I want to start a nano-brewery...

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distracted_at_work
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I want to start a nano-brewery...

Post by distracted_at_work » Wed May 17, 2017 10:52 am

I've gone back and forth whether to make this post for two weeks and decided to go for it. I'm a couple days away from starting to spend money on this project and wanted to hear from the smartest people on the internet. Yes yes I know; way to have an original idea...


The Executive Summary:

Brewing Company will create and sell beer through a brick & mortar taproom located in a high traffic, gentrifying area in city. I will sell all (or nearly all) beer through the retail outlet to take advantage of full $6/16oz pricing. The taproom will feature 4 standard beers and 2 rotating/season/experimental taps when running at full capacity. Every beer brewed will be under 20 PPM gluten content. The gluten content of each batch can be viewed in the taproom or online. I fills a void in being the only gluten-reduced beer with draft offerings in Western Canada. The gluten-reduction will be advertised in such a way that Regular Joe, whom would normally turn his nose up at gluten-reduced beer, has no idea that it is. It will taste the same.

I have a couple more ideas for the business I'm not ready to put out there because I think they are truly original.

Brewing Company will sell t-shirts, hats and other merchandise in addition to beer.

Craft beer is one of the fastest growing industries in province after it became legal. There are 50+ breweries in province currently with 31 more slated to open in 2017/2018. Craft beer still only makes up 5% of beer consumed compared to 25% in neighbor province. I want to take advantage of the boom by slicing out my niche market. I will use the newest technology to allow me to fit into a lower-rent, lower-square footage retail space that would be restricted from other craft breweries.

I will brew on evenings and weekends in addition to my full-time job with the hope of scaling that back to 4 days a week after opening. I am fully prepared to work 80 hours a week to make this happen, taking no time off. I know that my age, energy, background, lack of commitments (family, house, dog) and day-to-day application of ERE can allow me to do this.

I will be owner/operator/financer/brewmaster until/unless a partner falls out of the sky. I'll hire consultants and employees as need be. My best financing options are through an 6-9% loan from the BDC or selling equity to friends/family with built in buybacks.

I want to be open in 2018 or 2019 depending on how the next year goes. Ie. finding a space, securing financing, nailing recipes etc.

I've been in contact with financiers, small business owners, brewmasters, and anyone else that will sit down with me that can offer advice. I've nearly rode my bike to every single brewery in town. The craft industry is amazingly supportive. It's an Us vs The Big Guy mentality.



Financial Summaries

Decided not to post the broken-out specifics. I will PM or Skype if you want to chat further. My capital requirements accounting for new everything (worst case) are $150K and first year op cost (worst case) are $200K.* Gross revenue could be as high as $780K (all beer sold through taproom) or as low as -$40K (all beer distributed) Canadian dollars. No craft brewer I've met in this city has had problem selling product. I assume I move everything as quickly as I can brew it. Bold but that's the evidence.

*The summary has accounted for every single thing I can think of or read of on forums and in books. Labor, tax, utilities, ingredients, renovations, glass washing equipment, the most expensive viable lease I could find, website development, marketing, brand new stainless steel, contractors, and especially the fact the Canadian peso absolutely sucks. I'd be small enough my liquor tax is near 0. Does not account for the cost of the loan.


The big picture

I want to start a business in my life. I've read E-Myth, Siddhartha, Man's Search for Meaning, Meditations, 1 Mil in the Bank etc etc (some many times) and still want to start a business. I want to create something tangible. I can't imagine a better time than right now. I have no commitments to anyone but myself.

I'm not a 10 year beer brewing hobbyist. I'm detached. I will make what sells and not what my favorite beer is. It's a science and an art but it isn't rocket science or the philharmonic orchestra.

I will make a system that anyone can run so if I want to cut ties and sell I can. I will make every part of the business so damn simple that it can be outsourced to morons if need be.

I want to be able to go into a god damn establishment and drink a god damn draft beer for once in my life.

I'm not letting my immediate family invest.

I'm not doing this to get rich. I'm doing this because I think it will be interesting. It could help me develop another, potentially significant, income stream decoupled from my primary job. If it goes well, I can ERE sooner, if not... back to square one. I have the tools to work for 5 years and retire anyway so it is low risk in that sense.


Feedback and criticism from my business owning friends

-Be prepared to have no life.

-You need a girlfriend/wife to help so you can stay sane.

