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Business plans and break-even point


cookinaz

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Hi;

I'm looking for information about how long it may take to become profitable after starting up a distillery, equipment costs, licensing, etc. Has anyone seen a sample business plan for distilleries? I've seen sample plans for winery startups and most of them give a period of 5-10 years before the business actually has decent positive cash flow. Is the same true for distilleries?

I'd like to be able to compare the cost and profit on making whisky to that for brandy. Does anyone have any experience or advice?

Brett

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This may seem a bit harsh, but the questions you ask are things that you need to take the time and find the answers to. We took 18 plus months to research and write our plan and probably spent in excess of $20,000 doing so. I could give you a copy (if you were to give me a big check) and it would do you little or no good. It's my plan. What you may do will be totally different.

There are many challenges in this business that are based on who you are, what you want to do, where you want to do it, how big you want to be, and every minute financial detail/decision that plays in those questions. People looking for a short cut, are headed for serious trouble. There are no easy ways to do this. If there were, we would have all done it that way. Also, this is no get rich quick proposition. We are doing OK and lose money every day. Maybe in a few years that will change. But if your goal is to make a quick million in distilling, start with $2 million, send me one, and call it a day.

Don

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Hi;

I'm looking for information about how long it may take to become profitable after starting up a distillery, equipment costs, licensing, etc. Has anyone seen a sample business plan for distilleries? I've seen sample plans for winery startups and most of them give a period of 5-10 years before the business actually has decent positive cash flow. Is the same true for distilleries?

I'd like to be able to compare the cost and profit on making whisky to that for brandy. Does anyone have any experience or advice?

Brett

We here at Colorado Gold started selling product 6 months after starting construction. If you consider not being paid for our work, time and effort only last month were we able to pay all our bills without putting in any more money. We will no doubt pay ourselves nothing for another six months then and only then we may start paying ourselves a salary if we are lucky. It will take years to pay back our original investment. Coop

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Guest sensei

Don, I won't say for certain, but I don't think that the OP has dreams of getting rich quick. Anyone who thinks that they'll get rich quick in a small business, such as a craft distillery, obviously hasn't done any research. I'll assume that the OP was asking if there be such a thing as The Brewers Association's Guide to Starting Your Own Brewery for distilleries. There is a difference between getting rich and actually getting poitive cash flow. I too was wondering what resources existed beyond my local CoC and this is why I signed up here.

Am I correct in assuming that the $300 membership fee in AD gets you business insights not generally available on the open forum?

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Don, I won't say for certain, but I don't think that the OP has dreams of getting rich quick. Anyone who thinks that they'll get rich quick in a small business, such as a craft distillery, obviously hasn't done any research. I'll assume that the OP was asking if there be such a thing as The Brewers Association's Guide to Starting Your Own Brewery for distilleries. There is a difference between getting rich and actually getting poitive cash flow. I too was wondering what resources existed beyond my local CoC and this is why I signed up here.

Am I correct in assuming that the $300 membership fee in AD gets you business insights not generally available on the open forum?

Thanks for the info!

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We here at Colorado Gold started selling product 6 months after starting construction. If you consider not being paid for our work, time and effort only last month were we able to pay all our bills without putting in any more money. We will no doubt pay ourselves nothing for another six months then and only then we may start paying ourselves a salary if we are lucky. It will take years to pay back our original investment. Coop

Thanks for the response! One year to get a salary is less time than I was expecting, so I think you must be doing something right.

How did you get the experience/training you needed to get started? I don't have a local distillery around (where I could volunteer), but I think there may be a market for the products. I'm signed up for the ADI distilling course this year and have also looked at Heriot-Watt's distance learning program. This looks like it would teach me about brewing/distilling, but there's only a couple of courses in business and that concerns me a bit.

Any thoughts?

Brett

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Thanks for the response! One year to get a salary is less time than I was expecting, so I think you must be doing something right.

How did you get the experience/training you needed to get started? I don't have a local distillery around (where I could volunteer), but I think there may be a market for the products. I'm signed up for the ADI distilling course this year and have also looked at Heriot-Watt's distance learning program. This looks like it would teach me about brewing/distilling, but there's only a couple of courses in business and that concerns me a bit.

Any thoughts?

