Within one 12-month period, I became the sounding board for two start-up microbrewers. I told them they were wasting their time. I was ignorant about this industry. I even joked that I was the all-time designated driver for friends and colleagues.
I think both founders were hard of hearing. They kept calling me asking for advice on how to fund their start-ups, how to create business models and business plans, and so much more.
Hitting Paydirt While Studying the Microbrewery Industry
I’m a reader. I probe and data mine when learning about a new industry. I was already following the video interviews by Dr. Jeff Cornwall on his blog, initially called The Entrepreneurial Mind. I got lucky. He interviewed the co-founder of a microbrewery called Jackalope based in Nashville, Tennessee. Great insights.
Here is that interview.
Additional Questions for the Jackalope Co-Founder
I have the highest respect for Dr. Cornwall, but I had a few questions of my own. Bailey was gracious enough to follow-up with me in an email. Her responses are below.
Question | The first two entrepreneurs who used me as a sounding board when thinking about starting a microbrewery, I tried to talk them out of it. I was amazed at the startup costs for equipment and leasehold improvements for water, plumbing, and electricity. I’ve worked with a large vineyard and winery, and I know that scaling a new brand is hard. What is your advice for aspiring owners wanting to succeed in their unproven business models?
Bailey Spaulding | I would advise people to take the amount of money and time that they think it will take and double them both. I think that will save them a lot of stress. It is worthwhile to be patient in the beginning, raise a little more money, and save yourself some headaches down the road. And if your heart is wholly set on it, don’t let people talk you out of it (haha)!
Question | In the interview, you mentioned you created a business plan. Did you keep it? Have you ever gone back to it and laughed? Or, are your sales numbers in the first 2 to 3 years close to your planned numbers?
Bailey Spaulding | We did indeed spend a lot of time creating a business plan. Our sales numbers are close but more significant than what we planned originally. We were doing great but still in an awkward position of growing faster than we had planned on. The core values that we based our business plan on are still essential to the way we run our business.
Question | I confess that I roll my eyes when I hear someone say they have just added a new distributor thinking that’s the key to more sales. I’ve reminded them, their advisors, and their bankers that distributors distribute. Entrepreneurs sell. Big difference. It seems like marketing IS THE HARDEST PART to getting to profitability. Do you agree?
Bailey Spaulding | To me, the critical part of marketing for a small business is to let people know who you are so that they can identify with you, and want for you to succeed. All of our marketing success has been due to hard work, but it comes very organically from us.
Question | Key numbers? Do you have one or two?
Bailey Spaulding | Our key numbers are in sales volume, clearly, but also in the percentage of our production capacity that we are selling. For planning purposes, we never want to be selling more than 90% of what we can make, as if our sales surpass our capacity, we will undoubtedly be making a lot of people, from our distributor to our accounts, very frustrated, and it can potentially hurt our business. Of course, our monthly P&L is vital and will be more so as we look to grow and scale up our business.
My Insights on the Microbrewing Industry
As I mentioned earlier, I knew nothing about this industry. If you find yourself in the same situation, here’s what I picked up:
- Good luck on finding used equipment. Buying new is probably the safest route. But be prepared, it’s expensive which includes all setup costs.
- Before finishing the bank package for financing, wait till you get quotes on equipment. The equipment vendor can help you nail down your leasehold improvements.
- Regarding the financial package, you don’t need a lot of FTEs in the early going–just 2. Think front stage, back stage. The CEO should focus on front stage activities such as marketing. The brewmaster will handle all back stage activities.
- Packaging, wow!! It’s costly. Find a nearby brewer willing to share their numbers. You’ll be enlightened on these particular costs.
- Some states prohibit brewers from distributing their own beer. That means they need distributors. However, you still need feet on the ground by marketing the beer to local restaurants. Don’t expect the distributor to do this work for you–they are carrying other brands.
- Have a marketing plan? Yeah, right. Pitch it. Instead, find the breakeven point ASAP. Then work like crazy to hit breakeven. Then create a new sales milestone and repeat.
- Similar to tasting rooms in the winery industry, most states allow brewers to sell their product on-site. Consider selling retail as you help your client perfect their business model.
More on Bailey Spaulding
Title: CEO & Brewmaster, Jackalope Brewing Company
Degree: Biological Anthropology, Harvard University
Advanced Degree: J.D., Vanderbilt University Law School
Relevant Links: Bio | LinkedIn | Company Site
Photo Credit: Oliver Wendel