With micro-distilling being the new craze everyone wants to own a distillery and that’s great, except you should be aware of a few things about running a business in general and a distillery in particular. This is not an all-encompassing list, by any means, but I will attempt to make it a good start. I will expound on various points in later blog posts.
General Business Aspects
The first thing is that you are running a business. You will work longer hours, harder than any other job you have ever had and get paid less than you have ever been (it can be a big money hole for the first few years), but it’s your business and you are the boss. Many business’ fail not because the product or service is bad but due to poor decision making, poor execution and poor business practices. Read, take classes and talk to people who already own a business. Some information and situations are universal. Talk to someone who owns a distillery, in particular, they have the specific information you want and need. We are generally pretty open about talking about the business aspects of a distillery. If you are going to pick someone’s brain, though, please do it on their schedule. Try not to do it during a busy time or better yet make an appointment with them.
Some General Things to Consider
-Money: You are going to need it (duh!), but the question is do you have a ton of it lying around, ready to throw at your new project, are you going to get investors or are you going to operate on a shoe string budget? Each has advantages and disadvantages.
Note: This reminds me of the old joke. How do you make a small fortune in the winery business? Start with a large fortune. (Ba da bum!)
-Bills: The opposite of money is bills. Make sure you pay them. Wouldn’t you hate to have a shut down because you forgot to pay your electric bill?
-What is the Business: What are you going to do or make? Are you filling a gap or are you going to do something better than everyone else? If you are filling a gap; you should also do a little research to see if there is a need for this product or service.
-A Business Plan: you need one, even a basic one. There are books available and your local community college will have business classes available.
-The Business’ Name: You probably already have that one, but is someone already using it? (See below)
-Trademark Law: Get a lawyer who specializes in Trademark Law. Do your homework. There are online references available. http://www.uspto.gov/trademarks-application-process/search-trademark-database and don’t forget to do a web search!
Caution!: So, you have a friend/acquaintance/someone who knows someone who is a lawyer/knows the law and they want to give you their opinion on your Trademark issue (everyone wants to be helpful, right?). If Trademark Law is not their specialty, their opinion is as good as the average person’s. This is from personal experience. Would you rather have an expert neurosurgeon operating on your brain or the person who read a book about the brain, once, in grade school and is handy with tools?
-Location: Where will this business be located? You will have to look at local zoning ordinances. Different states/counties/cities have different rules on alcohol production.
Distillery Specific Aspects
The first thing is what are you going to make? Just because you can distill it will people buy it? Again, do your homework! Are you going to come into the business with something established (meaning you will have to compete with existing companies) or are you going to bring something new to the market? If you are going to introduce something new you will also have to educate the public about your new and different product (If you are introducing a completely new type of Spirit, you will need to jump through the government hoops to prove that it is safe to consume)
Caution: At this point I will warn you that your friends are not the best people to ask. I used to homebrew beer and my friends all loved it and said it was wonderful, that I should go pro with it. Then I asked them if they would buy it then the story changed. Free alcohol is always great. Once you have to pay for it is when reality starts rearing its ugly head.
-Paperwork: I hope you like it, because there is a ton of paperwork that goes along with a distillery (at least (most of) this “paperwork” is now electronic). Be sure to fill out the paperwork and submit it, preferably on time. Be aware you and any investors will be getting a background check by the Federal Government and expect visits from your state and local government officials (the Agriculture department, the Fire Marshal, the local Dog catcher, etc.)
-The Open Hand: Be aware that when said “officials” show up at your distillery most of them will come with an empty open hand and they will expect you to fill it with money, for the “services” they are providing you. You would not believe how many permits you will need to have just to open your doors (I’m not sure but I think there may be a permit needed to actually open your doors).
-Recipes: Again, what are you going to make? Everything has a recipe. When you are experimenting with recipes write everything down! That way you can replicate your happy accidents. Do not entrust this vital piece of information to your amazing memory. Also, if is not written down how can anyone else help you make your product?
-Taxes, Fees and Permits: There are a lot of different government agencies out there and they all want their piece of your pie. Right now the biggest one is the TTB (the Tax and Trade Bureau) formerly the BATF (the Bureau of Alcohol, Tobacco and Firearms). You pay them the excise tax for alcohol production (at present it is $13.50 per proof gallon). Make sure you pay your taxes!
-What are you going to make: (I know I am repeating myself here.) Are you going to make clear Spirits (Vodka, Gin or any unaged Spirits), brown Spirits (Whiskey, Rum and other barrel aged Spirits), colored Spirits (Spirits with color from non-barrel sources: Absinthe, Coffee Liqueur, Etc.) or any combination of the above. For barrel aged Spirits are you going to buy new or used barrels and where are you going to store them?
-New or Existing building: Are you going to build from the ground up or are you going to rent a space? The general thought, with a distillery, is to rent a space, which means retrofitting the building, until you can buy a property. Then the question becomes, build from the ground up or remodel an existing space? Another option is to have your product made by someone else. It is still your business but you pay someone to make the product for you, on a contract basis (to be addressed in another post).
Logistics: Logistics is gathering everything you need to make your product. (This will be addressed in more detail in another post)
Employees: You can only do so much work yourself. At some point you will need assistance. (See our previous post on hiring people. http://www.vivacityspirits.com/blog/2015/8/24/interviewing-people-for-a-job)
I am sure there are many things that I have neglected to put on the list. It is just a short list of the major things that came to mind. Again, do your homework! Owning your own business is exciting. How often are you the Captain of your own future?
Cheers!