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Read this if you are new to commercial distilling


Paul Tomaszewski

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All good points, but the most easily overlooked is that while you're working 18 hours per day, and making no money at all, your life and personal expenses go on. Don't forget to add that to your business plan...you need an income or your life will fall apart.

Paul's point number 7 is the most important. This business like all businesses is driven by sales. Sales is job one. Nothing happens unless something gets sold. If you're not good at sales, make sure someone on your team is.

Too often the focus is on equipment and process - the making of the product. That is essential, but sales is even more essential. After all, if you have a recipe and an order, you can get one of us who already has a license and equipment to make the product for you. Therefore the equipment and license, and all that stuff is secondary. Sales comes first.

Sorry to burst the bubble, but it will cost you less money having it burst now, before you spend your life's savings.

Will

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Great post Paul.

I’m in between point six and seven, not licensed yet (still in paperwork) but experimenting receipts and stocking as I can produce free here in EC but have to have the license at the moment I sell in public.

I have a problem in pricing the product, knowing that it is better than an industrial made when it comes to hangover but I have to find the good reason to get a place in the shop shelves.

I didn’t talk with distributors yet, so I don’t know exactly what the margin they are working with is.

Can you or someone please give an example how you price in relation to industrial booze (let’s say a white light rum) and the stages to pricing like wholesale, end user and export prices that would help a lot in this topic.

Thanks in advance

Joe

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And could the administrator please correct my spelling on the topic? gotta love typos (commercial)

Excellent post Paul. I've corrected commercial and pinned the topic so it will remain at the top of this forum for all eternity (or until the server crashes).

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When we started in September 2007 it took us until March 2008 before we had anything to sell. You will find out that until you are taking up shelve space in 250 to 300 stores most distributors will not take you on. You must do everything your selves to get to the point that they are assured you have a good product and will be in business for a long time. We were able to make enough money to pay all the bills within 6 months, but nothing for us at all. Then it took three more years to get to the point that a real distributor came to us and ask it they could represent our products. Let me clarify "real distributor". We had several small distributors before now, and nothing worked out. They did not pay on time and we had to pursue legal means to get our money. We still had to do all the work to build our brand name. But remember if it was easy their would be thousands of us trying their hand at this. Coop

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Since we've been down this road before I want to clarify that the feds don't have any rules about a distillery and a residence being on the same piece of property, just that they may not be in the same building nor attached buildings. They do, however, as Paul rightly said, care very much that you comply with all zoning requirements and that's why it's best to start locally and work your way up to the feds. If you are cool with everything your city, county, and state want, you'll mostly be cool with the feds too. Many people think the feds will be the hard part but in many ways they're the easiest part of the permits, taxation and licensing process.

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Not to knock Chuck down, but they do care if the distillery is on the same legal piece of property as the residence. They are likely to require you to AT LEAST put up some sort of fence to separate the building(s) from the residence, but they may require you to subdivide. Another possible angle is that if one business holds the property and leases part to the distillery and part as a residence and they have a separate address, that could fly. Again, it comes down to a case by case basis and I am merely telling you about my experience with that matter.

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Paul,

This is excellent advice. I wish it had been posted 4 years ago. But in the end it is almost exactly what I have done (only money was really out of my own pocket so I built my own equipment).

All you California folks thinking of starting a distillery, do me and a few other people here a favor and don't read this... JK - well, maybe not.

My advice to add would be;

Don't get in a hurry this takes 3-5 years. Licensing alone can take 6 - 12 months.

Reiterating the advice of one wise old codger (Bill Owens) don't quit your day job!!!

SELL, SELL, SELL, marketing and brand development can't be emphasized enough and will consume a good deal more of your time and money than you think.(thanks Bill Smith)

Distributors - wow, GREAT ADVICE COOP - thanks - I needed it.

You are your brand - clean up, speak well, get as much publicity as you can, figure out who you are marketing to and figure out how to market to them on a shoestring budget (unless you have gobs of money - if you do, we would all like to talk to you -but me first!)

Without good planning you are guaranteed to fail and with it you only have a chance of not failing - work hard and prepare yourself young padwan.

May the force be with you.

Lee

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Not to knock Chuck down, but they do care if the distillery is on the same legal piece of property as the residence. They are likely to require you to AT LEAST put up some sort of fence to separate the building(s) from the residence, but they may require you to subdivide. Another possible angle is that if one business holds the property and leases part to the distillery and part as a residence and they have a separate address, that could fly. Again, it comes down to a case by case basis and I am merely telling you about my experience with that matter.

