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Showing content with the highest reputation on 03/09/2017 in all areas

  1. The first thing I want to lay out is that in no way, shape or form do I consider myself a know it all. But due to some recent postings on this forum, and just people who have approached me in my local area about opening a distillery, I figure I'll do us all a favor and throw down some info based on my experiences over the past few years. Take them for what they are. If you disagree, feel free to post. If you want to open your own distillery, this is what I suggest. In my case, I don't come from money and didn't have the opportunity/ability to get a bunch of well-endowed folks to throw down a shipload of cash. I got a bank loan and used my personal funds that I had set aside during my time in the military. I won't go very far into how much I had, but the total allowed me to do some work on our site to set it up (those figures will obviously vary based on your individual circumstances), get some bargain equipment (total was about 20K) and then make it all work with almost daily trips to LOWE's (not being paid by them) over several months. So, if you have 500,000 dollars or more and don't need to start seeing a return for quite a while, then more power to you. But if you're on a limited budget and enjoy working 18 hour days, here's what I did: ***IMPORTANT STARTING NOTE: In 2007 (when I started to work on our business plan) there were very few options out there as far as educational opportunities for those interested in smaller scale distilling aside from books, the internet, and visiting working operations. However, there are now many, many options ranging from 1 or 2-day courses that may cost a few hundred dollars all the way up to full blown internships that are in the thousands. Case in point, I personally hold a 1-day workshop a few times a year (Camp Distillery, info on our website at www.mbrdistillery.com, and we fill up several weeks in advance). We specifically do this to help those seriously thinking about getting into the business that don't have a full week to spend on a course. I don't do it for the money, I do it because I literally have individuals wanting to stop by and meet with me on the matter at least every 2 weeks and I just honestly don't have time to entertain that many people for free. I can obviously vouch for our course that I teach, as I have had nothing but positive responses on the quality of instruction from those that have attended. Before you do get knee deep in a business plan, look into AT LEAST a one or two day workshop and attend it. The few hundred dollars you'll spend will save you either 1. At least tens of thousands of dollars in avoided mistakes or 2. You'll learn that getting into this business may not be for you BEFORE you start spending too much time and money. The longer I'm in this business, the more I honestly believe that there's really nothing quite like it, even beer and wine are usually very different from the spirits business both on the production and marketing sides. Plus, the amount of regulation and taxes we, as small-scale operations, pay is like the NFL compared to college or high school football. 1. Make yourself a REALISTIC business plan, then make several alternates in case you can't do it the way you want. I had plans A, B and C. I ended up going with plan C due to lack of funding. If you don't know accounting, teach yourself or find someone that can produce good financials for you if you're going to present things to either the bank or investors (or even just yourself). However, even if you have someone else produce them, you or they need to be able to explain them in detail if you're going to ask anyone for cash. Those two items (business plan and financials) are your foundation. You need to live and breath them and know them left, right, up and down. Working on those were pretty much my only hobby while I still had a day job, I spent the better part of 18 months on mine and it paid off because my numbers were almost dead on, and that was quite impressive when the bank or investors were trying to take me seriously about the business. 2. Start researching the art of distilling. Get books, go on sites, talk to other distillers, but don't expect to learn how to distill by reading. If getting hands on experience means visiting several distilleries, see below. Go to TTB.GOV and start reading, the regs are there. You can't know the regs well enough. I'm not lying when I say that I go on that site probably once a week or more to lookup info or just to go over things to ensure that they're fresh in my mind. When you get licensed and you produce a product, you are swearing under law that you are making that specific product according to the federal (and your state) regs. Your state may have some additional regs (mine does) that add to the federal regs, look them up as well. In essence, you are getting into a socialized business. It doesn't matter how much money you make (even if it isn't enough to keep the lights on), if you sell product, you pay the man. In most cases you have to "ask" the fed govt for permission to do certain things and, even if they're wrong, they're right. You can argue with them all you want, but you could be heading down a slippery slope to do so. IMHO, the only way that I would ever challenge the feds is if they were TRULY mistaken about something and (hopefully) I really won't upset anyone. In most businesses you don't have to ask the govt permission to make a product a certain way, to increase your production amount, or to change the setup of your facilities. In this business you do. 3. Go visit SEVERAL distilleries in different states. When you do so, call ahead and make an appointment to meet with the actual distiller and/or manager. Take into account my initial