Hello World!

[CRD]

Hi I'm Aron,

My friend and I have a dream to start a, you guessed it, craft distillery. Like so many others, we are in the business planning phase right now and have been in contact with some potential consultants (although I fear they may be too expensive). We are also starting some hands on training at a local distillery to get the experience side of things going (how I wish you could home distill!) and our local community has a grant/economic development program that mentors potential start ups with highly successful business folks in the community so right now we are working with a partner of a marketing firm which has been extremely insightful.

We don't plan on quitting our day jobs until we absolutely can afford to (we are both in the First Responder Community) and I think if we could find a model that could pay us both $60k a year we would be ecstatic.

I do have one question (the first of many I'm sure) for you folks who have done this for any period of time. How much capital we can raise will obviously determine how our dream looks when we are starting out.

If we go the shoe string budget route and we are able to find extremely affordable rent which we could support from our existing day job salaries, and had minimal upfront investment to purchase/lease equipment and other start up costs. What do you all think about just distilling on nights, weekends, and days off? Is that a model where we could get some traction?

Thank you all for your time and responses.

Aron

[Panoscape]

I'm in the same boat as yourself, just starting up. It's good you have a connection in with a local distillery, that will give you a ton of hands on experience. But, that's only 1/7 the battle. You also need to get experience with marketing, sales, distribution, accounting, sourcing, inventory and reporting... all while making it profitable. There are several posts here talking about start up costs... and the answer is between $15K -$2M... all depends on what you want to do. If you're on a budget, like me, then it's shoe stringing it till you make it. Here are the steps I'm taking:

1. Incorporate, get a bank account, register with the state and city

2. Read state and fed laws and regulations, then read them again... and again.

3. Meetings

City Planner - meet with them to get info on city tax, tasting room tax, zoning, sewage, water use.

State Liquor Commission - get your questions answered and receive your application packet.

Fire Marshal - Get the info needed for classification and how much product you can have in process at one time.

4. Decide what you're going to make. Shoe string operations like mine need to focus on one product. This will save a ton of money when starting up. You will be able to by in bulk, you will focus your marketing $ on one product and you will have defined what you need to buy regarding your set up.

5. Write out your production plan. This will tell you how much you will make if you're lucky enough to sell out. it will also give you the total needed for your bond fee's. Make sure to include hours in the plan, how long for water filtering, water heating, mashing, fermenting, stilling, mixing, aging and bottling. Home Brewing of beer can help you out with times needed, plus it will give you good experience doing your mashing.

6. Write out your cost of goods sold for the start up year. This includes rent, taxes, bonds, inventory, production, distribution, marketing, accounting and sales. Then compare and balance it with your perceived production of the year. Are you profitable? Do you need to scale back or increase in certain areas? You will need to have adequate funds to cover your costs of good sold or the Fed's wont let your DSP go through. You must submit a "cost of operations" and also provide them with "fund validation". You must have enough to cover your operations, adjust operations to fit your funds. This is how you can start a distillery on $15K.

7. Find a building that aligns with city, state and fed regulations... good luck with this one. My small production will need 2 hour fire walls, sprinklers, a fire hydrant out front, zoned LI, adequate sewage and water. You might find a building with several of these, but very rarely will you find one with all and also fits your tiny rent budget. Plan on the costs of building a drainage ditch and possibly upping the water supply. If the space doesn't have sprinklers or a hydrant keep looking... it's not worth the expense for us shoe stringers to put them in. If you find one, get a lease that is contingent on receiving your DSP license.

8. Bond and Insurance - go get your unit bond for operations and withdraw, plus your liquor liability insurance.

9. State/ Fed Application Paperwork - fill it all out and submit your paperwork. When referring to items, it's best to use the FED defined words outlined in the laws.

10. Set up your distillery - What your making will determine what you spend on equipment. For me as a shoe stringer, I'll be making due with less. If a Vermont farm distiller (Flag Hill Farm) can make a world class brandy with a retrofitted 55 gallon drum pot still, then I think I too can get by on my tiny shoe string.

11. Build your marketing items and start getting the word out. I have 20 years of marketing behind me, so this is very little cost for me.

12. Get your DSP permits, formula approval and COLA approval. Then, set off on this new adventure of filling out government forms, paying taxes upon taxes, obtaining better distribution, trying to get people to try and talk about your spirit, getting media coverage, getting good placement in the stores, cross promotions, sponsorships, riding the HR rollercoaster, meeting payroll and... oh ya, having fun distilling your spirit.

Personally, over my career, I have done three start-ups. So, I have experience in starting a shoe string company and within two years, having that company's products in 26 countries. The best thing I can recommend on how to do this is to do 180 degree's of what everyone else is doing. Find a hole in the marketplace and make the best darn thing you can to fill that hole. Then... market the heck out of it.

I'm sure I missed many things, but this is where I am now, in the middle of this process.

I'm ready for the ride, how 'bout you?

rw

[Rickdiculous]

Try contacting King's County Distilling in Brooklyn NY. www.kingscountydistillery.com They have done exactly what you are talking about with 5 small 10 gallon stills and small room to work in. They make a moonshine, a bourbon Whiskey, and a chocolate Whiskey (interesting). But they are all guys who have day jobs and do this as a side business. I don't know how much time they might have to talk, but you never know. There are a number of people making smaller affordable stills that can do the job you seek with out a huge investment. see www.artisanstilldesign.com (violent blue on the forum), www.hillbillystills.com, www.coppermoonshinestills.com, and artisanstills.com. good luck.

Rick

[Jedd Haas]

Good advice from rw. Certain items on that list are much easier (or more difficult) than others. Local factors will cause great variances.

Now for the OP, some thoughts on how to get to $60k per year (x2). If that's the goal, and you also have the goal of doing it part time until then, I would say that it's possible, but difficult.

Doing it by bootstrapping, you'd have to first get to the point where your part-time distillery was making enough to hire full-time help (at salaries lower than $60k). Then you'd need to crank up production to the point where the business was throwing off an extra $120k/year to hire you and your friend full-time. Of course, you actually need more than $120k to pay that amount in salaries. Depending on numerous unstated variables, I'd guess you'd need to get up to around $1M in sales, or more, for that to happen. A top variable to consider, of course, is your product. Coming up with it, branding it, selling it. If you have a fantastic product and the pair of you are already ace sales people, then it might be very easy. On the other hand, if product development, packaging, design, sales, branding, marketing, pr, deal-making, and business operations in general are like foreign languages, the road will probably be more difficult. There are a bunch more points to consider, but I think the above gives you the basic idea.

Another business plan would be what I would call the "2 rich guys" business plan. In which a couple rich guys decide to start a distillery, put up $1-5 million, hire professionals in several relevant fields, and make it all happen. (Or rather, the professionals make it happen.) In this scenario, $60k salaries are there from the beginning. It appears the bootstrap method is more towards what you are aiming for. But I thought I'd mention this alternative approach to achieving your goal, as it seems to be pretty common in my informal survey of micro distillery business plans.

[pressure9pa]

Thanks to the OP for the question and to the respondants. I'm facing very similar issues in my planning.