das winery solutions. And she well, I can't even begin to tell you everything that we learned during her episode went a little bit longer. And she was so generous with her time. But she's a winery consultant. And, and if you just Google her name, you will find that she is everywhere. And so she's a, she's an MBA, she's an engineer by trade, she's also
she's a level three of the wind and spirit Educational Trust. She does all kinds of work as far as strategic planning
company or winery positioning. And she was just such a wealth of knowledge. And and I guess the reason I really wanted to have her on was number one, I don't know anything about wineries we are we've sold a few in the last probably 510 years.
But they were difficult sales. And there's a lot of Believe it or not, there are a lot of wineries throughout the country. And those business owners, at some point will want to sell so. So the rough rule of thumb is that it takes one to two years to sell a winery and I wanted to learn what where's the risk in the winery, how to mitigate that risk, and then how to effectively transfer those businesses. And she did not disappoint. She was like so, so generous with her time and such a. So such a wealth of knowledge. So I hope you enjoy my conversation with Genevieve Rogers, of Pam das winery solutions.
I'm your host Ed Mysogland. On this podcast, I interview buyers sellers and advisors about what creates value in a business and then how that business is effectively sold at a premium value because because sellers now are sellers and business owners now understand what creates values in their company. So on today's show, I am you have no idea how excited I am to visit with Genevieve Rogers from PIM das winery solutions. And I am I am such a novice at anything wine related. I have a buddy of mine,
John Baker that that always makes me look good as far as wine selection. So I'm fortunate to have somebody in my corner. But now I'm going to get a lot smarter because I got Genevieve. So Jeremy, welcome to the show. Thank you, Ed, I am pleased to be here.
So tell me about PIM das winery solutions and and for the and you have to I haven't seen any business named PIM Das, but I know what it means. So tell me about it.
Genevieve Rodgers 3:32
Well, that's why I picked it is i and I'm an engineer by my original training. And so sort of a math geek. So I, when I started this, this business, I really wanted to help people work through how to start a winery, how to run a winery, how to have a winery in an organized manner. And so being a math geek, I came to pandas, I love how you in a organized method, solve a mathematical equation. You know, what? That makes total sense that that's a great, great way to look at how your practices I wouldn't have guessed it, but you know, I always just figured it was you know, you're just messing with acronyms, but there was there's a substantially more thought that went into it. And that that's awesome. Probably too much thought. But yes, yes. And it's interesting to me. There's
people who are in certain
groups that see PEM das and say, Oh, I know what that is. It's in that map. And people who look at me and say, like, what is what is that? I have no idea. And which I think is really interesting.
Ed Mysogland 5:00
Genevieve Rodgers 5:01
So, so you're based out of Oregon, right? Well, that's where my home is. But I work again, my clients are all over the United States. And I have some international clients. So I do a lot of, you know, a lot of my work from home office, a lot of my work over the internet with clients, things that can be shared electronically. And then I do winemaking consulting on site for clients. And so then I travel, and I'll be at the winery.
Ed Mysogland 5:36
Well, awesome. So I will apologize in advance for some of the silly questions that that I'm certain I'm going to ask that probably would be rudimentary to folks like you. So I appreciate the latitude. But the first thing that I guess we should talk about is that there's differences in in, in wineries, like you were talking about case thresholds, like they're the larger the larger operations versus the smaller operations. And I think the people that that listen to this podcast are probably more geared to the smaller side, but can you talk about, because there are some substantial differences, right, other than volume,
Genevieve Rodgers 6:22
there are some really big differences. And it's almost like being in two different industries. And, and people can think about it in like the difference between your local hardware store and Home Depot. And that's kind of where the winery is. So you have some really, really big players in the United States and across the world that make millions of cases of wine. But most of the wineries in the world, most of the wineries in the United States are making less than 5000 pieces of wine annually. So what you see in the stores, and if you're going to grocery stores, you're seeing primarily the big wineries, really big million dollar million cases annually of wineries. And then you might see some local wineries that are smaller scale. And you might see some wineries that are kind of mid size, that make specific products, the specific value, that they're big enough to be picked up through distribution, and sold across across the nation. But the majority of wineries are really fairly small, under 10,000 cases, and wineries that are like family owned, there's they're small. So they're the cost basis is very, very different. And the way they sell wine is very different. Because their cost basis is so different than selling through the distribution market is is taking their margin and cutting it at least in half. And so
Ed Mysogland 8:17
Okay, so that
Genevieve Rodgers 8:19
becomes a real boundary for small businesses for small winery. Can I take my, when I have a higher cost basis? Am I going to be able to sell it at half? Sell it through distribution? So it sets up really? Two different, almost two different industries?
