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Road Trip Blog (for live reporting from the road).
Trip departure was June 4, 2007.
Return to Eugene was October 20, 2007.
Total Length of Trip was: 139 days (4 months + 19 days).

Advice for Brewery Owner Wannabee

From time to time, people email me for advice. If I'm not too busy, I answer them. These are actual letters (with names removed). Hope you find them useful, or at least entertaining.

Please note: I do not neccessarily know these people before hand. Also note: If you email me, and if I reply, our correspondence is fair game for me to use any way I see fit. (Names and places have been changed.)

March 2008

Hi Teri!

I found your e-mail at your website that I found reading this article: http://www.bellaonline.com/articles/art53964.asp

I live in California and am a German native. In talking to friends the idea was born to found a brewery on an island in WA state. Now it takes more than an idea to do this :) and so I did some research on who could be a mentor to point us in the right directions. That is the reason why I am sending you this e-mail :)

Having so much experience as a brew master what would you recommend to some high tech folks who love beer, are into organic and who have the smarts but not the experience and skills to found a brewery?
What would you recommend that our next steps should be?

Here's what I have identified so far:

+ Do research on how lucrative and feasible it would be to open a brewery on the island?

+ Do research on what it takes to brew beer and match it to our skill sets.

+ Create biz model and define what it takes till we can open our brewery

+ Go get trained, do home brewing and go through trial and error phase

Any recommendations beyond this?

Washington Wannabeer

Subject: RE: founding a brewery?

Hi Washington Wannabee,

Congratulations on a great dream! You have a steep road ahead of you. Island breweries inherently have problems because it is difficult to secure a good water source, and it is difficult to dispose of wastewater. How large is the metropolitan area? Can their wastewater treatment facility handle what you propose? Will you have to ship in water? Will you have to build your own wastewater treatment plant? These are questions that will kill even a 5-barrel brewery project.

Also, don't forget that all your raw materials (malt and hops) will need to be shipped and not trucked in. You can ask Alaskan Brewery in Juneau what a huge expense that is. Right now the price of stainless steel is about twice what it was a few years ago, and if you haven't been paying attention to commodities prices, Malted Barley is about double from last year, and Hops are sextupel (six times) what they were a year ago, and that's if you can even find any.

Another important question is Who are your customers? Do the natives have enough disposable income to afford your beer? Will they even like craft beer? Are there enough local beer drinkers year round to support a craft brewery? Will you be a brewpub? or will you distribute beer? or both? If you are a brewpub, what established restaurants are nearby and how are they doing? Will the area support another restaurant, which is what a brewpub is? If you distribute, can you make enough money off the locals year round? If only seasonal, or if not, how much will it cost to ship your beer to the mainland? What are the closest mainland distributors like? Are they accepting new breweries, or will you have to self-distribute? What kind of refridgerated warehouse will you need on the mainland in order to build your brand large enough for the mainland distributor to consider taking you on? How much will it cost? And can you make money at it?

You may be really smart, but if you have never owned a business, be vary careful about starting a business as complex as a brewpub or brewery. Start smaller, with a bar. Once you decide if entrepreneurship is for you, then sell the bar and go on to the next step.

How many people are in on the plan? Do any of you intend to quit your high tech jobs and work in the brewery? Decide now what job functions people will take on. How many of you are there? I must assume that everyone on your team has excellent credit, and has available to her at least $250,000 (each) in cash or equity, as nowadays you may not be able to open a brewpub for less than about $2 Million. Also, without years of brewery or restaurant experience, a bank would barely loan you 50% and maybe no money at all.

If you all want to quit your jobs and work in the brewery, there are several functions each of you can specialize in. For example, let's say there are four of you, and you all want to quit your good-paying secure 401K and retirement-funded jobs. Here is what each of you could do:

The most anal-retentive, meticulous and technical person should be the brewer. This person should be passionate about beer. An interest in, and good palate for flavors, as shown by interest in differentiating food, wine and spirits is helpful. A knowledge of beer styles is also helpful. This person should begin homebrewing immediately, and should try to get a part-time job in any established brewery as soon as possible. There are also brewing schools to attend, such as the Siebel Institute in Chicago, which is where I attended the Diploma Course.

The person who is most obsessed with accuracy in numbers should be the business manager and bookkeeper. This person should be fluent in Excel and Quickbooks. She should also enjoy poring over other people's reports and spotting inconsistencies and errors. An intuitive grasp of Income Statements, Balance Sheets, and Cash Flow Statements is important. An ability to design reports in Excel is good. She will be responsible for getting the information needed from the staff, including weekly inventory if necessary (kitchen, bar and brewery) in order to keep her finger securely on the pulse of the business to make sure cash flow is under control, and that the business is actually making money.

The person who is best at managing and motivating people, especially undermotivated 20-somethings passing through on their way to their "real career," would be the General Manager. This person should be good at scheduling and juggling schedules, and excellent at spotting pilferage ("shrinkage") and potential for pilferage. This person should be good at creating a team and team spirit. An ability to work efficiently on less than enough sleep is probably required.

The person who has the most undaunted courage and enthusiasm level should be the entrepreneur. Experience with legal contracts, and setting up accounts for supplies and ingredients is helpful. When everyone else is having a bad day, this person can't. She can't show any doubt in public, as it is her job to whip all the partners and staff into an enthusiastic go-team frenzy of work-all-night to get it open marathon. A charismatic personality that charms bankers, suppliers, mayors, water commissioners, and anyone else who decides to have an interest in your project (or who you wish would be interested in your project) is a must. This person also handles guerilla marketing.

I'm sure this is more information than you wanted. If you jump in now, you'll be over your head. Keep your day job and get a night bartending job if you can. Sign up for all the SCORE and SBDC classes you can find. Ask lots of questions. Become fluent in Excel, Quickbooks, Charts of Accounts, beer distributing, and anything else that sounds useful. Get service industry experience at a chain restaurant, like Starbucks, or Chilis. If you quit your day job, become a manager at one of these places and learn to work with the public, as well as manage service industry employees. You have a lot to learn. Best wishes and good luck.

FYI: The annual Craft Brewers Conference will be held in San Diego April 16-19. Early registration ends March 13. Go to www.beertown.org for info. There are about six tracks of speakers. If you are serious, and I didn't scare you off yet, you may want to attend as part of your information gathering pre-business plan phase.

If you need more from me, we can set up a Consultation Appointment.

Cheers, Teri


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