Brett

Brett things out here in Colorado is much different than other places. For one thing we are allowed to sell and distribute our own products. We have a retail store along with free tastings here. I have been in business for myself for the last 30 years and a business is a business. Good planing can not be overstated. I also am not alone, my wife runs the store and my partner does all the wholesaling and his wife does the books. I just run the production end of the deal. I am convinced that good work ethics is one of the most important things. If I need to come in at say 4am to start a run then I do that, if I need to work past 4pm I do that also. No one needs to wait on me. Doug my partner and friend does all the real foot work. Starting in April he has now gotten us over 60 accounts and just today we found a small distributor that will work with us and not take us to the cleaners and will take just about all the product I can make working one shift a day about 5 to 6 days a week. No amount of schooling will take the place of hard work. My wife thinks I am a little crazy, I am but as long as I know this it is OK. Leonardo DeVience, not spelled right, was thought of as being crazy also. As for experience I am self taught as this is not rocket science, we are using more complex equipment but the process is the same as was done by the Egyptians. Coop

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Brett things out here in Colorado is much different than other places. For one thing we are allowed to sell and distribute our own products. We have a retail store along with free tastings here. I have been in business for myself for the last 30 years and a business is a business. Good planing can not be overstated. I also am not alone, my wife runs the store and my partner does all the wholesaling and his wife does the books. I just run the production end of the deal. I am convinced that good work ethics is one of the most important things. If I need to come in at say 4am to start a run then I do that, if I need to work past 4pm I do that also. No one needs to wait on me. Doug my partner and friend does all the real foot work. Starting in April he has now gotten us over 60 accounts and just today we found a small distributor that will work with us and not take us to the cleaners and will take just about all the product I can make working one shift a day about 5 to 6 days a week. No amount of schooling will take the place of hard work. My wife thinks I am a little crazy, I am but as long as I know this it is OK. Leonardo DeVience, not spelled right, was thought of as being crazy also. As for experience I am self taught as this is not rocket science, we are using more complex equipment but the process is the same as was done by the Egyptians. Coop

I believe AZ also allows direct sales. I don't think I could consider it otherwise due to the margins I'm calculating. I would like to make brandy, but the cost of even bulk wine (plus shipping) doesn't leave much room and I haven't figured in all the costs yet. I could grow my own grapes, but I'm worried about being spread too thin.

I'm a technical person, so I want to do a good analysis and make a plan I'm confident has a good chance of success. But it's easy to over-analyze too, so I'm trying to find the salient points. and make sure I cover some of the business/marketing aspects instead of just focusing on learning distillation on a larger scale. That'll be the fun part I think :-).

There's also a ton of equipment/supplies that needs to be bought and I'll need to factor that in to work out a timeline. I know this is all kind of fuzzy, and I'm not expecting to nail it down to the penny, I'd just like to get an order of magnitude.

I read some of the reviews on the Brewers Association book that Sensei mentioned and it sounds like one of the things missing from the book is a list of equipment (even a partial would be better than nothing). Do you (or anyone else) know a source that might give even a basic list? I know fermenters, casks and still and can probably get prices for those.

Brett

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An order of magnitude is the difference between $100,000 and $1,000,000.

I'd definitely want things nailed down much more than that.

Ya got me there! :-) I was being a little loose with the terminology to make a point, but I guess I exaggerated too much. How about within 10^-1? ;-)

Brett

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A lot will depend on how much extra funds become needed during startup and your financial standing, ie will you have ready access to extra funds when needed? Only you know your situation.

Talk to a financial planner if necessary to help. But it's best for you to do the work on what your business will be, how big you'll be, and all that. That way you'll understand your business very well.

I'd also talk with your SBA reps, local Economic Development agencies (usually at the county level, sometimes regional). They usually have programs and information sources on starting a business. Call potential suppliers and get quotes. It's a lot of legwork but it has to be done.

For myself, this has been the best job I've ever had, except for (art) painting, and it might pay a little better. I hope.

Good luck!

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cookinaz,

We have some serious challenges as microdistillers that a microbrewer does not. The amount of government red tape can add an extra 6 months to your initial timeline or more before you can even begin distilling. Many of our products unlike beers, have to be aged, and have enormous restrictions. This industry is not for the impatient.

