THROUGH THE GRAPEVINE:

Exploring the world of buying a winery in Michigan

Buying or selling a Michigan winery is a unique journey, where passion, business acumen, and an appreciation for the winery lifestyle converge.

Wineries possess distinct characteristics that set them apart from other businesses, as their focus extends beyond profitability and value creation.

While most businesses strive to provide exceptional products or services, owners of wineries are deeply committed to producing fine wines. They invest significant time, effort, and expertise into perfecting their craft, ensuring every bottle carries the essence of their passion and dedication.

There are a diverse array of individuals who are drawn to winery ownership:

Wine enthusiasts turned entrepreneurs. Many prospective buyers are wine enthusiasts who have found their passion for the grape evolving into a desire to create their own wines. These individuals seek the joy of producing fine wines that can

By Curtis D. Kuttnauer, columnist

be shared with others, combining their entrepreneurial spirit with a deep appreciation for the artistry of wine making. Lifestyle seekers. Some prospective buyers are enticed by the romantic lifestyle associated with winery ownership. The draw of vineyards, stunning landscapes, and the tranquility of rural living beckon those seeking a change of pace. Partnerships of high net worth individuals. In the realm of winery acquisitions, partnerships of high net worth individuals often come into play. While their primary focus may not be generating significant profits, they understand the value of the real estate will appreciate over time, making it a sound investment. These partnerships seek a balance between enjoyment, capital infusion, and the long-term potential of the winery.

Strategic acquirers. Existing winery owners seeking expansion opportunities are another type of buyer. These strategic acquirers recognize the value of adding additional brands, accessing more productive vineyard capacity, expanding production capabilities, or establishing presence in new locations. They bring with them a deep understanding of the wine making industry and a vision for growth.

Wineries place immense importance on growing high-quality grapes. Some even prioritize organic and/or SIP ings multiples, and projected cash flows. However, when it comes to wineries, value extends beyond these traditional measures. While some wineries boast profitability, many operate on thin margins or even face losses.

(sustainability in practice) certification, aiming to cultivate vineyards that harmonize with the environment. These priorities usually are at the expense of achieving higher profitability, as the costs are greater and there is a price elasticity to wine being sold.

Assessing the value of a winery requires

Moreover, many wineries have diversified their revenue streams beyond wine sales. From vineyard Airbnb accommodations to hosting private events, winery owners have tapped into these resources to build value in their enterprise. These additional streams contribute to the overall valuation, infusing depth and resilience into the winery’s financial landscape.

In the realm of Michigan wineries, buying or selling is not just a business transaction – it is a journey infused with passion, creativity, and a love for all things wine. The distinct characteristics of wineries, including their commitment to excellence, devotion to grape cultivation, and the tasting room experiences set them apart from other businesses.

The tasting room is also a unique cost center. Winery owners create spaces where guests can immerse themselves in the world of wine. From knowledgeable staff to breathtaking views, the sensory journey gives visitors unforgettable memories. For these factors, winery ownership offers a unique lifestyle, combining work and pleasure in a way that few other businesses can match.

Winery valuation beyond numbers.

In the realm of business, valuation often revolves around numbers, earn - a different approach that balances assets and intangible elements. Tangible assets, such as land, fixed assets, and inventory are the major elements of a winery’s valuation. However, goodwill also contributes to its ultimate valuation.

Goodwill encompasses the carefully crafted brand reputation, the unwavering loyalty of customers – especially those within wine clubs – and the established distribution channels that bring their wines to enthusiasts far and wide. This intangible asset weaves together trust, admiration, and anticipation, giving a winery its unique position in the market.

Valuing a winery encompasses the interplay of assets, goodwill, and diverse revenue channels, painting a unique picture of its worth. So, raise a glass to the Michigan wineries and the stories they hold.

Curtis D. Kuttnauer is co-founder and senior partner of Golden Circle Advisors, Inc. (GCA), with offices in both the Traverse City and the Plymouth areas. The business intermediary advisory firm specializes in working with small- to mid-sized privately held businesses, focusing on positioning, and marketing their businesses for sale. Visit goldencircleadvisors.com.

By Cortney Danbrook, columnist