Ed Mysogland 8:45
Yeah, so that explains a little bit about why you see all these small operations having, you know, you know, what's the best way to put like on site? You know, I don't I don't want to take tourism cut type winery, but but it seems as though that is more so why they do it because that's that's how they get the distribution as opposed to going through your your normal distribution chain. Right?
Genevieve Rodgers 9:19
That's correct. And, and really, if you look at what the sales distribution for small wineries and you look at averages, and you look at wineries that are that are doing well. There, they should be selling 85 plus percent of their sales directly to the consumer. So you're either doing it through your tasting room, you're doing it through your wine club, you're doing it through your website. That's that's your direct consumer market and for small wineries like if you're under 20,000 cases The vast majority of your sales should be through those markets. So then you need a tasting room, somewhere where you connect with customers. If you're a huge winery, it there's not a whole lot of value in that for you.
Ed Mysogland 10:18
Got it? And now that that totally makes sense, one of the one of the things that I guess, can you take me from cradle to grave? So we start with grapes, and then we end with a bottle of wine in the consumers hand, can you? I mean, what is the mechanics of all of that from a high level, you don't have to get too far in the weeds. So but I know you work with startups,
Genevieve Rodgers 10:43
I do. I do work for startups. So there's, I like to say that there's three different types of people in a winery. The first type of person is a farmer. So you're going to grow grapes, and grapes are a perennial, they're a lot more like having an orchard than other other types of fruit, because you'll plant and you'll plant for the next 25 years, that that plant is going to grow up for 25 years, if not more. So it's a real dedication to the land, to that crop to those individual plants. And you want a good winery that has its own grapes, you don't have to, but a good winery that has its own grape is growing grapes that work with that climate, and those soils and that produce a wine that customers like. And you have to do all of those things. So grapes are kind of a weed, they'll grow anywhere. But what you need is you need a grape that will grow well that will give you volume and quality in which to make a product that people are going to look at the price point that you need to sell it for.
Ed Mysogland 12:06
Okay, you have to ask your question, but can I ask you about the grapes? Sure. So So if I'm a farmer, does the does the winery owner? If I don't if I don't own the farmland? And, uh, do I get exclusivity? Is that how, how it works. Or if I'm a farmer, I'm just gonna I'm gonna sell it to anybody that needs my grapes.
Genevieve Rodgers 12:36
You know, most, most wineries have contracts. With farmers, it's sort of a little bit depends on the area that you're in. And the ability to get grapes. If you're, if you're a farmer, and you are growing grapes really well, you should look for contracts that are long term. And you build a relationship. And that's really what a winery wants to because the winemaker wants consistency. And they want to be able to direct the grape growing practices. And so for that you need a relationship.
Ed Mysogland 13:20
So the winery that hires the that contracts with the farmer, they have control over certain aspects of the farming other than just the product.
Genevieve Rodgers 13:35
You know, it's by contract. And so everything is every okay, it's a little different. Sometimes wineries will have long term contracts, and then it makes sense for those two organizations to work together and, and farm in a certain manner. And then wineries will often get to a point where there'll be growing or where they're the volume that they're getting from one farm isn't enough because of the year and they buy basically on the spot market. And then you're getting whatever someone grew.
Ed Mysogland 14:16
I see. All right, so first thing he says three parts, we had farmers. What's our second part? The second
Genevieve Rodgers 14:22
part is the winemaker. So the winemaker is this person who has a really high attention to detail is somewhere between a scientist and an artist. They they make the wine and and I like to say like a good wine maker is a little bit OCD. There's a lot of attention to how the wine is made on an on a daily hourly basis. And you want someone who's really methodical and then you and so that person is going to bring edge did the two parts, they will direct some of the growing to get the raw product that meets their quality standards and their chemistry that they're looking for. And then they work with the sales, which is the third person person to make or one that's going to match what's being sold.
Ed Mysogland 15:23
Got it? Sure. Great.
Genevieve Rodgers 15:26
And so the so the winemaker is going to get the grapes in, they process it. Harvest, you ferment it, there's different processes during fermentation. And then you press it and you put it into tanks or barrels to age it. And then you and then you bottle it and and bottling then goes to this third person who is the sales management person.
Ed Mysogland 15:56
Got it? So on the site on the on the the scientist or the chemist, how hard is it to find somebody that does that? Is that? Is that just some somebody you hire? Or is that typically the owner?
Genevieve Rodgers 16:12
Yes. First of all wineries, it is typically the owner. And the owner either has that background. And I see, I see a lot of first time owners that have backgrounds in engineering. This so the owner there has a background or they go out and get that you can't get well there are there are programs around the country that teach winemaking to adults who have already graduated. So Cornell has a program. Penn State has a program. University of California Davis has a program similar to Bisco. There's a whole bunch of programs around the country where you can take online or in person classes as a professional already,
Ed Mysogland 17:09
and so does
Genevieve Rodgers 17:12
but and you get a certification or thought you get a certification in winemaking.
