The interior of Falling Sky Brewing. (Source).
A solid business plan, learning from experience, monitoring the right internal numbers, trusting your judgment, and staying open to constant change: those are the key ingredients for making a successful business that can be scaled and improved.
What’s common between them? Each one relies on a mix of data and an owner’s willingness to stay in the know, not just on operations, but on the right numbers and insights.
That’s been Rob Cohen’s experience, anyway. The restaurateur opened his first coffee shop in Ithaca, New York, in 1994. Cohen ran the coffee shop and two restaurants until 2008, when he and his family relocated to Eugene, Oregon. Inspired by the region’s devotion to quality food and craft beer, Cohen got involved with a small group of entrepreneurs and decided to open their own brewpub.
Falling Sky Brewing opened its first location in 2012. They’ve since added two more locations and staff 75 employees (35 full-time and 40 part-time). While each location is under the Falling Sky brand, the downtown brewpub, the deli in a popular neighborhood, and the pizzeria in the University of Oregon student union building are unique.
It’s a recipe that has garnered Falling Sky local accolades including “best bar grub,” and “best place to drink in the sun,” along with national recognition from a recent Good Food Award. Yet behind the award-winning beers, charcuterie, breads, pickles, and more, Falling Sky’s success comes down to solid numbers and a willingness to keep improving.
Why it’s easier than ever to make nimble business decisions
The key is having access to good data—and actually reviewing and understanding it—something Cohen says is easier than ever.
“Point-of-sale data, and feedback from customers on-site and through social media is huge for helping you determine your real direction,” he explains. “We have better bookkeeping data from banks and such, so we can make more nimble decisions. It used to be that it might take a month to reconcile things with your bank before you could make a critical decision about what to change in your operation. Now we can do a quick download and make more informed decisions faster.”
Experience with staff, banks, and restaurants on two coasts has taught Cohen to rely more on hard data than what people tell you based on their impressions or recollections.
“I talk to lots of different people. Going by personal anecdotes—it will almost always take you in the wrong direction,” says Cohen. “Data tells you the truth. Chefs can think they are selling a ton of something, but it’s something else.”
The one thing that makes you ask critical questions
A baker once said something to Cohen that sticks with him: “Planning and forethought bakes bread.”
Planning and forethought bake a business too. They come into play before profitability, and even before a business opens its real or virtual doors.
“A good business plan tells your story, makes it interesting,” says Cohen. “It also helps you make projections, and that forces you to get the data you need.”
For the startup, Cohen and his partners focused on a five-year outlook. They wanted to have some understanding not just of their own responsibilities, but of the management structure numbers they’d need to see in order to grow. Today they focus on looking out one year, three years, and five years.
“I always try to think about how things can grow organically, instead of trying to craft a plan too much,” says Cohen. “We like to see where things take us. When the UO opportunity came up, we never normally would have expanded that quickly, but we knew we had information that we could use to help us figure out how to make it happen.”
Cohen also recommends observing area businesses similar to your own, both during startup and as you gain experience with your own operation. “Understand what’s successful and not successful about them,” he says. “Learn from the low-hanging fruit right in front of you, down to your own experiences as a customer.”
Reality will replace your initial numbers
Cohen and his partners recently completed a regular review and update of Falling Sky’s business plan. They see how the business has both followed their initial vision—but also where they’ve adapted along the way. They also can make better decisions, now that they have real data that reflects the day-to-day realities of their operation, instead of industry averages or more general-purpose numbers.
Those numbers give an entrepreneur an initial point of reference, but it’s important to remember that along the way you’ll need to update and replace those numbers with ones that reflect the reality of your actual business.
When developing Falling Sky’s original business plan, Cohen was able to draw “on my own data, because I’ve run two restaurants and a coffee shop. I had internal percentages I used to make projections from.”
But that didn’t mean he knew the data particulars for his new home on the West Coast. For that, he and his partners turned to research to shore up their business plan and make projections on everything from rent to revenue.
