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Start-Up Budget?


Shindig

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I know every situation is different but I am wondering what budgets people have started up with? What is the lowest that has allowed someone to start and maintain until business picks up and a profit is made?

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I'll play.

I already own my building/property so that alleviates a lot of the cost. I'm using 20 and 60 gallon traditional pots-no fancy columns, plates, or stuff like that. And, being in Ohio, I have to say we have one of the friendliest small business climates there is. I'm running a one-man show, incurred no debt to date, and I don't mind being small for a while. It's a legal hobby that I can enjoy and make a little money while I'm at it. I plan to quit my day job within 5 years. That said:

State fee was = $204, which allows up to 50 gallons/week of alcohol. I won't hit that, but micro it's $2 per 50 gallons + $100 base. I needed a goal. :)

LLC/DBA registration = $175

Background Check at Sheriff's office = $45

$20k bond = under $150

Township variance = $200

Stills = under $2000 in parts/materials (helps to know how to work metal)

Building improvements = about $3000 - electrical, fence, plumbing upgrades, driveway improvement (again, helps to have the tools and knowledge)

Label applicator & bottle fillers, Enolmatic, I I built a plywood jig for labelling--about $500

Certified lab equipment-$200 (Avogadro's Supply in NJ sells certified hydrometers and thermometers for much less than every other place)

Miscellaneous containers, buckets, fermentation tanks, etc = probably $500

I'm pending right now with TTB & of course state, but the state inspector's already been out and said I'll have no problem getting him to sign off. I live at least 1/4 mile from the next nearest structure, and clear open farm ground all around me. Should be hearing something this week. If I ran 5 days a week, I could make about $2000 a week profit selling at +/- $30 a fifth. BUT...you need a market that support's that quantity regularly. We can't all be Jack Daniels right out of the gate.

If I had to guess, I'm probably the cheapest startup on here, under $7000, maybe $7500 total because I forgot something. I didn't mortgage anything and bought things only when I could pay cash. I didn't hire a lawyer, I talked to other guys doing the things I wanted to do and they helped me out. I called TTB and established a relationship with an agent. They fast-tracked my packet through rfeview since they were basically checking their own work. I know I'm the rare exception, and some on here may laugh that I'm buying mason jars at Walmart for now til I can save up for a pallet of bottles. I don't worry about paying a loan for the business, I don't have any partners to answer to, and I control my own future.

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My encouragement came from a guy that started for right about $10,500. I think he unofficially claims the title for lowest cost start-up from scratch, but I know there's a ton of other folks just like me. If you own property (I think the feds like 2 acres at a minimum if your house is there,) you can do it. Regs say it can't be on residential property, but they look at each case individually. I had to add a fence to surround the DSP to distinguish the boundary between that and my yard. My rural setting helps immensely. Like I said, my nearest neighbor is 1/4 mile away.

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I don't have any property so I know my startup costs will be higher, but I am looking at options for financing. I just don't want to saddle my new business with $50K of debt from the starting gate. I am still a long ways from it but I'm doing my research. If I can get started with $25K and a 25-30gal still, I am happy. I know I'm in a fantastic market (the Pacific Northwest) and have a rockin' business plan with a solution to the problem, so I think I can do it.

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if you are doing this as a business and not a hobby, I would look at your #s again. I thought I could get away with under $100K, but we are at $140 and climbing,

My business partner and I are pretty handy so I know we can do a lot of the work. Our state is very friendly to all spirits and the law is still loosening up for us. I do not plan to start big, just the minimum, maybe you would call it 'hobby' but my long-term plan is to build it to a medium to large-scale craft distillery. I'm hoping we can get setup for far less than $100K. If I can produce a few cases per week, that will be a good start for me.

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We started distilling and opened our tasting room doors for around 60k. Tasting room traffic and having a product right out of the gates (in our case, a white whiskey) was critical for us, and 3.5 years later it still is! Startup expenses are the easy part. Operating capital is a whole nother matter — Especially if you're intent on whiskey production. 2+ year of staring at barrels is a mofo!