statement about time with regards to those individuals. If they're busy, just take note of their setup during your visit. But, in general, get in and get out and realize that they're not there to be your personal consultant for 2 hours or more. In total, I toured about 20 craft distilleries prior to making the first move to get ours going. Different states have different licensing requirements and different distilleries will have different techniques. During those visits I also met several people that I can call (or they can call me) if I have a question about something. I won't mention some of the guys that have helped me out and probably will still call (maybe they don't want the publicity cause I'm sure they're as busy as me), but they have helped make our business to some degree (FYI, I still owe most of them a free bottle or two and a whole lot of appreciation). I would also add that it helps to go talk to folks that aren't across the street (and preferably are a state or two away) because common sense will tell you that they won't really see you as a direct threat to their business. I'm not saying not to tour any nearby locations, but I didn't spend too much time questioning them about too many things because they may see me as direct competition, particularly for their local distribution business. My biggest trip included a tour of 9 craft distilleries, lasted 5 days, was several thousand miles of driving, went from KY to NY and cost me a grand total of 500 dollars in gas, budget hotels, and food (pack an ice chest to really save). That being said, I do have a Honda Civic that gets 40 mpg on the highway. Also, there are the distilling workshops and the ADI conferences, but I still recommend you hit as many small-scale craft distilleries as possible to broaden your understanding of the business and to get as many points of view as possible. Even if you go to a workshop with several distillers there, it's not the same as seeing them at their location with their equipment and in full business mode. The small-scale distilling industry isn't near as well-developed as the wine-making or brewing business, you'll see some very interesting things at different operations. 4. Get your site (and if you don't know yet, YOU CAN'T HAVE A FEDERALLY LICENSED DISTILLERY AT YOUR HOUSE without a property subdivision of some sort, this ain't a winery or brewery kids, the law is gonna tax you and tax you again, they don't want you makin stuff in your basement), refer to CFR Title 27, Part 19, Subpart F, 19.131. And, just for some fun, go lookup the federal tax rate on spirits compared to wine and beer, it's about three times as much, and that's not even taking into account that small-scale wineries & brewers pay a fraction of that 1/3. Now, back to the whole distilling at home thing, you can subdivide property, put up a fence, or tell the feds that you have a "force field" separating the "house" from the "distillery" to get around that. But, BOTTOM LINE, you MUST GET FEDERAL APPROVAL FROM THE TTB, go talk to them because they only give that appproval on a case by case basis and don't expect them to snap to and give you an answer overnight. Furthermore, you have to deal with local zoning first and foremost because the feds WILL ask you about that. For all planning, I recommend you start locally, then go state-level, then federal. The feds EXPECT that you are in complete compliance with all local and state regs and will ask you about it when they interview you. Bare in mind that your location is one of your biggest factors that will allow your business to be successful. First thing is that the environment (city vs. country) will make a huge difference in the local requirements that can add tens or even hundreds of thousands of dollars difference to your startup cost. Second, state (and even local) laws will determine if you can sell your products from your gift shop/tasting room. You make up to three times the profit when you sell a bottle from your gift shop vs. to a distributor. Finally, if you are off the beaten path, how many folks will venture to come and see you? All of those factors are important to consider for your location, so setting up shop in one state that may allow tastings and product sale out of your facility vs. another state where you can only sell t-shirts can make the difference between needing to sell 500 cases or 2500 cases your first year. 5. Once you have a place that you can legally set up and is zoned appropriately and the townsfolk won't come at you with pitchforks and torches, set it up for distilling. What does that mean? Well, either you can hire a consultant (there are many out there) or you can do it yourself. We have started with some pretty bare bones stuff and when we are able to move along, we'll buy (or make) the "nice" equipment. Cost is up to you on all of this, but you are going to need at least SOME money, more power to you if you can make your own equipment. 6. Once your equipment is in place and your site is ready, send in your federal paperwork (the feds require that your equipment is in place prior to licensing). Again, if you have money, you can hire someone to do this part for you. The paperwork itself isn't rocket surgery. But, if you mess it up, it very likely can slow things down. For example, I had something on our permit changed, it took 3 months to add two words on our already existing permit. Plan for a 3-6 month wait, hope for less of course. I can't tell you about your state requirements, that's up to you to figure out cause each state does it their own way. 7. Once you're licensed, make some hooch and sell it (probably to a distributor, or the state if you're in a "control state"), and start beating feet to get it on shelves. If you're not a natural or can't play the part of salesman/diplomat, find someone who can do a good job for