Ed Mysogland 17:18
And that gives you enough knowledge to to produce a you know, a commercial grade wine. Hmm. I wouldn't, I wouldn't have done that.
Genevieve Rodgers 17:31
Yeah, well, and you can go the route. I mean, that's sort of the route I took. I have an engineering, okay, I have an MBA, when my family started a winery, nobody had never made wine. And so I took classes, I became the winemaker with my engineering degree and my MBA, and I took classes and I worked with a consultant, or a couple of consultants. Okay. And so, I guess so I was learning, but also I was, you know, the consultant would say, Okay, do this today, and I would go and do that. But then I was learning at the same time. So you can do both. You can do one or the other, it really depends on your temperament. And how much work you want to put into it. Because there is a lot that you need to know, to make one well. Or you go
Ed Mysogland 18:31
Yeah, well, and that's what I was getting at is that it seems like the astute the astute wine. People in my life, they are they are always talking about different things about the wine. And so, when you start when, when we're talking about chemistry and stuff, I'm sitting here going, Okay, how, how, how do I learn this over, you know, online, in order to, to be able to produce something in a manner that that is attractive to the consumer, you know what I mean? But, I mean, it makes sense. So you you worked with somebody and and that's probably what other people do, too. And I
Genevieve Rodgers 19:15
do it. It's one of the things that I do is I come to wineries and I train people to take over my job basically. And so and while I'm not there, they're doing the work we're we're talking I'm saying do this, they do that but they're also learning intensely why this is happening, so that they can then take thought
Ed Mysogland 19:40
it was so much Yeah, I thought it was it was so much more about tasting and tailoring it based on a you know, kind of a palette that you were going well and and that it
Genevieve Rodgers 19:55
is to Okay. Yeah. Okay, so That's why I said it's so how do we do that? So it's science and art. Because you can't do it right on the chemistry. So when the wine and wine is made, usually during fermentation, this is really when the wine is made. And that's a couple of weeks. And during that time, so if I'm making wine and I'm at a winery, I will taste every, every single, tank fair a lot in the winery, at least once a day, if not twice, if not three times a day. And then I will make changes to how the fermentation is going, based on based on those tastes. So you do have to do both. And in you also have to understand, if I want a product that tastes a certain way, the end, after its age. What do I need to do now during fermentation in order to get that? And? And that's something that makes you have to have the mind for it. But you also have to have some experience doing that.
Ed Mysogland 21:16
I get it. All right. So you you had talked on the third part, which is the sales. So what is at this level? I mean, what is the optimum route? To maximum value? Who, who is I think we've established that probably, you don't want to go to a distributor because you don't have the volume to accommodate that. So it sounds to me that it's direct to consumer. And you know, the ways that I if I if I heard you, right was your, your tasting room, ah, events, and online, right? Those are the three or one club,
Genevieve Rodgers 21:54
which is the backbone. So the best thing that someone can do, if someone has a winery for starting a winery, the most important thing that they can do is determine what experience they are creating their wine. That is the by far the most important thing that a winery can do to be successful. Is what experience do I want people to have? When they visit when they come to my winery? And do it come to an event? When they taste my wine at home? When they come to my website? What do I want them to feel? What am I creating for them, because what people people who love wine and get into the industry think that it's all about the wine, because that's what's been important to them while they've been drinking wine is that the wine this one is fantastic because of this criteria. But that's not actually how wine is sold. Wine is solely based on the experience that people have. And the wine is integral. But not only not, it's not always the most important. But it is integral. So that's the first thing that people should do is really, if they have a winery, and they're thinking like, I would like to sell this at some point, they need to nail that down. What am I creating? And then figure out? You Is that what I think I'm creating? Or what I'm actually creating? Because those two things can be different. Does everything match? Is the experience I'm trying to create? Does that match the wine that I'm selling? Is it matched the prices that I'm selling it at? Does the label match? About the packaging? How about my website? And when people call me on the phone? Does that all is it all consistent?