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We started distilling and opened our tasting room doors for around 60k. Tasting room traffic and having a product right out of the gates (in our case, a white whiskey) was critical for us, and 3.5 years later it still is! Startup expenses are the easy part. Operating capital is a whole nother matter — Especially if you're intent on whiskey production. 2+ year of staring at barrels is a mofo!

I get that about the whiskey lag time. We have some ideas for spirits quick out of the gate, tasting room from the beginning, and our signature whiskey(s) aging while we sell the quick stuff. Probably a lot like many new distillery startups.

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Under 100k club (leasing space and had no equipment going in) and are sending out our first pallet tomorrow--so I'm there. Granted, it's not an ideal setup--but it works.

I think I'm somewhere between 60 and 70k, but I'm not sure. These last few months I've just spent money on stuff because I absolutely needed to and haven't been checking the totals.

It's totally possible to start under $100k, but it takes a lot of hard work and determination. You need to be frugal, but not cheap. I spend a lot of time debating if I'm going to spend $200 on something whereas others may just pull the trigger at $2,000 like it's nothing. Pinching pennies certainly adds up over time, but it also takes a LOT of time and effort away from other tasks.

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Not doubting that it can be done very cost effectively, I know many have done it, but there is a difference between going into a venture like this with a realistic budget, and being frugal about how you spend it, versus going in extremely uncapitalized, with no room for buffer. There are plenty of assumptions that are easily blown out of the water after you've started buildout. You may also find your local jurisdiction is not as lax as another. You may find that the neighbor that loved your idea yesterday is now battling for all-out war. You could get stuck behind totally unexpected government delays (remember the shutdown?). For those reading who are thinking about starting, do yourself a favor and take a pessimistic stance on budget, not an optimistic one. I'm sure there are startups blowing up left and right at this point, before ever opening their doors, that we never hear about here.

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Six years ago it was probably hard to start a distillery but easier to move product once you got up and running. Today the tables have turned and its easier to start up but harder to move product. I think a lot of guys like myself Skaalvenn and Deerhammer, etc. came of age during the transition between these two stages. A lot of people (including myself) have gotten their first product in the bottle and felt like they had finally arrived, or had made it, only to realize that the more difficult job was just getting started.

TLDR:

In today's world turning sugar into alcohol is easy, the tricky part is turning alcohol into money.

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Hedgebird has the best reply in this thread......

TLDR:

In today's world turning sugar into alcohol is easy, the tricky part is turning alcohol into money.

......you need to remember that you are opening a "Marketing Company That Happens to Make Hooch", not a distillery. If you don't understand that from the get-go, and budget accordingly, you are going to have a tough hill to climb. 5-10 years ago, this was a "build it and they will come" kind of business. Now, you won't even get enough distributors, bar owners, or liquor store owners to talk to you if all you're offering is a "vodka, gin, and a white whiskey while you're waiting for your brown stocks to age".
Distilling is easy. Selling is hard. Of your initial startup costs, you should have at least 30-40% in just brand development and marketing. Once you're running that number can be 25-35% of your COGS.
If you aren't setting that bar, you are in this for a hobby, but not to service your debt or ever make enough to live off of and pay your employees.
Lastly, no one can build a safe distillery for less than $100K. Period. Yes you can build a distillery, but not a safe one.....and that should be your primary goal. Your kiddos won't be proud of all the money you saved if you wind up dead.
Cheers,
McKee
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Under 100k club (leasing space and had no equipment going in) and are sending out our first pallet tomorrow--so I'm there. Granted, it's not an ideal setup--but it works.

I think I'm somewhere between 60 and 70k, but I'm not sure. These last few months I've just spent money on stuff because I absolutely needed to and haven't been checking the totals.

It's totally possible to start under $100k, but it takes a lot of hard work and determination. You need to be frugal, but not cheap. I spend a lot of time debating if I'm going to spend $200 on something whereas others may just pull the trigger at $2,000 like it's nothing. Pinching pennies certainly adds up over time, but it also takes a LOT of time and effort away from other tasks.