-Do not take on any partners who have less to lose than you do. This probably applies to more than business.

-Do not let people give you "free" money.

-Finance as little as you need to, only use the BDC for bank loans.

-Start small and grow into it (if you want growth).

-Highly competitive market right now and that came with conflicting advice.
1. Maybe wait 3 years see where the industry is.
2. If you don't start now, when?

“When you throw a stone into the water, it falls quickly by the fastest route to the bottom of the pond. This is the way it is when Siddhartha has an aim, an intention. Siddhartha does nothing – he waits, he thinks, he fasts – but he passes through the things of the world like the stone through the water, without bestirring himself. He is drawn forward and he lets himself fall. His goal draws himself to it, for he lets nothing enter his mind that interferes with the goal. This is what Siddhartha learned from the shramanas. This is what fools call magic, thinking that it is brought about by demons. Nothing is brought about by demons; demons do not exist. Anyone can do magic, anyone can reach his goals if he can think, wait, and fast.”

Thanks for reading through, it felt great to write it all out. Now please... shoot as many holes through it as you can. Edited for spelling.
Last edited by distracted_at_work on Wed May 17, 2017 12:19 pm, edited 1 time in total.

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Re: I want to start a nano-brewery...

Post by jacob » Wed May 17, 2017 10:55 am

Permits?

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distracted_at_work
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Re: I want to start a nano-brewery...

Post by distracted_at_work » Wed May 17, 2017 11:04 am

Need a development permit which is the nasty city one. Every start-up around here started building while waiting on the the development permit as it takes 4+ months. That then enables you to apply for the building permit. Apparently standard practice....

Need two licenses from the liquor commission. These are relatively quick to get but I need drawings and inspections done (among other things). They will come after a lot of the work has been completed.

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Re: I want to start a nano-brewery...

Post by FBeyer » Wed May 17, 2017 12:07 pm

I have nothing to add except I wish you all the best.
Kick ass and chew bubblegum dude!

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Re: I want to start a nano-brewery...

Post by OTCW » Wed May 17, 2017 12:27 pm

Best of luck. I like your entrepreneurial spirit.

I would caution that nano breweries are pretty trendy right now. Who knows if they will stay that way. Gentrifying neighborhoods and disposable income that can support $6/16 oz pricing can be likened to bubbles supported by a growing and healthy economy. All is well and good until it isn't.

I like a good beer, but struggle with your price point. Beer has traditionally been the working man's drink and as such has has working man's pricing

Anyway, I anticipate the 'lumbersexual' bearded, craft beer drinking trend to go the way of all trends, to be replaced by some other trend by the generation that doesn't want to be like the one just before it. White wine, polo sirts, and boat shoes may be the next 'new' thing. Or not, but something will. If you want in on that as a business, get in early would be my advice. Observe the kids a good 5 or 10 years younger than you to see what they may like. It's a roll of the dice when you are the one with the money on the line I guess.

Edit to add: a friend once told me the best part of owning your own business was that you got to choose which hours you worked. As long as they added up to 80 or more a week.

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Re: I want to start a nano-brewery...

Post by C40 » Wed May 17, 2017 1:22 pm

How bad would you feel if you lost all the money?

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Re: I want to start a nano-brewery...

Post by James_0011 » Wed May 17, 2017 2:01 pm

How much do you want to be FI vs how much do you want to own a business?

I thought you wanted to be location independent? This site: https://flippa.com/ is a marketplace for online businesses I found recently.

Also, do you live in a hipster city? I don't really know anything about Canada, but I could see something like this working in Vancouver. Not sure about the other cities in western Canada though.

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Re: I want to start a nano-brewery...

Post by Sclass » Wed May 17, 2017 2:55 pm

Sounds brilliant. I had a report who brewed and serviced a microbrew pub in his town. He was a full time engineer but he had enough time on weekends and evenings to get his brews going. I guess you make the microbes do the work while you're out.

Anyhow he had no permits. Basically a bootlegger. He'd pay for his lunch in $100 bills. The pub was so popular that they couldn't brew enough for their clientele so he picked up the slack for them. I cannot remember if he bottled, kegged or both. He said he did $2000/mo of business. I'm not sure about how much of that was profit.

Since brewing was his hobby he was just having fun.

Not saying you should go this route. Your legit business plan may help you sell the business later.

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Re: I want to start a nano-brewery...

