First year income projections

[KEL]

I know it is a long shot, but would anyone be willing to share some of their aggregate first year numbers privately?

My SBDC advisor thinks that some actual numbers from actual tasting room sales would greatly strengthen my case with investors.

My plan is to purchase GNS to produce gin and vodka while distilling my own whiskey and bourbon.  

I don't know if this is a realistic request and I know every circumstance is different, but some ballpark figures and percent growth in the beginning would be profoundly helpful.

If you know of a source where I can this data, that would be helpful too.

Thanks,

[Hudson bay distillers]

Don't have any numbers for you because our facility is closed to the public ,no tasting room . But I wanted to say is your logo looks great , nice to see distilleries showing off there brand . 

[Glenlyon]

The problem with beginning projections is that the answer is - it depends. You would have to start with considering your geographical market area and your location. Are you farm based or opening in the middle of town? What size town? Are there competitors nearby? Each one of those location options will largely dictate what kind of traffic you might reasonably expect - tourism, locals, etc.

Then, how much alcohol can you physically make? That will depend on equipment size and your labour force. You might have good market potential, but if you are the only one actually making the booze - it can be a hard slog just to keep up with the tasting room, much less outside orders - which, in themselves - are very time consuming. On the other hand, if you make too much booze, that can be a problem if you can't sell it. So you have to make sure you find the right pacing for your business. Are you planning to sell by the glass in a lounge/restaurant? More profit, but requires more labour, more inputs. More labour, more inputs = more overhead. Even though we have low fixed costs the variable monthly overhead can be quite substantial, even for our tiny place, so make sure you are on top of your COGS.

In terms of product, you should be focused on a 40 - 45% margin on bottle sales. Less means you are losing money fast, more means you may yet be profitable soon. Keep your base products reasonably priced and make sure the high end specialty stuff is priced for profit. 

We spent a lot of time working out our original projections and in review they were not even close. We are soon discovered that they were meaningless in the face of battle - but, the banks loved them.

[Glenlyon]

Another helpful metric is how much people spend per visit. Our customers spend about $70 per visit on average and we will close 80% of the customers who come through the doors. 

[KEL]

Glenlyon,

 

Thank you for that!  That is really helpful.  I understand the varieties of conditions, but illustrations of real world success in tasting rooms is useful and will be seductive to bankers.

 

[Glenlyon]

So, just closed the tasting room for the day. We were open from noon to four.

So just some context here - based on my previous musings... Our distillery is located a $60 ferry ride away from the big city. The village in which our distillery resides has a population of about 2000 and the greater geographical area contains about 30000 people in the winter time and roughly double that in the summer. 

The distillery is located on a five acre farm in a 1000 sf custom built building. We run a 65 gallon still and a 26 gallon still. We're open three days a week (weekends). Our tasting room holds about eight people comfortably. 

We opened about a year and a half ago. Since then we've sold a slightly more than 11,000 bottles. Today we sold about $2K, with about $800 of that coming from the tasting room and the rest from outside sales. 40 sales in all. All in this weekend we'll clear about $6000. The important point here is that you need to be selling in more than one outlet on your active sales days.

Here is something else you may want to consider... if you've read any of my other posts you'll soon learn, I am not a fan of investors. No disrespect to them - but they play a different game. Also, consider your potential partners very carefully. I started with one.... but, am now much happier on my own.

Also, equipment size is a big discussion onto itself. Big or small - the question rages. We went small and yes, we did suffer some significant disadvantages from the small scale. But, after a year and a half of solid work, I've made hundreds of mashes and run my stills into the ground. "Get up you lazy dogs!" I say to them every morning and I've worked out a lot of problems that could have cost big time. Now, I would feel comfortable walking into any distillery in NA knowing I could make and distill a mash that is going to deliver desirable results. And, I sell everything I make, practically as fast as I can make it, which might have been harder to achieve had we started bigger. But that all depends on your market and goals, of course.

That will be a good story for your bank

 

 

[captnKB]

@KEL Ive help and handled start up for quite a few distilleries and can help you with some of your business planning and forescasting.

Shoot me an email Distillerynow@gmail.com

[sandytoes]

17 hours ago, Glenlyon said:

Today we sold about $2K, with about $800 of that coming from the tasting room and the rest from outside sales.

Glenlyon - Are you doing a combination of cocktail and bottle sales or just bottle sales? If both, what is the breakdown on that?

[KEL]

Thanks!  

 

I am actually completely against investors as well.  I am looking to work with a bank on a loan.  I think I have a line on a used 250 gal still that will work very well for my vision.  

At the moment, I am waiting to hear about the FET reduction extension and looking at remodeling an old building in our downtown.