Ed Mysogland 24:12
So, but when you're making, why when you're when your sub 20,000 cases is a case of cases. So yeah, so So how does I mean, I follow I follow what you're saying, I'm what I'm trying to when I'm trying to reconcile with is, Can Can they, you know, can they create that brand consistency that you're talking about? You know, and again, it's back to the it's back to the wine, you know, so you have a great product. And so how do I how do I make everything downstream? tied together, you know what I mean? And I'm certain that's, that's the, that's the trick in your in your industry is, is you if, if they knew you wouldn't have a job, you know? So
Genevieve Rodgers 25:13
this is why I don't want people to do this. So you start first with the experience, and what you want people to use, what do you want people to have? So there's, there's a winery in Napa called Opus One. And I use it because lots of people know it's, it's, they make a single line, one line, a year period. That and they tell you this is a singular line, it's part of their vision statement is the singular line that transcends generations. That's their vision statement. So, okay, that's what they do. So if you imagine in your head, well, what does that look like? It's going to the place is going to be something you remember, you're going to look at that building go, Oh, that's it. That looks like an homage to wine that looks like a wine museum where the best wines would be stored. Right? Then your price is going to match that. So that's not a $20 bottle of wine. That's a $304 bottle of wine. So all they do a really good job. And it's why I use them is because everything matches. So same, but it doesn't have to be the best of the best. You can have a place where families time families come in, they have a great trip together. Well, what does that look like for a wine, it's gonna be a lower price point, you're gonna have a bigger breath of wine, some of it will probably be sweeter off dry, you're gonna have whites and reds. That's kind of how you progress through this.
Ed Mysogland 27:12
I got it. And I think that's where business owners get themselves in trouble is they're they're looking at volume rather than looking look, look playing the long game and get the experience down and, and the end the money in the, you know, the profit will follow up. That totally makes sense. And part
Genevieve Rodgers 27:31
of the thing is, is something that you kind of, maybe didn't realize you were alluding to at the beginning. Most consumers don't really know a lot about wine. Like you're not unusual. Most consumers don't know a lot about wine. They like what they like they've tasted a wine, it tastes good to them. That's what they know. And so when you think about it in that manner, it's really not as much about the wine itself. Because people don't know a lot about the wine. What they know is that they had a good time. Everybody enjoyed themselves. And, and or someone that they know, recommended this, they probably drank it together, right? And so wine is especially for small wineries really need to get out of and this is hard, because I'm a winemaker, you really need to get out of this idea that is all about the why. Because it's not.
Ed Mysogland 28:43
Okay, that's no, that's, that's, that's great advice. So, you know, you were, we were talking about the farmers earlier, and how, I mean, we've got some pretty funky weather going on, you know, these days, you know, how, how does that affect, you know, the, you know, because one of the things you were talking about, and when we when, when we talked last was how, you know, how important it is to kind of foresee and what what is the outlook for the region. And I guess, as a business owner, you know, you know, I valued companies all the time. And one of the things the tenants is, is what does the future look like for this particular investment? And I'm looking, I'm looking at a winemaker. And they're trying to forecast what the what the, the farmland and the farmer and the climate looks like down the road. So how how do you do that? And how do you pivot if it goes
Genevieve Rodgers 29:55
well, so you know what And the benefits for winemaking is like I said wine, grapes are kind of like a weed, they, they will do well in a climate range. So, so but you do want to target the varieties, that is going to do better in your climate range. And there's a lot of them. And and then in part of it is you go to your, if you're in the United States, you go to your extension program, which works with agricultural and farms and you and you say to them, what's brewing in, in my state and, and you work to make sure that the land is going to be good for grapes, and that you pick the right grapes for it. And then there is some looking forward. And and it depends on how much risk you want to take. If you plant a great right now, you'll get a good crop in five years, the climates probably not going to change substantially in that five years to make this great non-viable, it's still going to be viable, it will still be viable in 10 years, there might be a great that's kind of on the edge of your climate, that you may take a risk on and say I'm going to plant that now. Because I can see what's been happening with with the climate in my region, and this is going to be really good in 10 years. That's, you know, that's a risk. And it depends on how risk averse you are.
Ed Mysogland 31:56
Well, and that's what I was taught. You know, we were talking it was a question I was gonna ask that little down the road was, you know, it takes, especially in, in selling wineries. I mean, you're talking one two years to, to sell it to define the right buyer and to sell it. And then on top of it, the, you know, trying to see into the crystal ball, what my crops are going to look like or what my grapes are going to look like, you know, 510 15 years down the road. And and I guess my question is, how do I lock in the farmer? If you can't do contracts go out that far, or are they one year, and then one year renewals and their
Genevieve Rodgers 32:38
contracts are all over the map. And in contracts and Midwest are very different than contracts in California, where 85% of the wine in the United States. So what is what is common is a multi year contract that is more like four or five years, or one year renewable contract. And, and the contract, you know, the contracts are with the business, but there's a lot of contracts that are really with the owners. So if you're purchasing a winery that doesn't have its own grapes, you want to talk to their great sources and get a feel for you know, do I want to work with these people? Are they going to give me the quality that I need? Are they going to give me the volume that I need? So I can be consistent and have a consistent cash flow?
