Introduction
The success of a micro-distillery business directly depends on its ability to understand and measure its key performance indicators, or KPIs. These KPIs relate to several different elements of the business, such as customer retention rate, revenue growth rate, volume of distilled spirits sold, operating efficiency ratio, profitability margin, awareness of the brand and the cost of production per unit. As companies strive to achieve their goals and objectives, it is important to track, monitor and calculate these KPIs over time to ensure success. In this blog post, we’ll discuss the seven most important KPIs for a micro-distillery business, how to track and calculate them, and how to use them to evaluate your business performance.
Customer retention rate
Definition
Customer retention rate is a metric that measures the percentage of customers who continue to buy from a business over a certain period of time. It is a measure of customer loyalty and is used to gauge a company’s success in building customer relationships.
Benefits of Tracking
Tracking customer retention rate is important for micro distilleries as it provides valuable insight into customer loyalty and satisfaction. By tracking customer retention, micro-distilleries can identify which of their products are most successful, which strategies are working, and areas need improvement.
Additionally, tracking customer retention rate can help micro-distilleries identify trends in customer behavior and develop strategies to retain customers. This is especially important for micro-distilleries, as they typically have fewer customers to work with and need to maximize their efforts to ensure customer loyalty.
Industry Benchmarks
The industry benchmark for customer retention rate varies by industry. For micro distilleries, the average customer retention rate is around 70-80%.
How to calculate
Calculation example
For example, if a micro distillery had 100 customers at the start of a 6 month period and 90 customers at the end, the customer retention rate would be calculated as follows:
Tips and Tricks for KPIs
- Track customer retention rate regularly to measure customer loyalty.
- Compare customer retention rate with industry benchmarks to identify areas for improvement.
- Identify strategies to increase customer retention, such as loyalty programs or discounts.
- Measure customer retention rate across different product lines to identify which products are most successful.
- Analyze customer feedback to identify areas for improvement and strategies to increase customer loyalty.
Revenue growth rate
Definition
Revenue growth rate is a measure of the percentage increase in revenue from period to period. It is used to assess the performance of a micro-distillery business and can be used to compare performance against industry benchmarks.
Benefits of Tracking
- It gives an indication of whether a business is growing or shrinking over time.
- It can be used to identify problems and opportunities in the business.
- It can be used to monitor the effectiveness of marketing and pricing strategies.
Industry Benchmarks
The average revenue growth rate in the micro-distillery industry is 5-7%. However, the rate can vary greatly depending on the size of the business and the market in which it operates.
How to calculate
The revenue growth rate is calculated as follows:
Calculation example
For example, if a micro distillery had revenues of 0,000 in period 1 and 0,000 in period 2, the revenue growth rate would be calculated as follows:
Tips and tricks
- Track the revenue growth rate on a monthly basis to get an accurate picture of performance.
- Compare the rate of revenue growth to industry benchmarks to determine whether performance is above or below average.
- Focus on increasing the revenue growth rate to ensure the business grows.
Volume of distilled spirits sold
Definition
The volume of distilled spirits sold is an important KPI metric for micro-distillery businesses because it measures the total amount of spirits produced and sold by the business. This metric can be used to measure the success of a micro-distillery’s sales and marketing efforts, as well as its overall performance.
Benefits of Tracking
Tracking the volume of distilled spirits sold can provide valuable insight into the performance of a micro-distillery. It can help identify areas of success, as well as areas that need improvement. Additionally, tracking this KPI can help the company better understand the effectiveness of its marketing and sales efforts and identify opportunities for growth.
Industry Benchmarks
The industry benchmark for volume of various spirits distilled will vary depending on the type of micro-distillery and its target market. Generally speaking, micro distilleries should aim to sell at least 10% of their total production in order to be considered successful. In addition, the micro-distillery should strive to sell 20% of its total production to remain competitive.
How to calculate
The volume of distilled spirits sold is calculated by subtracting the amount of distilled spirits in inventory from the amount of distilled spirits produced. The formula for this calculation is as follows:
Calculation example
For example, let’s say a micro-distillery has produced 10,000 liters of distilled spirits and has an inventory of 5,000 liters. The volume of distilled spirits sold can be calculated as follows:
Tips and Tricks for KPIs
- Regularly analyze data to identify patterns in the volume of distilled spirits sold.
- Try to identify ways to increase the volume of distilled spirits sold. This could include implementing new marketing campaigns or improving product offerings.
- Compare micro distillery’s performance to industry benchmarks to ensure it remains competitive.
Operational efficiency ratio
Definition
The operational efficiency ratio (OER) is a metric used to measure the efficiency of a micro-distillery business. It is the ratio of total operating expenses incurred to generate revenue, to total revenue generated. This ratio measures the effectiveness of the company in controlling its expenses in relation to its income.
Benefits of Tracking
Tracking OER is important for micro-distilleries because it provides insight into how effectively the business is managing its operating expenses. By understanding OER, micro-distilleries can identify areas of their business where they can reduce costs, leading to increased profitability.