Post by distracted_at_work » Wed May 17, 2017 6:25 pm

@OTCW. @FBeyer. @Sclass Thanks, appreciate it.
I'm afraid to tell you, @OCTW, that at $6/16 oz I'd be among the cheapest pints in the downtown area. Even in a city with a ~9% unemployment rate due to the oil price shock of the last two years. A lot of wealth has been generated here and will continue to be.

@C40. I'd feel bad not because I lost the money but because I failed. I can make more money. That's corny but honest.

@James. I'd like to have both. I don't think starting this project changes my FI plans. It will delay or accelerate them is all. I weighed it out and figured that this would be the best time I have in life to try something risky. I'd still like to live location independent one day. I don't think these goals are mutually exclusive.

If successful, I'd like to run this project for 5-10 years, reevaluate, and go from there.

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Re: I want to start a nano-brewery...

Post by OTCW » Wed May 17, 2017 8:19 pm

I had $6 US currency in my mind. Canadian is more reasonable. Best of luck!

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Re: I want to start a nano-brewery...

Post by Riggerjack » Wed May 17, 2017 8:45 pm

What is the point of the reduced gluten beer?

I've tried gluten free sorghum beer, I won't do that again.

My wife is gluten free, and wouldn't touch a reduced gluten product. Either it's gluten free, or she isn't interested. Most of the gluten free folks I know don't drink gluten free beer.

While I could see an overlap of hipsters and gluten free, and hipsters and brew pubs, is there really a overlap of gluten reduced beer fans? If there is, I would keep a gluten-rich beer for the rest of us, and push hard your gluten free status online. I know my wife looks online the few times we eat out. There is a chain restaurant here that keeps a gluten free deep fryer, so when we eat out, we eat there. I don't deny your customers will be loyal, but I do wonder if you will have enough of them.

Only you will know. I don't want to rain on your parade. I'm just saying be cautious.

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Re: I want to start a nano-brewery...

Post by RealPerson » Wed May 17, 2017 9:27 pm

I am with RJ that I can't really envision a demand for low in gluten. It is either gluten free or it is not. Unless you cannot tolerate gluten, why would anyone care how much gluten is in the beer? I know I don't.

The microbrew trend seems far along in its cycle. As mentioned before, I think it would be better to sniff out the next trend than tag along with a mature one.

If losing a couple of $100k would not bother you, maybe you are already FI and don't need to do this? Brewing beer may be fun, but going fishing or doing whatever you enjoy will be much more fun.

There is nothing simple about hiring a couple of employees. Employment law, managing employees, OSHA and other regulatory compliance (I assume there are Canadian equivalents to this), etc. Also, signing a commercial lease may have you on the hook for an expensive lease for years, even if your business does not succeed. Commercial leases almost always involve a personal guarantee.

Not trying to rain on your party. After running a business for many years I have concluded that there are very few turn-key simple business models. There is invariably much more work involved than anticipated. If you do decide to go for it: good luck!

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Re: I want to start a nano-brewery...

Post by distracted_at_work » Wed May 17, 2017 9:58 pm

No rain whatsoever! Everyone's feedback is incredibly valuable, thank you! Please allow me to elaborate a few things:


@Riggerjack. I can get it low enough so that it is safe for most celiacs to drink. It's cheaper to make traditionally and reduce rather than to use sorghum or buckwheat. Of course, it also tastes much better. I recommend she tries Omission, a popular brand in the States. Obviously, if she can't stomach a molecule of gluten, disregard that.

I've have had a few people advise that I do 0 general advertising of the gluten-reduced status and let the other draws of the idea bring people in. For example, to get the gf crowd, I could take out targeted ads in celiac association newsletters. To everyone else, I'm the hip new nano brewery that just opened a few blocks away and is selling beer cheaper than the bars.

I plan to do side by side batches in a controlled environment, one beer with gluten and one without. If my results show a statistically significant number of people prefer the blind taste test with gluten... then I will figure it out from there.


@RealPerson. I'm not FI. Failing would be extremely significant. I'd be keeping a year's worth of expenses in reserve and then going all-in.

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Re: I want to start a nano-brewery...

Post by FBeyer » Thu May 18, 2017 8:35 am

distracted_at_work wrote:
Wed May 17, 2017 9:58 pm
.... If my results show a statistically significant number of people prefer the blind taste test with gluten...
Using a null hypothesis or are you trying to account for the possibility of unknown parameters to be the cause?
:geek:

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Re: I want to start a nano-brewery...