Ed Mysogland 33:37
Supply? Wouldn't someone do? I mean, why would if I'm a buyer, and you're a seller, and I meet, I meet your, you know, your farmer, and I like him or her and, and, you know, we kind of we kind of get along? What's I mean, why wouldn't they do want to do business with me? I mean, is it all economic? It's not because we were talking about this the other day about Goodwill?
Genevieve Rodgers 34:03
Yeah, and I am, you know, it's hard for me to answer that question. Because I've seen, you know, I've seen vineyard owners that say, I want a five year contract. And let's write out how we're going to value the crop. So that it's reasonable for everyone. I want to do that and and I want you to take all of my crop. Everything I grow, I want you to take and then I've seen some growers who say, I don't want I want like five buyers every year. I don't want one buyer because I don't trust that they're going to do right by me every year. And so it's very individual. And, and part of it also depends on where you're located and what experience those growers have. makes a big difference too. And when I say experience, I mean experience working with binaries.
Ed Mysogland 35:07
Yeah, I follow? Well, like I said, it's one of those things. Boy, yeah, everything is sizing up risk. And, you know, the prospect of losing your supplier? That because, again, it's back to the debt, I guess my question then becomes, does the does the farmer have the leverage over the business owner or the the winemaker who has leveraged in
Genevieve Rodgers 35:41
a scarcity? Really, you know, if you're the only one that makes it and you're the only grower, you're the only game in town. If you're one of 50, then it doesn't. So that's where it really starts to make a difference. And then it's personality. You're working with people, and it's getting a good, you know, good mix that both people work together.
Ed Mysogland 36:09
Okay, show what what a typical owners look like, these days, what's the owner of a winery so
Genevieve Rodgers 36:17
small for small winery? Um, you know, it's all over the map. If I look at, like my clients, I have clients who started wineries who are retired, they made some they made money. And, and one, you know, one gentleman had just opened, it was just opening a winery in New Jersey said, you know, Genevieve, I spent my career making money, and doing things for other people. Now, I want to do something for me, this is for me. So that is one group. Okay, another group is people, I get a lot of people who are younger than I am. So they're in they're in their 20s and 30s. I mean, I guess at my age, a lot of people are younger than I am, but they're in their 20s and 30s. And they, some of them legacy farms, in, in their family. And, and then and so now they're gonna turn left a legacy farm that was growing, you know, as growing corn or soybeans or something else, and change the way that farm works. And then it's all over the map. Usually, it's people who have liked wine. And who wants to do something different, and they want to do something that they're going to love. And that's really important if you're going to buy a winery, because people who buy wineries unless you buying it, for someone else to run, it will become your life. There's really not an in between. So you want to love so?
Ed Mysogland 38:12
Again, it so if so it seemed it strikes me that that the avatar of somebody that wants to get into this business is a high net worth individual that is either on one side of the scale, meaning they're, they're on, they're at retirement age, looking for kind of the next the next chapter of their life, or they're on the younger side, and they're trying to set the world on fire, but yet they have the net worth to pour into something like this. Is that
Genevieve Rodgers 38:54
true? For the most part, I find that the people who are younger who are starting this, they're really bootstrapping it, but they don't have to purchase the land. And so that makes a huge difference in how much money in capital you just started. And you can do that. But, but I think you're right, for the most part, we're gonna you're gonna be looking at people who who have equity and have money to spend and either or have equity in have a group behind them that has the capital
Ed Mysogland 39:38
okay. So does it so, how, I know you just alluded to private to private investment. I mean, do these things get financed through conventional means like through the SBA or through through conventional banks or or How are you familiar with that? And I know I'm I'm kind of
Genevieve Rodgers 40:04
jumping all over here, but I'm just kind of curious to see how that works bigger wineries, that the bigger startup wineries do get with commercial banks and conventional loans. For smaller wineries, it's harder to it's, you really have to make the case. And it is one of the things that I do so I create 10 year financial forecasts that you can take to a bank. But you have to take it to a bank who understands what's going on, because this is not something that you can just turn around the next year. Right, it's in this is a long term project. So wineries are not wineries, start up wineries do not make money the first year or the second year. And they start getting to, to the black on an annual basis in their third or fourth year. But it does take 5678 years to actually get truly profitable, where you paid back your loans and all of your capital, and you're actually making money now.