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Guest sensei
cookinaz,

We have some serious challenges as microdistillers that a microbrewer does not. The amount of government red tape can add an extra 6 months to your initial timeline or more before you can even begin distilling. Many of our products unlike beers, have to be aged, and have enormous restrictions. This industry is not for the impatient.

One cannot help but come to the conclusion that if one wants to become a microdistiller, one should open a microbrewery first to ensure a steady income to fund and allow the distillation & aging necessary for certain spirits. Well, its not neceassry to do this, but it does appear to be a great deal easier than just going out on your own.

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We have some serious challenges as microdistillers that a microbrewer does not. The amount of government red tape can add an extra 6 months to your initial timeline or more before you can even begin distilling. Many of our products unlike beers, have to be aged, and have enormous restrictions. This industry is not for the impatient.

This is definitely an advantage to brewing beer alright. Whisky's and brandy's need to be aged. I suppose vodka can be sold right away. How about Grappa or Eau de Vie? Maybe a small percentage of the product could be sold each year while the rest ages. I've seen this done with wine until the aged stuff is ready.

...

Call potential suppliers and get quotes. It's a lot of legwork but it has to be done.

Agreed. It's the only way I'll have actual figures to plug into my spreadsheet (that's growing every day).

One cannot help but come to the conclusion that if one wants to become a microdistiller, one should open a microbrewery first to ensure a steady income to fund and allow the distillation & aging necessary for certain spirits. Well, its not neceassry to do this, but it does appear to be a great deal easier than just going out on your own.

I'm leaning towards Brandy. I suppose I could start with a vineyard, then a winery, then add a distillery (if I'm not overwhelmed by operating a vineyard and winery by that time). I may need to rethink this, but I think that going through the exercise on paper will help me figure out what I should have done in the first place. :-)

This is the exact type of help I was looking for guys. I appreciate the comments and thanks for taking an interest in a newbie.

Brett

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  • 2 weeks later...

First- to address the original question. This field is one where the answers don't come easy. You have to do several years of homework and research before ever even thinking about starting. This forum is making things easier in many ways, also more difficult, because you will learn more negatives, as well as positives.

The rare few who open in less than 2+ years from start are lucky, as well as smart. The rare few who start breaking even in less that two-three years after start of production are even more so. The most important thing to realize is: Timewise budget 2-3 times as long to get built and get permits. Financially budget 2-3 times the cost to build and get started than you think. The worst thing is running out of cash halfway through and never getting it to happen at all. This has happened a lot. You just never hear about the ones who fail before ever getting started.

Second- Yes, being a winery, and now just getting a brewery up and almost running, means that the distillery can have some time to grow. The smartest thing I ever did was partner with a winery that was already in operation. Then we just recently, out of the blue and unexpected, got a great deal on buying a whole micro-breweries equipment when they went out of business due to personal stuff. Although our start-up costs just increased by 300-400 %, the income from beer will add to that of the wine, we can have a small brew-pub on premises immediately, and the amount of eventual output of the distillery increased by 1000%.

Start a winery or brewery first, depending upon what would be more successful in your area, and what your final goals for a distillery are. If you want to make brandies start a winery, if whiskey start a brewery, if vodka... bend over. The market is saturated unless you can produce something exceptional, and get huge local and regional sales first, before going national.

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.....

Start a winery or brewery first, depending upon what would be more successful in your area, and what your final goals for a distillery are. If you want to make brandies start a winery, if whiskey start a brewery, if vodka... bend over. The market is saturated unless you can produce something exceptional, and get huge local and regional sales first, before going national.

You mean we don't need more lighter fluid? ;-)

I'm always a bit leery when someone makes it sound too easy. Talking to someone who's selling something (such as equipment or a vineyard) is likely to get you a rosy picture. Talking to someone who's busy trying to make it work will probably get you a dose of reality.

I've been looking at the store shelves lately and see several new brands out - in everything from Absinthe to Whisky. So, I know that competition is strong.

My next task is to try to get an idea how big the local market is. Maybe I should have started there. I have an idea for the wine business here in AZ, and it looks pretty rosy. It looks like AZ wines only account for about 3% of the total volume sold in the state and the local wineries are selling just about every drop. So, we haven't hit saturation yet. But, what's a reasonable number, 10%? Even at that, the numbers are huge (something like $50M).

So far, I know of only one distillery in the state, and none of the wine-makers I've talked to are interested. They look at distilling as a very complicated process they don't want to bother with.

