Starting a new business costs money. Obviously. There’s the loss of a secure salary if you quit your job to run the new company, the increased taxes from being self-employed, and the slew of costs, from overhead to supplies to payroll. Starting a small consulting business, or shirt designing firm, or a new social networking website, are all expensive in their own regards. But what we’re attempting to do here is an entirely different level of expensive. Give me $20k, I can quit my job, find a few friends, and start a web development company. It would fail, because I’m not interested in it, but I could start it.
While we haven’t run the numbers yet, our current guesstimate is in the $500k range. That’s a big number. It’s hard to swallow. And it’s going to be hard to get. I could ask 10 of my friends to take their paychecks every two weeks for a year and deposit them right into an account, taking nothing out, and it wouldn’t be $500k (gotta love entry level positions…).
Why so much, you might ask? A brewery is in the business of making beer. Manufacturing it. Basically, it’s a beer factory. We need an industrial zoned warehouse in a good location (because we’re manufacturing a product that can be used on premise, location matters), with lots of big shiny tanks and vessels. Each batch of beer contains hundreds if not thousands of pounds of grains, pounds of hops, and swimming pools of water. There’s a lot more than that as well, but that’s the big stuff.
There are a variety of sources we’re considering for funding. A bank loan backed by the SBA is going to be one of them. We’re working on an airtight business plan right now, in the hopes that a banker won’t look at us, look at the number with all those zeroes, and laugh us out of the bank. Other sources will hopefully include friends and family. I wish we could stop right there, but I don’t think it’ll be enough. So we might need to get investors. People who will give us money, but take some control of the business, at least until they’re paid back with interest. I’d prefer to keep control of the company, but this is definitely an option we might have to take.
I suppose the dream situation would be for an angel investor (any reading this? hint hint..) to give me a call, offer a half million dollars at a low interest rate payable over the next [insert long period of time here], and request no control, just a beer whenever he or she comes by the brewery. So to any and all people of this nature who might be reading this, Hello, My name is PJ, I’d like to meet you.
Anyway, this is just a preliminary posting on finances. Like I said, we haven’t run the numbers yet. I’ve met with a banker to talk about this dream, but haven’t gotten into the nitty gritty of what it’s going to take. I haven’t even asked friends and family for the pledge of money yet, let alone a check. Except for a few comments about costs here and there, we really haven’t even begun to tackle the issue. So the pessimistic tone isn’t meant to be so.. pessimistic. But this is part of how I feel right now.
On the brighter side, even with the economy not doing to great and all that, things aren’t as bad as they seem. The liquor industry as a whole is somewhat safer in a recession than some other industries. Beer sales, and specifically craft beer sales are on the rise.
Small independent craft brewers are gaining alcohol market share due to a shift toward full flavor beer and increased support for local breweries. From 2007 to 2008, estimated sales by craft brewers were up 5.8% by volume and 10.5% in dollars. Overall share of the beer category from craft brewers was 4.0% of production and 6.3% of retail sales. More than 1 million new barrels of beer were sold in 2008, and close to half of those barrels were beer from craft brewers.
We’ve got some serious passion working in our favor. I sort of only talk about beer, brewing, and the brewing business these days. We’ve got youth working in our favor as well. When I’m 40 or 50 I probably won’t be excited to work 80 hour weeks on the brewery. Today, at 25, I cannot wait. And we’ve got the support of our friends and family. Yes, people suggest we keep our jobs in these current economic times. But the overall momentum of support is in favor of getting this brewery open and pouring. Lastly, we’ve got Denver. Denver is primed for beer. There are already breweries here. People like good beer. We don’t need to convince people that our beer tastes better than the macro breweries. The already know it. And let’s not forget about that little annual event called the Great American Beer Fest. It’s a good town to make beer.
Personally, I can’t wait.
As usual, we have open ears and open minds for any and all ideas. If you know someone who has money burning a hole in a nice pair of pants, just waiting to fund a start up, I’d love to buy him or her some lunch. Likewise, if you have an idea or contact or anything you’d like to share with us, we’re all ears.
Maybe I’ll win the lotto. I should probably start playing first…