The "Under 100K Club" !! I love it!

We should start a thread under that heading. I have seen many types of start-ups with many having loads of cash. The most interesting, and topical, start-up is the boot strap style. Trying to figure out what equipment is needed and what is just nice to have. I see a lot of places opening up with someone else making their product and then once they have product ready to go on the shelves they start their real buildout and buy equipment. I have no problem with that if the end result/plan is to make it all yourself. Those of us with smaller bank balances want in on the game and are trying to find realistic ways of doing it.

One of our problems is we think we have enough to start production but not enough to do the buildout for the tasting room . The tasting room is where the quicker and better profit is so this is a problem. We want to make sure we have enough working capital and are definitely spending on the design work and marketing. Can anyone share what they think a good working capital budget is?

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My idea is that it will be easier getting a loan for a tasting room once I show the bank that I actually am a competent and at least marginally profitable business. A year ago I was just another yahoo with a crazy dream and a piece of paper claiming that I'd make money. Now I've made it happen and want to keep the ball rolling.

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I agree on the loan. Not a lot of banks willing to shell out cash unless you sign over your house. They are only giving .40 on the dollar for equipment and we are keeping that to a minimum anyway.

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I don't think it is possible to do a distillery with $100,000 or less and be successful long term. Yes, you might be able to open and produce something, but I question the long term viability of the operation.

Besides just the equipment and other items needed to get started, you need working capital to fund your bottles, ingredients, and all of your inventory.

Just as an example, If you are really hurting for cash, then you are likely buying your bottles is really small quantities. If you are buying your bottles in small quantities, then I suspect you are paying a really high price per bottle. That same lack of scale is hurting you in every part of your business. It all adds up.

Just my opinion. I am not trying to discourage anyone from getting into the distillery business. But I think anyone doing this would be better off working with partners or investors with deeper pockets. I would not consider starting a new distillery without $300,000.

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I don't think it is possible to do a distillery with $100,000 or less and be successful long term. Yes, you might be able to open and produce something, but I question the long term viability of the operation.

Besides just the equipment and other items needed to get started, you need working capital to fund your bottles, ingredients, and all of your inventory.

Just as an example, If you are really hurting for cash, then you are likely buying your bottles is really small quantities. If you are buying your bottles in small quantities, then I suspect you are paying a really high price per bottle. That same lack of scale is hurting you in every part of your business. It all adds up.

Just my opinion. I am not trying to discourage anyone from getting into the distillery business. But I think anyone doing this would be better off working with partners or investors with deeper pockets. I would not consider starting a new distillery without $300,000.

I may pay more per bottle but I guarantee my loan payment is a lot less. =D

Also, the sub 100k included all my initial supplies/ingredients.

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@teton

Thanks for your perspective! Anyone on here started for less than $300k and made it llonger than 2yrs (without working full time at another job and continually paying for things out of pocket)?

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Just to throw another spanner in the works, how does being a foreigner complicate matters? I'm born and raised in Scotland but my father became a naturalised US citizen some years ago. I was on my way to getting a green card when sadly he was taken from us before his time. It had always been our dream to start a distillery together on your side of the pond with him as capital and myself as the "brains" of the operation.

I've been working in single malt Scotch in one form or another since I finished my Masters in Chemical/Process Engineering back in 2006 and am currently the Brand Ambassador for the world's largest single malt based in the Middle East (they drink a hell of a lot of the golden nectar out here).

My father left me with a substantial amount so the dream is still alive but my route has had to change. Now getting to the point...

Would you recommend starting my own place from scratch or investing in an existing operation (should I be able to find one willing) as my route to a visa have now substantially closed and finding a craft distillery to sponsor my visa as a trainee/assistant distiller would be nigh on impossible.

Thoughts both personal and professional most welcome.

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@teton

Thanks for your perspective! Anyone on here started for less than $300k and made it llonger than 2yrs (without working full time at another job and continually paying for things out of pocket)?

Yes well under $100k. We have not been open for a full two years yet but its my day job getting paid and turning a profit.

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