Ed Mysogland 41:33
Now, are those capital sources, exclusive to the industry? I mean, because my my point is, I'm certain there's a lot of people that are probably listening, saying, you know, what, if I get a buyer, I'm gonna call Genevieve because she knows where the capital is, you know, that the you know, I have lenders that specialize or understand this industry and the risk profile,
Genevieve Rodgers 41:55
there are lenders, there are people that specify that do is let me just say, it's not my forte. But yeah, but yes, there are most of them, a lot of them are in California, or their ad, their ag based fix, you can get can qualify for SBA loans. It's, it's sort of a hard sell for you can do it and I've worked with the SBA. But you really, you know, when you're, when you're in the you probably have had this experience, like when someone's trying to get funding for a project. You're going to be looking if you're buying a winery, first you're looking at their cash flows. And do they have positive cash flows for years, not just this year? But do they have a history of positive cash flows? That makes it goes a long way to a buyer saying, oh, you know, or a lender saying, Yeah, I'll lend that to you. Because like looking at their years of positive cash flow, if you're starting up Sure. That's a more difficult sell. Yeah.
Ed Mysogland 43:15
Sure. It always is. I get it. Um, I'm bumping up on time. Do you have do you have time for two more questions? All right. So on the Coronavirus, you know, how did how did that affect the smaller business that didn't affect the supply chain as much as it did for a lot of the larger business?
Genevieve Rodgers 43:46
High chain for the larger one for for smaller wineries, primarily at the at the end of the day of making wine which is bottling. small wineries have have and continue to have a very difficult time getting bottles. And that's been a problem. Yes. And it's been a really substantial problem that is ongoing. Because what is happening in the Ukraine is affecting the cost of energy in Europe where a lot of the bottles are made and bottle making is high energy usage. And so not only are costs going nowhere, but the suppliers is going down. So that's that's been the biggest as far as supply chain that's hit the industry is is in bottles. The pandemic affected the industry differently in that it closed a lot of tasting rooms and the ability to for people to come in to your to your tasting room. Oh, and so wineries had to pivot and wineries that did well. Did pivot, they kept in touch with all their consumers. They worked their wine club, they worked online sales and classes and meet the winemaker. And they did all that. And the industry in the United States actually grew through the pandemic.
Ed Mysogland 45:27
Yeah, that, and that totally makes sense. Because one, and as you know, one of my questions was, you know, as a, you know, as restaurants, as restaurant usage is declining, the consumer usage is growing, is growing. Right. And so, yeah, and, and to be, and based on what you were saying, on the the areas of, of, you know, the areas where you create value, you know, through the tasting room, through the through online, and through the wine club. I mean, it probably the pandemic, for the smaller wineries, if you played it right probably did, it did pretty good for you that your margins actually probably improved.
Genevieve Rodgers 46:17
The wineries, you know, the small wineries that were able, that had a wine club, to start with, and build consumer loyalty, and built interactions with their, with their consumers. Over the years before the pandemic, they were able to leverage that and continue to give real value to their customers who stayed with them. And not only did they stay with them, but they bought more wine. And, and their cost basis then went down because they didn't have an employee in a tasting room and have to staff that now they're staffing, someone shipping wine and moving wine as opposed to tasting room. So the wineries that did that really well, like they made out because now all of that infrastructure is still good. It's still viable, people still buy wine over the internet, they still want that interactions. So if I'm, you know, if I'm now looking and I'm a wine, a winery per buyer, I would look at, well, you know, show me how you did during the pandemic, like, what is your wine club, like, now? How are your interactions, because those have real value?
Ed Mysogland 47:44
But conversely, if I'm the buyer, and I'm saying, Oh, you didn't capitalize on the wine club, you didn't capitalize on online, you know, from from a, from a buyer standpoint, am I not sitting there saying, Wow, I have a tremendous opportunity to take advantage of something you didn't? Or has that ship already.
Genevieve Rodgers 48:04
Not past that opportunity is always there. And really, from a buyer point of view, then what you would do is you would look at and they say, you know, wine club is based on the brand, the value of the wine club is is is how you value the bank blank. Sorry, how you value the brand. And so, okay, if they haven't done that, then the value of the brand, which is this, you know, what we call this goodwill, amorphous value that we that we put on, we're selling something that declines. And, and most likely, you're going to come out with a new brand. And, and do something else. Okay. Yeah, it does give you that opportunity. But you're starting your starting point, though, is is then lower from a sales perspective.
