Jump to content
stillwagon

Discussion on Sale of Distillery

Recommended Posts

I am looking at my options on whether or not to continue this business. We have a small distillery on the coast of Oregon. We currently have 18 products on the shelf. We produce primarily rum, vodka, and increasing our whiskey production. We produce about a barrel a week at this point. 

The primary consideration for the sale is the necessity for a hip replacement, and the worry of the repercussions of the inability to work in the distillery as needed.

We have a steady increase in sales, expansion into other states has been steady, with an organic growth based on demand of our products.

We have maintained very low debt and overhead expense. We have two satellite tasting rooms in addition to the distillery tasting room. We have great local support and an increasing fan base.

I have not had an assessment done on the value of the business. I haven't considered selling until the condition of my hip has deteriorated recently. So, this is more a discussion of possibilities than anything.

Share this post


Link to post
Share on other sites
2 hours ago, stillwagon said:

I am looking at my options on whether or not to continue this business. We have a small distillery on the coast of Oregon. We currently have 18 products on the shelf. We produce primarily rum, vodka, and increasing our whiskey production. We produce about a barrel a week at this point. 

The primary consideration for the sale is the necessity for a hip replacement, and the worry of the repercussions of the inability to work in the distillery as needed.

We have a steady increase in sales, expansion into other states has been steady, with an organic growth based on demand of our products.

We have maintained very low debt and overhead expense. We have two satellite tasting rooms in addition to the distillery tasting room. We have great local support and an increasing fan base.

I have not had an assessment done on the value of the business. I haven't considered selling until the condition of my hip has deteriorated recently. So, this is more a discussion of possibilities than anything.

Hey,

Sorry to hear about your hip .  If I was you, I would sell the distillery if somebody is willing to pay the price .  As a distiller, I use to run 2 distilleries and I am doing this work now for almost 20 years and It still is hard working .  I love it but if you have to run a small craft distillery , I am not sure if you can do this with a new hip .  On the other hand, if you have somebody that can do the heavy work for you and you just have to give orders, why not keep it .

Share this post


Link to post
Share on other sites

A hip replacement is recoverable. My mother has had both knees replaced twice! Sure she isn't going skiing and she does have to be careful, but the results are remarkable. If you intend to keep going, now is the time to bring some young blood in and start being more shifter of information and less a shifter of stuff. I run my place with a nasty case of Rheumatoid Arthritis and some days its hard to get started. But, it does beat sitting around.

Share this post


Link to post
Share on other sites

As a rough estimate of what you can get for your distillery:

- Cash Flow: 3-5x times earnings adding your salary back in. 3x if you don't have high free cash flow to costs, 5x if you have very high free cash flow to costs. It is very hard to go above 5x unless you are really profitable and growing well. If you are the main person making everything and you don't have a good backup then take 1-2x back. 

- The cost of your total FFE at discount sale price

- The cost of your realty if you own the building.

If you own the building you're probably looking at the the cost of realty + the greater of Cash Flow or FFE. The more someone has to do to keep the business running then the less you'll get for it. If someone can own the business with very little activity required then the more you'll get for it. And the smaller you are the harder it is to sell the business vs sell the equipment.

I would look at your goals in life to evaluate the sell vs continue question. If you can hire or rely on someone to run the business with you calling the shots I think you can do it. If you can't trust someone to run the business without you being involved in everything then it might be better to sell. If you want to continue on and you don't have a good #2, find one. It's not easy but hopefully you will eventually find someone with the passion and ability to do it. If you're relatively close to retirement maybe bring someone in to eventually take over the business a little at time - say over 5-10 years. Part of their salary can be a small incremental increases in ownership (1-2%) in lieu of some salary then a purchase of the most/rest of the business at the end of the term. If a person owns 20% of a business that is healthy it shouldn't be too hard to finance the rest. 

There's tons of ways to do it. Those are just a few ideas. Good luck!

  • reaction_title_1 1

Share this post


Link to post
Share on other sites

I'd be careful on estimating how to calculate value, especially from a distance like this and not knowing your particulars.

The pricetag is dependent on so many variables, it can be staggering.  Location, absolutely, but also what and how the business functions is paramount.

On the one hand, if you're a lean shop, no dedicated sales (on/off premise, retail) or production staff, it's doubtful anyone would consider any cashflow formulas.  They aren't buying a system, people or processes, they're picking up where you left off.  And it would be absent the most important part: you.  I would suggest FFE and assets (inventory/real estate) minus debt plus AR.

If you have a self-driving production and sales team, processes that they follow without you directing their every step, budgets, plans/forecasts of sales, operations, etc., then the business may be ready to stand with or without you there.  That' could be a better candidate for cashflow formulation.   

Just my two cents worth.  I am certain there are more informed folks here too!

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×