Post by distracted_at_work » Thu May 18, 2017 10:48 am

FBeyer wrote:
Thu May 18, 2017 8:35 am
Using a null hypothesis or are you trying to account for the possibility of unknown parameters to be the cause?
My null hypothesis would be that there is not a detectable difference due to gluten levels in otherwise identical beer. I'll make a large batch of each and hold a little event at a local brewery that I've made friends with. It would also be a chance to collect valuable feedback on whatever recipe type I make.

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Re: I want to start a nano-brewery...

Post by Riggerjack » Thu May 18, 2017 8:00 pm

OK. So, you would brew... Then "X", then then rack into bottles and kegs.

What is X?

How are you removing the gluten, and how are you testing it?

I would serve beer, and turn your reduced gluten brew into your house specialty. Something " extra special" and MORE expensive than the 6$ pints. Use your regular customers as advertising of your special brew. Make reduced gluten the sign that you will go above and beyond for that special wow factor. You will have to work out what that wow factor is. Cleaner, deeper flavor, but still retains a full body. Or some such BS.

You are looking to sell $6pints. That's $1 for the beer, $2 for the seat, and $3 for how special your customers are, for being allowed to drink with you. Plus tip.

So you gotta push how special your beer is.

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Re: I want to start a nano-brewery...

Post by Riggerjack » Thu May 18, 2017 8:04 pm

So by that formula, it's 6 bucks a pint. $8 for the good stuff. And make a big deal about how good the good stuff is.

I couldn't do this, but I have seen it in action. If you aren't sure you have the swagger to pull that off, hire hot bartenders. And get ready for that set of problems.

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Re: I want to start a nano-brewery...

Post by Riggerjack » Thu May 18, 2017 8:14 pm

How many hipsters does it take to change a lightbulb?

A: " oh, it's a very rare number, you probably haven't heard of it. "

If you are capable of making your beer beyond anything anyone else is capable of, you will do fine. The very best will always sell, at a fine profit. But you have to be able to market it as the best.

Which is entirely different from being the best.

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Re: I want to start a nano-brewery...

Post by distracted_at_work » Thu May 18, 2017 8:57 pm

Enzymes to remove the gluten. I'm torn on charging more for a special beer. On one hand, more money, neat. On the other hand, I've been on the other side of that transaction and it does not feel nice. Everyone else drinking cheap happy hour and I'm stuck with $8 / imported cans or some b.s. due to shitty genetics.

As for taste, I gave a master brewer in town one of my experimental home brews and he texted me last night that it was decent. That's high praise from one of the best brewers around. Especially, considering I wasn't on my A game monitoring temperature for that one. Realistically, I'm expecting to be able to make good beer. Maybe not the best. But quite good. It will be a combination of location, marketing and a few other ideas that bring people in. Hipsters will be my life blood. I will feed off their careless spending habits.

Somewhat related. I just got hired with a significant raise to do engineering and sales work. They must see some sales swagger in me. The next few months will be indicative.

Important to note as well. At my scale, I will not be bottling or canning. I need to move the majority of the product out the door at a retail price to be profitable.

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Re: I want to start a nano-brewery...

Post by Riggerjack » Fri May 19, 2017 7:53 am

If you want to sell to hipsters, you have to let go of your issues with overcharging. This is the ultimate consumer group. They are extremely interested in buying *specialness*. If that were in your values, you wouldn't be here. so you need to put special care into promoting THEIR values. Cheaper beer does not promote their values. SPECIAL beer does.

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Re: I want to start a nano-brewery...

Post by BlueNote » Mon May 22, 2017 10:18 am

I'll shoot some holes in your plan. However in my heart of hearts I hope that you succeed. I want to note that I studied small business and entrepreneurship in university. I have also started a few little businesses. So I've studied a lot of different theoretical and real businesses so maybe I'll be able to add some value. You have a very good plan, compared to what most people come up with, in that executive summary. I'm assuming you worked out a full business plan that has pro forma financial statements etc.. The business plan is useful for getting financing and for Learning how to think about the business. In most cases things don't go according to plan so be prepared to be very flexible.