Your experience is priceless, Paul, I just know what the rules say and they say nothing about property separation. Most distilleries in Kentucky have a residence on the premises because it was typical for a master distiller to live at his distillery. Separate building, of course, usually a hundred yards or more from the distillery, but not on a separate parcel.

Based on what you and others have said, TTB officers apparently have some leeway to make their own rules, if you want to call it that. Whenever you can just say "yes sir (or ma'am)" to a government official, that's your best course. But people shouldn't get hung up on this. Farm-based distilleries are encouraged, with the idea that a farmer can supply the farm's fuel needs by distilling some of the farm's produce into ethanol. What TTB primarily cares about is physical separation from the residence, not legal separation.

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If there are no specific regs requiring something to be a certain way, the TTB officials should have no authority to impose a set of rules of their own making without authority from Congress to do so.

If you are asked to do something specific by TTB, make sure you know what reg imposes such requirements. Ask where you can find that in the CFRs so you can understand it fully. If it isn't a matter of the regs, it ain't regulated.

The regs can't be arbitrarily changed or modified based on who is the reviewer.

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  • 3 months later...

Not to knock Chuck down, but they do care if the distillery is on the same legal piece of property as the residence. They are likely to require you to AT LEAST put up some sort of fence to separate the building(s) from the residence, but they may require you to subdivide. Another possible angle is that if one business holds the property and leases part to the distillery and part as a residence and they have a separate address, that could fly. Again, it comes down to a case by case basis and I am merely telling you about my experience with that matter.

Sorry to counter this disagreement, but there is no regulation which stipulates segregating a house/abode from a distillery located on the same parcel. Case in point, I live in a house that is no more than thirty feet from our distillery and no fence is required. The question never even came up, though we had two separate visits from investigators when we were in the licensing phase. It is possible that the requirement was something peculiar to the person dealt with.

R

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  • 6 months later...

If there are no specific regs requiring something to be a certain way, the TTB officials should have no authority to impose a set of rules of their own making without authority from Congress to do so.

If you are asked to do something specific by TTB, make sure you know what reg imposes such requirements. Ask where you can find that in the CFRs so you can understand it fully. If it isn't a matter of the regs, it ain't regulated.

The regs can't be arbitrarily changed or modified based on who is the reviewer.

However, if you look at what Blanco Bustro (I don't have the magazine article at hand) had to go through to get their beer and spirits packaged together in each separate TTB district you wouldn't be saying that. Most of these issues arise because they haven't come up before.

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  • 8 months later...

Paul,

I've been an entrepreneur my entire adult life (I'm pushing 72 now) and have started, invested in, bought or taken over many businesses (some were sick) in that time. I've great success' and, of course, some failures but each was a valuable lesson that went into my 'life experience' book (my head). I'm now looking at doing a craft distillery with my son, and as you have learned, a distillery start-up has many more variables than an ordinary "typical" business (if there is such a thing). However, your post is so spot on that I've copied and pasted it into a reference document for myself. I've also created reference documents from Ian Wisniewski's "production" articles in Whisky Magazine in my attempt to "educate" myself in the whisky distillation process. Bill Owen's books have been great along with several others in understanding the process but you have laid bare all of the bumps in the road that one will experience as they travel down the start-up road. Thanks for the effort and time to help others pursuing the same dream that you have. I've had a look at your website and look forward to trying your malt whiskey. Best of luck and best wishes for 2012.

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  • 7 months later...

Sorry Newbie again, or maybe I just have ADD, anyway, i noted that you put together a business plan FIRST, but the argument i keep coming up with is should we not have a product first, at least an example of a product say gin of a certain flavor, then put together a business plan, just asking what folks opinion is on this plus what is the experience of having a company or consultant put together a plan for you with inputs from you of course....

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  • 3 months later...

I too have been a entrepreneur my entire adult life and I have had more failures than successes, mainly because I tended to bin the failures pretty quick and keep the winners a while before selling them. But, after 25 years of making a living the hard way I have just found one of the most informative pieces of business build advice I have ever come across. I have read 100's of business, self improvement, management books but, this online FREE lecture series is gold for anyone reading this thread and thinking of going commercial. If you apply Paul's advice to the "How to build a startup" business series you will be way ready for the realities ahead. http://www.udacity.c...245/CourseRev/1

Cheers,

Mod

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