Ed Mysogland 49:02
Right. No, I, but if I'm the seller, you know what, I didn't take advantage. You know, I didn't, I chose not to do what, maybe I wasn't aware of what to do. But nevertheless, I mean, that's where the value is. And, and you talked about this a little bit when we originally talked was this is this is the goodwill component is tends to erode very quickly, meaning that there you've got, you've got inventory, you've got the equipment. And now you have what what we're talking about is goodwill, and then goodwill separates into personal Goodwill or the branding. And then you have corporate goodwill is you know, the earnings, the earnings that you can forecast. So, where I was going with this is I'm Curious to know. If I'm a if, if you're coaching a seller, how do I, how do I? How do I sell that I have that goodwill, because of the good the equipment is what it is, you know, how do I? How do I demonstrate that I do have the goodwill? So I know you said, you know, I've got I'm certain it's mailing list. Now wine club, but I mean, what what other things in it? How am I going to withhold with withstand the scrutiny of a buyer? Well, how would you coach a seller and so scenario
Genevieve Rodgers 50:39
for the goodwill, you're really you're looking at a couple of things. One, you're looking at the wine club, which is, which is going to get, which is an annual income that is really easy to forecast, and put a value on. Okay. So that's a big piece. And that's probably going to be a significant portion where you say, look, I've got this value, because I have a wine club, and it's this size. Another thing that you're going to look at is how many people walk through your door. And if you're going to sell your soul, your winery, you should be counting those people. And literally telling every single person who walks through your door, because there's a potential sale. And as a winery consultant, I can tell you what that potential sale is. There's a there's a real value. Yes, you many people walk through your door, you may take advantage of it or you may not. But I think that's a piece of the goodwill. And that has to do partly with your location, partly with your marketing, how you're branded how people know you. So those would be the two biggest things that I would that I would say, like maximize your value of those two things, because you can really sell those. And that's those have, or that goodwill value. Got
Ed Mysogland 52:24
what? what do what do fires look like? I mean, I know we said what, here's what a seller looks like we've got we've got our, you know, we're on both sides of the spectrum. So buyers these days is at the same avatar Are you seeing are you I guess my The first question is, are you seeing winery sell, and to who's doing the buying?
Genevieve Rodgers 52:52
So small wineries? The reality is most small wineries don't actually sell well. And and you talked about this, like it takes a couple of years, most winery small wineries don't actually sell well. And most of them just close. They haven't done. They're not they don't have these cash flows. Right? They haven't done either they don't know. Or they were not able to for whatever reason, they don't have this. And so their brand, the winery brand doesn't have a lot of value. Now their property has value. The buildings have value. Their equipment, may or may not have value. Unfortunately, a winery equipment. I was asked today by someone who's who's starting a winery and he says, Well, how long do I keep this? And I told him I said, Well, I can hear your children in the background. They're the ones who will replace this equipment that you're buying. That's the lifespan of equipment and children were young. So okay. So I was we were talking about like, what does this person look like? People who are buying is one of those wineries don't sell those, that's just the reality. Most wineries close the wineries that sell or are selling to someone who wants this as a lifestyle. Because it is a lifestyle, you may be selling it to someone who has made money who has been a high real high achiever, like a lawyer or a surgeon or someone who's been in construction or building and and they've done something for a long period of time. They have equity and they have capital. Now they want to do something for them. And that's the kind of lifestyle that they want to lead. Those really other buyers?
Ed Mysogland 55:04
Okay. Back to the sellers, though, if I'm, if I engage you and I have two questions that kind of go hand in hand. So can you coach me? If I'm a if I'm a business owner? Can you coach me into making my my winery a marketable asset to a buyer? And if so, how long does it take? And then the I guess the third question is, how do I how do I work with someone like you? It seems to me like you're going lots of places, how do how do we work together? So
Genevieve Rodgers 55:42
as a seller, you're a seller, and you want to sell your winery? i It's a long term process. Unless your winery is so sale ready. Okay. Yeah, so what does that mean with your sale randomly, what that means have years of cash flow that are positive, that are consistent, you can show that you have put in money to keeping up your equipment, to keeping to training your staff, to your facility, like you have been doing ongoing maintenance, and everything is in real working order. You've got those two things from from just a straight production business side. Okay, the next thing that you need to have is you need to have Wi Fi that is what what we call the industry clean, it needs to be good wine. And so it needs to be free of faults. Because faults are a winemaking problem that make the wine not taste good to consumers. They also wine that has has no value to a buyer. So if I've got a whole bunch of wine and tank, but that one has faults, that one has no value to seller, so it's that bad. So I would work with you to fix that. That takes one to two vintages minimum because you have to get through that wine. So you do those things and then work to build your wine. What are you still Vinci? What is that? Okay, sorry about that what grapes are harvested one time a year in the United States. We, we put the number the vintage, which is the year that you see on the bottle is based on when we pick those grapes. So right now the vintage that is in people's wineries is 2022. But what you're seeing coming out in the marketplace, maybe 2021 and 20. God so it takes a while. That makes
Ed Mysogland 58:13
sense. Yeah, thanks.
Genevieve Rodgers 58:14
So if you've got if you want to get there Okay, so you've got to get through a couple of vintages, which is yours. To to get sale ready.