I guess this is a long way of saying I think there's a market here, but I need to check what the demand is.

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Guest sensei
First- to address the original question. This field is one where the answers don't come easy. You have to do several years of homework and research before ever even thinking about starting. This forum is making things easier in many ways, also more difficult, because you will learn more negatives, as well as positives.

I think that thius place is great. One can muse or even have a stream-of-consciousness post all without losing any money in the process. Due to being small, many distillers can exchange information without fear of giving away their edge to a competitor.

I'm always a bit leery when someone makes it sound too easy. Talking to someone who's selling something (such as equipment or a vineyard) is likely to get you a rosy picture. Talking to someone who's busy trying to make it work will probably get you a dose of reality.

I guess one could say that it is easy.....like playing poker. It only takes 5 minutes to learn how to play - but a lifetime to master. Its easy to know the "WHAT". Its the "HOW" that nails yah.

I've been looking at the store shelves lately and see several new brands out - in everything from Absinthe to Whisky. So, I know that competition is strong.

My next task is to try to get an idea how big the local market is. Maybe I should have started there. I have an idea for the wine business here in AZ, and it looks pretty rosy. It looks like AZ wines only account for about 3% of the total volume sold in the state and the local wineries are selling just about every drop. So, we haven't hit saturation yet. But, what's a reasonable number, 10%? Even at that, the numbers are huge (something like $50M).

Those who are doing it would know much better than I, naturally. But, I cannot help but think that anyone who does start a craft distillery that you will be confined to your home state, maybe even you own immediate geographical region if you're in a larger state, for your entire lifetime. If I am not mistaken, all the Big Boys of distilling were not the major players that they are now until long after their death.

Is there an example of anyone actually getting filthy stinking rich while distilling during their lifetime?

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Is there an example of anyone actually getting filthy stinking rich while distilling during their lifetime?

No...not yet. B)

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Is there an example of anyone actually getting filthy stinking rich while distilling during their lifetime?

I suspect we can find more than a few examples of a lot of money being made producing alcohol. Most of them probably started out with money first though. For example, Sammy Hagar has done well with his Cabo Wabo tequila (now majority owned by Skyy). Speaking of Skyy, Maurice Kanbar founded it in 1992. He was a successful entrepreneur for a long time before that but he did pretty well with Skyy.

Let's not forget Sidney Frank who started Grey Goose and sold it eight years later for $2 billion dollars.

Not that I expect to see any of us do the same thing, but it has been done. :)

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I suspect we can find more than a few examples of a lot of money being made producing alcohol. Most of them probably started out with money first though. For example, Sammy Hagar has done well with his Cabo Wabo tequila (now majority owned by Skyy). Speaking of Skyy, Maurice Kanbar founded it in 1992. He was a successful entrepreneur for a long time before that but he did pretty well with Skyy.

Let's not forget Sidney Frank who started Grey Goose and sold it eight years later for $2 billion dollars.

Not that I expect to see any of us do the same thing, but it has been done. :)

Both examples of the power of marketing versus actual manufacturing and craftsmanship.

Don

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Both examples of the power of marketing versus actual manufacturing and craftsmanship.

Don

The trick is to combine both. :) You've done a great job of that in your area, btw.

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  • 1 month later...
No...not yet. B)

I agree with Marc ~ not yet. B)

I take a great deal of my motivation from Walter Elias Disney, considering every single Amusement Park operator at the time said he was crazy to charge admission for people to enter his park. They all predicted he'd be out of business in a month.

"If you can dream it you can do it" ~ Walt Disney

~ Jeffrey

P.S. Starting with the goal of getting rich leads to ruin, if you're passionate about what it is you do and experience good timing, then wealth is attracted to you.

P.S.S. Rumor has it that Patron was started by a hairdresser (not that Patron is artisan, though it's still technically a spirit that occupies shelf space that you may someday unseat).

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Not rumor...Patron was started by John Paul DeJoria (of Paul Mitchell)

http://en.wikipedia.org/wiki/Patr%C3%B3n

In fact, his is a story worthy of inspiration...from being homeless to wealth rivaling Trump's. Then add to it all the humanitarian work he's done.

http://www.islandconnections.com/edit/dejoria.htm

I wanna be him when I grow up!

Cheers,

Paul

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