You seem to have a viable strategy. I don't know much about the industry but it sounds like your product is differentiated (locally crafted, low gluten, Quality ingredients etc.) and you're focusing on a niche (Young drinking age people, regional, craft beer enthusiasts, and/or those with gluten intolerance). Differentiation and niche combined are usually the best generic strategy for a small business IMHO. Essentially you're positioned so that the big guys won't spend many resources going after your market and you're focused enough that your minimal resources can go very far. So if I were a potential investor I'd be wondering how are you going to get a foothold in this market. What is your entry wedge? You're not franchising and your product isn't new. I mean it isn't new in the sense that you're not the very first person to employ this technology ever, therefore someone could replicate your product from a technological standpoint. You'll be competing in parallel to the other firms in your industry by creating a similar product with some small points of differentiation. That means you have to start thinking more about exactly where the market is vulnerable so that you can wedge in and get a foot hold. It sounds to me like you may have identified the wedge already you're just not aware of how important it might be. You mentioned that a well regarded local brewmaster thought your brew was decent. Often times in these types of businesses the momentum provided by the first customers is the critical thing that launches the business. If I were you I would develop insanely good marketing around that concept. You'll need to isolate who the movers and shakers are in your market segment and figure out ways to get them to market/advertise/recommend your product. If you do that right it's cheap and extremely effective marketing.

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Re: I want to start a nano-brewery...

Post by Laura Ingalls » Mon May 22, 2017 6:55 pm

Riggerjack wrote:
Fri May 19, 2017 7:53 am
If you want to sell to hipsters, you have to let go of your issues with overcharging. This is the ultimate consumer group. They are extremely interested in buying *specialness*. If that were in your values, you wouldn't be here. so you need to put special care into promoting THEIR values. Cheaper beer does not promote their values. SPECIAL beer does.
Please explain PBR?

And why the beer was so mediocre in Austin, TX?

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Re: I want to start a nano-brewery...

Post by Riggerjack » Mon May 22, 2017 7:20 pm

PBR, because white trash soldiers need to drink, and make less than minimum wage. I'm sure they sell to others, but when I saw, (and drank,) PBR, white trash and/or soldiers were the primary consumers.

I was speaking to the OPs plan for a nanobrewery, or perhaps the anti-PBR. If I am going to a hipster place downtown, I have different expectations than when I go two stepping at a place with sawdust floors and chicken wire to protect the band.
And why the beer was so mediocre in Austin, TX?
I've never been to Austin, but I'm tempted to just point out that it is in Texas. The home of loudly proclaiming that mediocrity is best, because it is Texan. A tautology that seems to justify damn near anything. (You'd never know a served a 3 year sentence at Ft Bliss, right?) :lol:

I've heard plenty of good things about Austin, mainly from people trying to convince me that somehow, that Austin isn't really Texas. And yet, when I look at a map...

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Re: I want to start a nano-brewery...

Post by OTCW » Mon May 22, 2017 8:35 pm

I think PBR is so unhip that hipsters have declared it hip. Ironically hip if you will.

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Re: I want to start a nano-brewery...

Post by distracted_at_work » Tue May 23, 2017 8:11 pm

OTCW wrote:
Mon May 22, 2017 8:35 pm
I think PBR is so unhip that hipsters have declared it hip. Ironically hip if you will.
This is the correct take. PBR stands for Pabst Blue Ribbon for the confused.

@BlueNote. Thanks. :) Total aside, you took what I wanted to take in University but was directed into engineering instead. "You can be an engineer in business but you can't be a businessman in engineering." Follow your dreams kids :roll: Any practical book recommendations? Talking strategies for doing my cash flow projections, taxes... those types of things.

My full b plan is nearly complete (is it ever?) and I'm having the financials looked at by an industry professional tomorrow morning. I've been warned that under-capitalization sinks the majority of these start-ups and I do not want that to be my primary concern. To your questions about my entry wedge, let me try to answer with my plan, at least, the plan right now. If I linked you to a map of micro-breweries in large oil city ;) you would see that they are all in the eastern (undesirable, industrial) side of town due to cheap rent. I believe I can get into one of the nicer inner city neighborhoods due to using the smaller set-up. I'd go for targeted advertising to the immediate neighborhood as well as to the celiac population to get into the market. Be the local beer guy for the rich kids and an important destination for those physically needing my product. As for the movers and shakers in the marketing side.. I hadn't considered that yet nor have I met any of them. I will ask about this during my meeting tomorrow.

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