Ed Mysogland 58:24
Okay, so I need a couple of years with you. Right? To get sale ready, okay. And, and during that time, you're going to work on on fault you're going to work on on how to improve cash flow and how to shore up the the online, the wine club,
Genevieve Rodgers 58:43
and I taste right. And this depends on what people need, but some of it, I come on site. So I would come on site, we taste all your wine, every single thing you have. And we would talk about what's going on where you need to go and what and how you get there. And then some of it is one hour sessions where we talk on the phone and you say okay, Jeremy, this is what I've been doing. This is where I am. And, and I say okay, well here's your next step. Like this is where you need to concentrate. What questions do you have? How can I help you understand? And then and then you as as the winery owner, you then have to execute?
Ed Mysogland 59:31
Got it? Okay, so. So I guess. And I always kind of conclude every podcast with you know, what is the one piece of advice that you would give that would have the most impact on somebody's business, and I'm assuming it's February, but
Genevieve Rodgers 59:50
if you want to go into this industry or you're in this industry, if you've got a winery, you want to start a winery, the most important thing that you can do is fully understand write down and encompass? What is the experience you're creating? How and how are you creating it? With every single thing you do that is in this industry that is going to be the most impactful for your business in the wine industry.
Ed Mysogland 1:00:29
Awesome. So, how, number one, how do how do people connect with you? And number two? How, how does your process so I do I work with Jennifer
Genevieve Rodgers 1:00:39
best, where's my website? It's winery dot consulting is my website. Okay? So or if you go to Google, and you type in winery consultant, I'm at the top of the list. That is the easiest way to find me, and then you and then you go on my contact page and say, and it sends me an email and says, Genevieve, here's what I've got, let's connect. And then we set up a one hour phone call or video conference. And that's the way that usually one hour works. And people, you know, they see like, this is what I need. And I'll and we'll decide, like, am I the right person for you. Because it's important to me that we get are the right fit, and then go forward. And it depends on what you need. You know, sometimes people need hourly work, sometimes they may need me on site for a day, two days a week. I'm flexible in that. And and then we go from there.
Ed Mysogland 1:01:49
Okay, so you scoped the work. And this is what I need you scope it this is this is how this is kind of the mechanics of and the deliverables. And that's
Genevieve Rodgers 1:01:59
my background, too. So it's like, my deliverables here as well. This is how much a cause like that's what I do.
Ed Mysogland 1:02:14
I get you, Well, gentlemen, I'm telling you, there's i, this will probably be we're proud of bumping up into 80 episodes. And I have normally I'm, I'm, I'm fairly versed at, at a lot of the things that I'm talking about, but you enlighten me so much about, about, about how this this world works. And my buddy John is, you know, he's, he's our, he's our wine guy, you know, you're talking about the experience, he's the guy that no one knows what we're to drink other than him. And he hooks us up every time and so, so I'm so grateful that you you have now given me something to talk to him about. Because this is awesome. And I'm certain that the our listeners have have learned a lot because it What a unique business. You everybody, you know, everybody drinks a lot of wine. We end to learn how how this is made and the mechanics behind it. I hope, I hope we'll we'll find some some people that are that are willing to give it a go and get get into this industry. So thanks. Thanks for all your time. I know we went long, and I'm certainly grateful that you were willing to well, it was like a couple extra minutes with you.
Genevieve Rodgers 1:03:33
I, since I love what I do, and I love the industry that I'm in it's really easy to talk about it.
Ed Mysogland 1:03:44
Yeah, well, you made it super easy for someone like me to understand it and, and if I if I can understand it, others will too. So I have everything. Everything about you will be in the show notes. So so don't hesitate. You know, those of you listening don't hesitate to to look to the show notes because everything that we've talked about and more will be will be there. So all right. Well, Jeremy, thank you so much. And I'm so happy it was a pleasure finally got together very happy to be on your
Genevieve Rodgers 1:04:19
show. And it was fun.
Ed Mysogland 1:04:26
Friday. Thank you for joining us today on the how to sell your business podcast. If you want more episodes packed with strategies to help sell your business for the maximum value visit how to sell a business podcast.com For tips and best practices to make your exit life changing. Better yet subscribe now so you never miss future episodes. This program is copyrighted by miso Inc. All Rights Reserved.
Transcribed by https://otter.ai
Genevieve Rodgers, Owner, PEMDAS Winery Solutions
Award-winning winemaker, consultant, engineer, and professed math geek Genevieve Rodgers of PEMDAS Winery Solutions joined host Ed Mysogland on this episode of How To Sell a Business Podcast. Genevieve gave an overview of the major roles in a winery business, the key elements that impact the winery's success (it's not just about the wine), how wineries get financing, what questions buyers should be asking, how the winery creates value, risk management, and much more.