 

[Glenlyon]

We only do bottle sales. Also, when I was referencing sales in my previous post - that's different from actual bottles sold. For example one guy came in and bought 9 bottles, but that was only one sale. So each sale may be one or multiple bottles. Inside sales are tasting room sales and outside sales are direct sales we make through markets we attend, restaurants and liquor stores. We've been selling a lot more through liquor stores recently I've noticed. We get a lot of returning customers who bring friends. That kind of word of mouth is gasoline.

The consultant is a good idea - I've used a variety depending on the problem.

Restoration of an old building sounds expensive! But, fun I'm sure. I hope you own it!

[Glenlyon]

When we first opened we'd only sell one bottle at a time and we only had vodka - it was pretty sad those first few months. Then we introduced gin and then kept selling out of one or the other. We laugh at it now, but nothing is worse than selling out of a product halfway through an event. Now most of the sales are for multiple bottles as we've gotten a lot smoother when it comes to selling the product. Also, now we have 22 products that we cycle through and you never know what you might encounter when you visit - several products are creations or interpretations of our own and they always sell well when we release them.

[Huffy2k]

I think it's pretty doubtful that folks would be willing to share their actual 1st year sales with you but the real issue is, as others have pointed out, they would be pretty meaningless anyways.  So many variables that would have to line up perfectly for the numbers to be remotely meaningful.

Thoughtful, carefully crafted projections based on your product mix, SRP's, production capacity, population/tourism potential, etc will work for a bank but in the end, the bank is not lending just because your projections look amazing, they are betting on you and your team and how much confidence you can instill in them. Your entire business plan is the key to getting a bank to listen to you. Don't discount your story, your branding, your marketing, your team; they are as important as your projections to your lender.

Regarding your SBDC Advisor's idea to get meaningful data, you could refer to the Craft Spirits Data Project or any of the various market research services on craft spirits to demonstrate the growth and expected continued growth of the craft spirits market.

[KEL]

Huffy2k,

Thanks for your comments as well.  Several people have shared some data with me.  I don't need specifics, but it is helpful to see how fast operations scale up and how other have succeeded.  Glen has shared some very useful information that will be a tool to help bankers understand the business.

The craft market is great too and that is part of my proposal.  Other successful distilleries in other parts of the country bolster the general case that this a growth market.

I understand will that we are not just selling products, but selling our passion and our commitment to success.  There is much agreement among those I talk to locally about the place for spirits in our local market and enthusiasm toward the project.

I am excited and I hope to approach bankers after the new year.

Karl

 

 

[Huffy2k]

Sounds like you've got it covered Karl.  Best of luck, good to see you have local/community support - that's definitely a key component to success!

Cheers!

[et1883]

7 hours ago, KEL said:

Huffy2k,

Thanks for your comments as well.  Several people have shared some data with me.  I don't need specifics, but it is helpful to see how fast operations scale up and how other have succeeded.  Glen has shared some very useful information that will be a tool to help bankers understand the business.

The craft market is great too and that is part of my proposal.  Other successful distilleries in other parts of the country bolster the general case that this a growth market.

I understand will that we are not just selling products, but selling our passion and our commitment to success.  There is much agreement among those I talk to locally about the place for spirits in our local market and enthusiasm toward the project.

I am excited and I hope to approach bankers after the new year.

Karll

 

 

Karl, one notable Seattle area distillery started with $192K USD, and a $350k loan.  That range was confirmed to us by another well known Wash State distillery, by one in Virginia, Chicago and Ohio and a few others under NDA.  Ballpark #s, for sure, and your mileage may vary, of course.   Glenlyon's comments are spot on.   Others I know in the lower mainland of BC started for more/less than the $ figures above, and produce consistently followed products.   We of course love the inspiration we see and do our best to put out the best possible.  No small group can compete on price, there's no mfg scale of economy.   Depending if you are LLC, S-corp, C-corp, you may rethink investors, as 51 % of something beats 100% of nothing.  Many we have seen and talked with doubled capacity each 12-18 months.  Again, ballpark, and not a promise of course.  Best of luck with your plans!

[KEL]

12 hours ago, et1883 said:

Karl, one notable Seattle area distillery started with $192K USD, and a $350k loan.  That range was confirmed to us by another well known Wash State distillery, by one in Virginia, Chicago and Ohio and a few others under NDA.  Ballpark #s, for sure, and your mileage may vary, of course.   Glenlyon's comments are spot on.   Others I know in the lower mainland of BC started for more/less than the $ figures above, and produce consistently followed products.   We of course love the inspiration we see and do our best to put out the best possible.  No small group can compete on price, there's no mfg scale of economy.   Depending if you are LLC, S-corp, C-corp, you may rethink investors, as 51 % of something beats 100% of nothing.  Many we have seen and talked with doubled capacity each 12-18 months.  Again, ballpark, and not a promise of course.  Best of luck with your plans!

et1883,

Thanks to you too for this information!  I feel confident that I can make this business go, but I have to convince others.  

