Paul Tomaszewski

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.

Our previous tenants (Amish) left us 15 cats, never seen a live mouse, rat, mole or gopher around and we're surrounded by wheat/cornfields. If you're in the city and you had one or two full-time, I'm sure that would suffice, plus it's always a plus for tours with kids. Oh yeah, and as far as the bugs go, two words... shop vac (or is that one?).

Not to keep beating a dead horse or anything, but my take is (from the insurance company), $20K bond and below is fairly simple. Once you start going too much bigger than that, they start asking a whole bunch of questions with regards to it and start wanting to get a bit more serious on the matter. As far as it being a big deal or not, put this in your pipe and smoke it. The bond is, technically, the only thing the TTB cannot alter when processing your application (or so I was told by them). So, if there's an iota of anything amiss about it, you (and the surety) have to correct it and you get to send it back through the federal anthrax-detection snail mail system. If anything contained within your application is going to be 100% accurate, I would suggest it be the bond. For example, my surety did not put in their name block the exact name the TTB had in their records. Therefore, I had to go back to the company and explain that they had to put the EXACT, legal company name that was on record with the Treasury Dept. Just some food for thought.

Here's the "no crap" answer, I've redone my bond already, so I'm pretty familiar with this: minimum $5K - production minimum $5K - storage (if you intend on storing, ie aging in barrels) minimum $5K - processing (bottling) $1K - withdrawal (if you choose to have withdrawal coverage, but you are not required to do so. However, if you DON'T have it, you are required to pay your tax bill immediately after the product leaves your bonded area. I would recommend you get it) IMHO, I would do at least $5K withdrawal from the beginning, but that's just me. Now, here's something that also blurs things, but this is straight from the TTB. The 15K total for the prod, storage, and processing does not break down as 5 for each when doing your math. In other words, that total 15K covers whatever your total tax liability will be at any given time during a filing period on your bonded premises. Example, if you have 1K production, 10 K in barrels, and 4 K in processing, you're covered because your total is 15K. However, withdrawal is basically like a separate bond within your bond and has nothing to do with your prod, storage, and processing. Clear as mud? I know, this is confusing until you understand the whole thing, but once you get it, you got it.

it's in the TTB regs, but the bottom line is you can make your own still (as long as you assign it a serial number) and you can run water through it to test/clean it out, just make sure you're not distilling a drop of alcohol.

Based on my experience and reactions from our distributors, retailers, and customers, I'd say it's all in the still. Some (pot) stills require two runs to make a product that is a proof that is not too low. Others can do it one run. It all depends (as said by the last response) in the proof, imho. We make four different grain-based distilled spirits, all distilled at around 120 proof, and I believe that we're doing an outstanding job as far as the quality of our products go. Now if you want to make a vodka and a whiskey I would purchase a still that will allow for both.

Well this has been a problem for a while (I looooooooove dealing with my labeling folks!). We use a band-aid style label as a seal over the cork and they are not staying on very well. I was wondering if anyone knows of a type of glue that we could use to dab on the ends in order to make sure that they don't start peeling off over time. And yes, I know, I'm working with my labeling folks, but that's easier said than done.

BTW, went ahead and looked it up for my own knowledge, 27 CFR, 5.46, Standard liquor bottles.

I got one of the lab-grade glass thermometers from novatech, then got a cheap digital kitchen thermometer and regularly gauge the digital one off the lab-grade one. That way if I end up dropping or breaking the digital one, it's a quick $10 fix.

Not sure on the exact regs, but the director for the TTB's lab told me "no more than 8% headspace." Other than that (from what she said), it's on us. We checked ours by filling our bottles max capacity to the very, very top, then did the math after we emptied out that headspace to get it back down to the standard-fill. Now I tell kids that algebra and geometry actually does get used after school!

Does anyone have a recommendation for purchasing lab equipment for testing obscuration, particularly a glass condenser. We are on quite the shoestring budget, so going the $1000+ route isn't really an option. If you happen to know of a good way for testing for obscuration other than the distillation method (again, not overly expensive), please throw it out if you have it.

Ha, I think I may have your answer. I spoke with an actual TTB agent about what would happen in the event of someone breaking in/stealing from/destroying anything associated with the federal govt. bonded premises. His answer was that the feds would most likely get involved in some way. Now as far as your sign goes... We have several cameras, motion detectors, an alarm, etc. However, our most successful (imho) security device is a very simple red sign on our front gate that reads the following (when the gate is closed): "Warning! This is a US GOVT Bonded Facility. Premised under 24 hr video surveillance. Trespassing without the presence of a registered official is strictly prohibited." I even included that in our security measures when we applied for our federal DSP permit and our specialist said he thought it was a great idea. Nothing on that sign is a lie, but you can see what idea it gives people who may be up to no good or not understand the govt implications of a dsp.

Based on conversations that I've had with folks who want to open distilleries, bottom line is before you start filling out paperwork for you federal permit or purchasing equipment, know your regs from the federal level down to your local city/town or county. I had my local fire marshall come and check things out before I started construction so he could give me feedback on what we needed to do before we started investing thousands of dollars in work that needed to be done.

