“How do you make a small fortune in beer?”
“Start with a large fortune.”
I laughed when Neil from Yazoo told that joke. I was on my first stop of a 22 brewery research tour, and I was full of excitement and ambition. No chance I’d let a little thing like financial reality get in my way.
Then Kent from Blackstone told the same joke on my next stop. Next was Manny from Georgetown Beer in Seattle. When the Brooklyn Brewery marketing director also kicked off his tour with the same joke, it started to sink in.
Since starting on my beer adventure a couple years ago, I’ve had the chance to meet some really great folks in the beer industry. Every brewery owner’s story is unique and each person took a different path to get to where they are. They each had different advice based on their experiences. I’m grateful for all of it.
While their career paths and personalities were all over the board, there were two common themes that became readily apparent:
1. They loved what they did
2. They weren’t doing it to make money
The reality of the craft beer industry is that it’s a relatively capital-intensive business with low margins. High risk, low reward opportunities are not what most investors are looking for in a business. My best friend since kindergarten runs the credit department for a local bank. When I told him about my idea he said, “man I think that’s awesome. Don’t ever come to me for a loan.”
One of the brewery owner’s said that on one of his fundraising calls to finance his brewery, a savvy businessman looked over his pro-forma for a while. After thoroughly reviewing the numbers, the man looked up and asked, “so why should I invest in this?”
The future brewery owner looked his potential investor straight in the eyes and with as much confidence as he could muster, he said, “…because you think it’s cool to own a brewery.”
The investor laughed and later wrote a 6 figure check.
Since starting Jubilee, I’ve met with a number of aspiring brewery owners interested in getting into the business and I’ve emailed back and forth with many more. Some are pretty far down the line; others are as clueless as I was. I’ve enjoyed talking with each of them.
For anyone that might be reading this and thinking about taking the plunge, here’s my advice:
First, do your research. Go online and learn as much as you can, then go and meet with as many people in the business as possible. Ask them for their advice. Take it with a grain of salt. Then form the strategy for your business (draft only, bottles, tap-room, brewpub, contract brewing, etc).
Next, REALLY understand the numbers. Know what you’re getting into. And don’t do like I did and grab a calculator to double check. Excel isn’t making a mistake. The numbers really ARE that bad starting out.
Along the way, ask as many people as you can what they think about the idea. But keep in mind that we’re trained to be risk adverse as soon as we enter kindergarten. So take those opinions with a larger grain of salt.
Once you have done your research and you know your numbers front and back, I’d recommend putting all the cards on the table and trusting your gut. If you’re not quite sure, it’s probably not for you. If you still have that burning desire to open your own brewery, take the plunge and never look back. You’ll be glad you did.
This is the first in a series of pieces I’m going to write about my experience in the beer industry. Next post will talk about why I decided to go the route I did and what I think the “smartest way” is to get into the craft beer business. If you have questions or suggestions, feel free to email me at email@example.com. If you like this, please post to your Facebook page. Cheers!