Everything people share makes it easier!

Karl

[Rum]

You can get some proof gallon stats for Florida distilleries at the following link. Click on Gallonage Reports, choose a year, scroll down to Liquor, choose a reporting area. You will see a list of many alcohol related companies. The numbers for the distilleries are basically the tasting room sales in proof gallons (proof gallons of sample bottles are included also). They range from a few proof gallons to over 800 for the month of October which is the latest one currently listed. We did second best with 410 proof gallons out of the tasting room of mostly 70 proof infused rums. Look up the names and you can figure out where each is located, etc. 

http://www.myfloridalicense.com/DBPR/alcoholic-beverages-and-tobacco/revenue-reporting/

 

 

[et1883]

well, no production data privacy in FL, is there!     No matter how you look at it, that's a ton of spirits.   Thanks for the useful link! 

[sandytoes]

5 minutes ago, et1883 said:

well, no production data privacy in FL, is there!     No matter how you look at it, that's a ton of spirits.   Thanks for the useful link! 

Florida is an open records state. So data protection of any sort is rather thin. But hey, we have great weather (most of the time).

[KEL]

Thanks for all the information -- that Florida info will be great for what I need!

 

[38°]

Great info as I'm in a similar phase. Trying to estimate sales to determine scope is no easy task with no operations nearby. If anyone would be willing to send similar stats and data as supplied to KEL I'd be grateful. 

 

So far I've been using what data I can glean from nearby wine industry tasting rooms and vacation rental data to predict seasonality.

[Glenlyon]

Numbers are meaningless in the face of creativity. In fact, if you stop and think about it - you can only generate as much revenue as you can produce alcohol. So, the size of still and your anticipated production capacity will soon dictate your potential revenue/cash flow. Remember, spending two years creating a business plan isn't about creating a plan for your business - it's to help you understand the dimensions of the business - so, everything is thought out. That way, when you open your doors and come into contact with the enemy - you'll know how to maneuver in the heat of battle.   

[38°]

On 12/22/2019 at 5:41 PM, Glenlyon said:

Numbers are meaningless in the face of creativity. In fact, if you stop and think about it - you can only generate as much revenue as you can produce alcohol. So, the size of still and your anticipated production capacity will soon dictate your potential revenue/cash flow. Remember, spending two years creating a business plan isn't about creating a plan for your business - it's to help you understand the dimensions of the business - so, everything is thought out. That way, when you open your doors and come into contact with the enemy - you'll know how to maneuver in the heat of battle.   

Good points and advice. However, I still feel an intense need to be able to build the best financial model I can to prove whether the business can survive or not. If the numbers don't work, it makes no sense to invest time and money on this project. 

Being in a small vacation community, it's important for me to be able to understand seasonality, as well as potential sales. I want to "right size" the operation to our market.

Less science than art I am sure.

[Glenlyon]

I just reviewed this thread from the beginning and harkening back to business school, there is certainly enough material here for your to build a compelling case for any banker.

Also, my advice is only probably only relevant for people who are considering distilleries that produce 100,000 litres or less - anything bigger than that is out of my league.

Let me finish with a final thought or two. First, this just happened to me...

So, the other day I show up to a market. I'm late, only 30 or so minutes to opening. To my dismay I see a competitor has already set up their booth in a superior spot and I find I'm relegated to a tight corner and a measly 6' table. Bummer. Worse yet, their booth looks great. Lots of branded swag. Company colours well utilized. A good selection of ancillary products.

I have to admit, I was a bit thrown. Our table was a white table cloth some christmas lights a few rocks and our bottles. Soon the market opened...

The market was spotty, the crowds ebbed and flowed - yet, the entire time we had people milling around our table and buying our bottles. Across the way, our would-be competitors looked on in horror - only making a few sales. In that five hour period, we grossed over $3k and I doubt they broke $250.

The moral of the story is - no matter how rosy you create your plan to support your idea - your real mission is to build your audience, create loyalty and close sales. The way to do that is to create a great customer experience. Selling your booze should simply be a souvenir of that experience. 

Because I paid for my entire operation as I built it with no outside cash and because I started small and worked up. When I finally did approach the bank for a line of credit so I could buy some new equipment, they couldn't give me money fast enough - they barely looked at the books. All they looked at was the monthly revenues. The real beauty of this business that they pointed out, no accounts receivable and no accounts payable and six digit monthly revenues. The perfect business.

I'm looking forward to next year with great enthusiasm!