you. Even if you can start up your operation on a very, very slim budget, you're going to need a few bucks for this part. I would plan for at least six months of not selling jack through distributors. These distributors manage many, many products and you are just one piece of their usually very large pie. You're going to have to make an effort to build a quality relationship with these guys and work around their schedules. Anything that seems like it should be easy with them WILL NOT BE. If you happen to be setting up on a location that will garner loads of tourist traffic, that's always a plus. But, even then, you're going to have do some sort of marketing (may not cost you a bunch of money, but some of it will) to get the word out that "there's a local distill'ry here" (so come and visit so we can keep the lights on). During this entire process you also need to keep your lights on at home on. In my case I have a wife that kept her day job for our first 4 years of business, so we were able to support ourselves with her income alone until the business could afford to pay us. When you start producing product, you need enough cash to run your business and your home expenses for six months or more. Basic business expenses will include but are not limited to the following: lease/rent, insurance, utilities, payroll (if applicable), raw material costs (grain, molasses/sugar, yeast/nutrients, packaging, etc.), MARKETING (everything from signs and ads to travel brochures for nearby locations), EXCISE TAXES for product that you sell, items for your gift shop (if you have one), and some buffer for the honorable Mr. Murphy (he WILL pay you a visit at least once in your first few months, so be ready to throw some cash down for when he comes). A very realistic rule of thumb is to take your budget and cut it in half. Use half for your facility and equipment, then the other half for your initial production costs and unappropriated costs. But I'd say that advice is still marginal at best. Finally, another important thing to think about is your workforce. I was the only full-time employee for our operation for our first 2 years. I served as distiller, bottler, tasting bartender, cashier, tour guide, sales rep (on the road to stores/on premises accts), accountant, handyman, groundskeeper, and whatever else needs to get done. Until we were able to begin hiring full-time employees, we had friends and family help us out with many different things. I'm sure that this experience is somewhat normal for many small businesses, but it seemed to take a while before we were able to truly afford standard employees. Again, this is just my experience, but that's something to think about. NOTE: This forum has a wealth of information, so do other forums when it comes to techniques (homedistiller.org). I recommend that you read through it and others extensively prior to posting and, when you post, attack a single issue at a time. Don't ask something like, "How do you distill???" or "how do I start a distillery?" Look through the postings, get Bill's book (not being paid for that either), and any other references prior to posting. But, bottom line, be specific when you post so people don't have to write a book IF they do decide to respond. If you don't get much feedback, bank on the fact that you asked a question that already has an answer on the forum. If you really, really don't know anything about distilling or setting up a distillery, refer to steps 1-3. But, just because you can make a product, does not mean you can run a business that profits from that product. I know quite a few folks who can do some good things that they could turn into a business, but they don't want to or can't start a new business for whatever reason. Even when I was the only employee, I spent 75% of my work time NOT MAKING HOOCH. In most cases you are going to have to work at it to make some cash. But, know this, no matter what, the feds (and your state) WILL PROFIT IMMEDIATELY, but that does not mean that you will. From idea to an actual working distillery making hooch, my timeline lasted about 3 years. We're now beginning our 5th year in business and we have 6 full-time employees (including myself), and 6 part-time employees. I still drive a Honda Civic, but I work for MB Roland (consequently that's my wife's maiden name ). Good luck and I hope this serves as a good reference and starting point for those who need guidance on this topic.
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  2. The reason for the difference between adding water and sugar is that proof is based on volume and a given mass of sugar has a different volume from the same mass of water. For example. if you have 10 gallons of 100 proof spirit and you add 10 lbs of water the volume will increase to 11.169 gallons. But if you added 10 lbs of sugar to 10 gallons of 100 proof spirit the volume would increase to only 10.749 gallons. In both examples no additional alcohol is added, so both contain the same amount of alcohol after dilution. Adding the water would lower the proof from 100 to 89.54, but adding the sugar would lower it to only 93.03 because the volume has increased by a smaller amount. If you used a standard proof hydrometer to determine the proof of the sample with the sugar added it would read about 30.4 proof because the sugar would have significantly increased the density of the sample and the hydrometer is not calibrated for that.
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  3. You are welcome Ryefarmer, thank you for the compliment. Navonjohnson please email me paul@distillery-equipment.com Happy Holidays!
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  4. I also thank you Paul. You show great class. We will certainly put your company at the top of the list for our needs.
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