I may be reading into your inquiry the wrong way, but here is my take on it. If you're talking about nip bottle (50 ML) samples, then I can understand me sending someone that free of charge. However, overhead for me is far different from a larger distillery. Like many on this forum, our operation is truly artisan in that every step of our process from grain to bottle. Therefore, if I sent you an entire bottle, plus add in any shipping, I'm out quite a few bucks. Now multiply that times however many people/places would like samples and you can see how I could be out out several hundred dollars a month. Keep in mind that no matter what we have to pay federal excise taxes whether we sell it, drink it, or give it away.

In order to be in compliance with federal law, you cannot have your dsp and your tasting room as one open entity. You must have some sort of wall or permanent partition in order to separate the two (I would recommend you ask TTB before you go through with any construction to make sure that you will be in compliance with their standards). Bear in mind that DSP regs are different from wineries and brewpubs.

you can either pay once it leaves the bonded premises OR you can include withdrawal coverage on your federal bond and allow for spirits to be removed and you do not have to pay the tax until you file (either quarterly or monthly depending on how much you're making). I would highly recommend withdrawal coverage.

Your solution is part math problem part what works for you. A good estimate for us is for every 38 gal. of liquid (after filtering), you need approx. 50 gal. of space. So, based on that figure, you're looking at needing 355 gal. for your cooking space. After that you need headspace for stirring. Your headspace is calculated based on your dimensions figuring that one cubic foot is equal to approx. 7.5 gal. It's funny how those numbers go up when you start figuring it all out.

I am not claiming in any way to be a subject matter expert on this. However, my understanding and practice is that if you do distill to a lower proof, you'll do a few things. Not only will you provide more flavor from the base spirit, but by doing so you will allow the aging to mature a bit quicker being that there is more base flavors for the wood to interact with. We distill at a lower proof because it provides for a more fuller flavor quicker. Also, the level of char plays a part in the process, or if you're using new or used barrels. There's a few folks out there that know a whole lot more about this, maybe they'll post.

In my experience we had to go with a specialty carrier. Now the amount of production is going to drive your train quite a bit. We're tiny, so we fall into a different category when it comes to building codes, liability, etc. We have a policy for our buildings (general liability), then a policy for the commercial/liquor liability (basically a 2 in 1 deal). The price we have (I think) is quite good. We use Cincinnati Specialty (a division of Cincinnati Insurance). We got them through a broker. However, you are in CA, and they like to make their own rules that can make situations like mine possibly not applicable in any way. They may require you to capture your fermenting CO2 in a bag, then give it to Al Gore so he can plant trees and fly around the world in private jets while leaving his lights on in his 4 houses across the country... I dunno (full disclosure, we're close to Nashville and he leaves his mansion lights on 24-7 while telling everyone else they need to turn theirs off to save us all from global warming).

As far as the local options go, so far they aren't any better than someone that's a bit down the road (including the freight, oddly enough). But that's why you shop around. As far as the whole "is it worth it?" argument, that mainly depends on the state and distributor(s). My distributor in TN prefers the smaller cases because there is no "split case" fee that they have to pass on to the retailer (thus adding more money to the shelf price). Every state has their little differences, plus you always want to try to cater to your customer and (for most of us) our number one customer(s) are usually the distributors. Thanks for the insight though.

As many of you have experienced, it's a tad easier getting product out there at the best possible rate if you can score smaller cases, like 6 x fifths or 12 x pints. I've done some pretty extensive looking around to try and get some specific, custom-made corrugated boxes for those smaller amounts and am wondering if any of you found someone (manufacturer) that you prefer and has a good price compared to others. Thanks!

We've just recently walled up and insulated a portion of our "pole barn" and so now we've got a 2000 sq. foot climate-controlled area for our production. It's a double metal building (metal exterior and interior walls). That being said, do we need to incorporate a mechanical vent in order to ensure that we do not have an overabundance of CO2 floating around in the facility, or will walking in and out with the door getting opened and closed be good enough to let the CO2 out? We will have a heating/air system installed soon, nothing different from a standard system used for 2000 sq. ft. We currently have five fermenters @ 200 gal. each. Right now I'm planning on getting a few CO2 detectors to see how things are and hopefully that will tell me if we'll need a vent. Any ideas/experience with this?

My situation had a lot of similarities to yours as far as size goes. Basically, you need to figure how much bang for your buck it's going to be. It all comes down to overhead (equipment, utilities, insurance, bonding, licensing fees, federal and state taxes, etc.) and if you can at least pay that off and hope to make some profit after a little while. Everyone's situations are specific to their immediate local laws and cost of doing business. But, IMHO, there is a breaking point as to how small you can go in the financial sense IF you expect to make any money whatsoever. By the way, I'm about to write a hefty check to the feds for our taxes and I personally still haven't made a dime, just throwing that out there.

Thanks Jonathan, talked to one of the guys at Tuthilltown. A few points for the forum: 1. If you can help it, go with at least 5-gal. barrels, as you will lose far less "angels' share." 2. A good guestimation for aging is (very) roughly, about 40 days/gal. That all makes sense along with our limited experience with aging in smaller barrels here. And, of course, the proof, spirit, weather all play a part. Hope this info helps out a few others as well. Paul

Gents, Wondering about two things when using little (5, 15, 30 gal.) barrels for aging whiskey. Now I know that this is a loaded question and there are many, many variables involved (proof off still, how much you water it down, or don't, the weather, time of year, geographic location, alignment of planets, etc.). First thing is, about how much angel's share are you likely to lose in a given period (ie, per 6 months) and about how long is a good aging time for a 5 gal?