Industry Benchmarks
The average OR for micro-distilleries is around 40%. This metric can vary depending on the size of the business and the type of products they produce. Smaller micro-distilleries generally have higher OERs due to their limited resources compared to larger companies. It is important for micro-distilleries to benchmark their OER against industry benchmarks to ensure they are managing their expenses effectively.
How to calculate
EDO can be calculated by dividing total operating expenses by total revenues. The formula is:
Calculation example
For example, a micro-distillery has total operating expenses of 0,000 and total sales of 0,000. The OER of this company would be 40%:
Tips and tricks
- Regularly monitor the OER to identify areas of opportunity for cost savings
- Use industry benchmarks to compare your OER to other micro distilleries
- Analyze operating expense components to identify areas of inefficiency
Profitability margin
Definition
Profit margin is a KPI (key performance indicator) that measures the amount of profit a micro-distillery business makes as a percentage of its total revenue. It is calculated by subtracting total costs from total revenue, then dividing the result by total revenue.
Benefits of Tracking
Profit margin tracking can help micro-distilleries measure their success, set goals, and identify areas for improvement. It also provides a useful metric for comparing performance over time periods and/or against industry benchmarks.
Industry Benchmarks
The average profit margin of micro-distillery businesses is usually between 10% and 15%. However, this can vary greatly depending on the type of product produced, size of business, and geographic location.
How to calculate
Profit margin can be calculated using the following formula:
Calculation example
For example, if a micro-distillery business has total revenue of ,000,000 and total costs of 0,000, the profit margin would be calculated as follows:
Tips and tricks
- Regularly monitor the profit margin to ensure that the micro-distillery industry stays on track.
- Focus on reducing costs while maintaining sales to maximize profitability.
- Compare profitability margin to industry benchmarks to identify areas for improvement.
- Use economy techniques such as bartering and buying in bulk to reduce costs.
Brand awareness
Definition
Brand awareness is a measure of how well known a micro distillery company is to its customers, target market, and industry peers. It is a key indicator of a company’s success and can help determine future growth potential.
Benefits of Tracking
Tracking brand awareness is important in the micro-distillery industry. It helps identify areas for improvement in marketing efforts, customer service, and product development, and can be used to measure the effectiveness of current strategies. It also allows business owners to better understand their customers and target markets and make informed decisions about where to focus resources.
Industry Benchmarks
Industry benchmarks for brand awareness vary depending on the size and scope of the micro-distillery business. Generally, a successful business should have a brand awareness rating of at least 70%, which means that at least 70% of its target market are aware of the business and its products.
How to calculate
Brand awareness is calculated by taking the number of people who know about the micro-distillery industry and its products, and dividing it by the total number of people in the target market. The formula is:
Calculation example
For example, if a micro-distillery business has 100 customers who are familiar with the business and a total of 200 customers in the target market, brand awareness would be calculated as follows:
Tips and Tricks for KPIs
- Develop a strategy to increase brand awareness and track progress.
- Measure your brand awareness in different target markets.
- Analyze customer feedback to identify areas for improvement.
- Engage potential customers on social media.
- Incorporate customer testimonials into marketing materials.
Production cost per unit
Definition
Cost of production per unit (CPPU) is a key performance indicator (KPI) that measures the cost to produce a single unit of a product or service. It is calculated by dividing the total production costs by the number of units produced.
Benefits of Tracking
CPPU tracking is beneficial to micro-distillery businesses as it helps them identify areas of cost savings. This metric also helps in forecasting and budgeting, as it provides an accurate gauge of the cost associated with producing a product.
Industry Benchmarks
The industry benchmark for CPPU varies depending on the type of product or service produced. Generally, a lower CPPU indicates that the company is more efficient and is able to produce more for less.
How to calculate
The CPPU is calculated by dividing the total production costs by the number of units produced. The formula is:
Calculation example
For example, if a micro-distillery company has total production costs of ,000 and produces 100 units, the CPPU would be . The formula would be:
KPI Tips and Tricks
- Track CPPU regularly to identify areas for improvement.
- Compare CPPU to industry benchmarks to ensure it is in line with competitors.
- Consider factors such as labor costs, material costs, and overhead when calculating CPPU.
Conclusion
The success of any micro-distillery business depends on its ability to measure, track and calculate the most important KPIs. As these KPIs vary from company to company, the most important for a micro-distillery are customer retention rate, revenue growth rate, volume of distilled spirits sold, operational efficiency ratio , profit margin, brand awareness and cost of production per unit. By keeping track of these KPIs and monitoring and calculating them regularly, distillers will be able to better control their operations, set achievable goals and confidently measure their success.
To optimize the performance of a micro-distillery and achieve desired goals, distillers should consider investing in KPI tracking software that allows them to automatically monitor KPIs over time. This will allow them to have more visibility into their performance and make effective changes sooner.
- Home
- Customer retention rate
- Revenue growth rate
- Volume of distilled spirits sold
- Operational efficiency ratio
- Profitability margin
- Brand awareness
- Production cost per unit