“We did demographic research for the local area, and we got information from brewers on the beer side too, because they had done a lot of research on the costing and production, such as how many beers we needed to sell to justify two brewers,” explains Cohen. “That helped us know how much we needed to start with, what made sense, and what revenue we needed to see to know when to scale up. We spent a lot of time researching that. That’s why doing a business plan is so important. It makes you ask those questions.”
The key is to understand that over time, real numbers from your operation will replace your business plan’s initial numbers. That’s a good thing: your business plan can more accurately reflect your current business, and give you a better outlook. For Falling Sky, that’s been key in helping them open their subsequent locations—both of which came as the result of serendipitous opportunities for locations with great potential.
“We’ve taken our own information and made projections over a longer period of time so we can plan accordingly,” says Cohen. “We get feedback from a financial perspective, and that helps us do things, such as our last expansion at UO. We tripled our brewing capacity, opened a third location, and relocated our fermentation supply shop. We could only do those things because we solidly planned for it, and in the long-term, it will save us a ton of money.”
What are your business’s most crucial costs and data points?
Every business has to figure out the key metrics that tell owners the most crucial information about where the business is and where things may be going.
“As far as restaurants go, there’s two things that are your controllable costs: labor, and costs of goods sold, or COGS. Those are the two things I track regularly,” he explains. “If those are in check and where you want them to be, you will be profitable as long as you are selling enough.”
Given the labor-intensive nature of restaurants, Cohen suggests keeping labor costs around 32% and COGS around 30%. “COGS is everything. Look for different options, compare different vendors, and make those vendors compete with each other.”
Rent is the third factor where you have some control. Cohen suggests keeping rent to under 6%. “Look at those three things, and odds are you can know if a restaurant is successful.”
Other expenses need to be tracked once or twice a year, such as laundry, utilities, and credit card processing fees. “Make sure they’re good,” says Cohen, “but they’re not really in your control.”
Improve what you have
After rapid expansion over six years, Cohen and his partners can now improve and optimize day-to-day operations.
“I’m focusing on all aspects of how we’re working ourselves, how we’re streamlining menus for the kitchen, which is quicker for customers and less wasteful for food and labor, and make better specials to keep things interesting,” says Cohen. Falling Sky is also investing in better staff training, internal policies, and new company-wide healthcare and retirement programs.
“Those things help you have less turnover and happier staff. That leads to better service and happier customers. You also have a good message to sell,” explains Cohen. “I’m focusing on those things to make everything run better.”
Good decisions are a marriage of systems data & customer feedback
Ultimately, good decisions come from a combination of hard data, anecdotes, discussion, and trusting your own experience and judgment. Falling Sky has found data more plentiful, accessible, and useful than ever—and that’s been paying off for them in terms of business decisions, expansions, and optimizations.
“There are so many data streams coming at us,” says Cohen. “We have a POS. We have regular reports of what we sell for every item, nightly, weekly, monthly, and we look at that for what’s popular and how we need to change our menu. We have things like Yelp, Google, and Facebook, where customers give feedback directly.”
Staff asks for feedback from customers while they’re at a Falling Sky location, and that gets noted down in a manager log, says Cohen. “Managers log all feedback and review it each day, so we can communicate with one another, know what people are enjoying and what they didn’t, know if something took too long.”
The ultimate data, though, also comes from the owner’s own observations. That comes only by being on site and seeing how things are going for staff and customers. “I try to go to each location each day I’m around,” says Cohen.
Doing so helps him look at both “the macro, such as scheduling, but also the micro, the individual customer experience,” he explains. “You have to think big and small, all at the same time.”
No matter how many data points a business owner can access nowadays, though, it all comes down to a very simple fundamental.
Before Cohen started his first coffee shop in Ithaca, he met with a friend of his father’s, a “successful restaurateur” who was behind 16 restaurants. That friend gave him a key piece of advice that Cohen still works toward each day.