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MicroBrewr 091: Let them do the job you hired them to do

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Michael Altman was in the industry for years when he bought a brewpub. Now he’s been operating Iron Springs Pub & Brewery in Fairfax, California for 12 years. Before they opened he had to have back surgery and totally reinvent his role for the brewpub.

“You really need to live, breathe and be the beer.” [Tweet This]

 

“The first 6 months we owned that pub, every single day I called my wife and said we’re selling this place, I can’t stand this, this is ridiculous,” recounts Michael. “Thank God for my wife who was my rock.”

He went through 3 back surgeries. “It was hard for me to hang up my mash paddle,” says Michael. He still does some brewing, but mostly leaves the hard work to others.

Hiring employees and letting them do the work you hire them to do has been essential to Iron Springs’ growth. They are on pace to produce approximately 2,000 BBLs of beer this year, which is an increase of 20 percent since last year. They have 16 taps for 10 draft beers, one cask, and 4 handcrafted sodas.

Iron Springs Pub & Brewery now has 50 staff, 4 are in the brewery. To hire more staff Michael recommends:

  1. Figure out what needs to be done
  2. Figure out who you are going to hire for each task
  3. Hire people who can do the job
  4. Let them do the job you hired them to do

It sounds simple, but it’s important to follow through and let others take your load off.

Something else that has been very helpful for Iron Springs is the give back Tuesday. Every Tuesday they give 10% of profits to a local non-profit organization that focuses on education or the environment. Iron Springs has donated $160,000 in the last 6 years. “We love and we really believe in it, and that really translates to the community,” says Michael. “They really believe in it and they want to come out and support it. It’s a win-win for everybody.”

Michael says certainly, “There’s no way in the world that I would started a brewery in today’s market.” There is too much competition, he says, compared to when he started. Although he does say, “A brewpub will work in neighborhood,” you have to have good branding.

You have to figure out why people are coming to your place, and really focus on your story. The 3 keys are:

  • Good ambiance
  • Good service
  • Good food and beer

Brewery specs:

Kettle size: 10 BBL.

Size and quantity of fermentation tanks: 9, 10-BBL fermenters.

Size and quantity of bright tanks: 10, 10-BBL serving tanks.

Annual brewing capacity/last year’s production: 1,820 BBL.

Square footage: 5,000 sq. ft. in the entire pub, 1,100 sq. ft. in the brewery.

Years in operation: 12 years (opened October 2004).

Listener question:

From Awhile Pandey: When can you tell whether you are known as a brewery pub with exciting beer that people like, or you have become known more as a restaurant with beer just as a side thing? Is there any research on what kind of food formats and themes go well with a microbrewery pub layout?

Can’t-go-without tool:

Rubber boots, Bosch.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Session beer

Other resources:

You can reach Michael Altman and Iron Springs Pub & Brewery at:

Sponsors:

Beer Exam School, free study notes and flashcards for the Cicerone Certified Beer Server exam.

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 089: Make whiskey from high-quality craft beer with Seven Stills of SF

MicroBrewr 089: Make whiskey from high-quality craft beer

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Over a few beers, Tim Obert’s friend from college, Clint, told him that whiskey is actually made from cheap beer. They got to thinking, why not make whiskey from high-quality craft beer? Thus was born Seven Stills of SF, in San Francisco, California.

“I wish I would’ve taken on investment sooner.” [Tweet This]

 

Whiskey is a distilled spirit made from the fermented mash of usually malted grain, like beer. At first Tim and Clint were homebrewing in the backyard of Clint’s parent’s home, and “distilling that out, not really with the intention of starting a company, but just to see what happens.”

“Distilling,” says Tim, “is a hundred times simpler than brewing.”

To make whiskey from beer, they increase the temperature of beer to evaporate ethanol. The gaseous ethanol is then cooled to condense it back into a liquid. Different temperatures and different points in the process evaporate different material and different quality flavor.

“After a while,” recalls Tim, “Clint and I ended up having 30 different whiskeys and they were totally unique and were all, in my opinion, outstanding.”

“Everything that I had researched said that the base beer doesn’t have an impact on the flavor of the whiskey, which we’ve realized is just completely untrue. We can distill something like a chocolate oatmeal stout for instance, versus and IPA and there is no way that you could not tell the difference,” Tim laughs. “They’re completely different whiskeys.”

RELATED: MicroBrewr 047: A forty-year career at the epicenter of craft beer

Clint contributed the money he had saved for grad school, Tim pitched in a portion of his life savings, and they started Seven Stills of SF. For 2 years, they had a contract brewery make the beer. Then they had a contract distillery use the craft beer to make whiskey.

Seven Stills of SF currently produces about 120 cases of whiskey per month. They’re trying to increase production by 8 times.

They will be able to do it, now that they have their own 15-BBL brewhouse with fermenters and bright tanks. And they recently bought the largest still in San Francisco, a 300-gallon pot still.

They also have an entirely other line of vodka and bitters. Whereas whiskey is made from various grains, vodka is made from corn. Most of their bitters are made from vodka.

“Just for consistency sake, it makes sense to keep the 2 separate,” says Tim. “That’s part of the reason we hired different designers to work on the [labels on the] bottles.”

With so much expansion and growth, Tim says one thing he wishes he would have done differently was taken on investors sooner.

RELATED: MicroBrewr 067: How to find investors for a brewery

“We’ve been trying to grow off of just what we put into the company organically for the last 2 years, and it’s just painfully slow.”

Getting investors urged Seven Stills of SF to:

  • Develop a business plan
  • Calculate budgets
  • Get organized
  • Get something bigger off the ground

Part of having investors is putting together an advisory board. A formal advisory board is a set of people to whom you can seek advice on the business. Tim recommends finding experts in different areas such as:

  • Banking
  • Design
  • Marketing
  • Social media

“I definitely wouldn’t recommend giving up too much equity right off the bat,” advises Tim, “but give them something, and incentive instead of just getting counsel from them.”

“Just kind of building a team you can go and ask questions about when you have something come up. Because, I mean, it’s kind of stupid to keep reinventing the wheel with all this stuff.”

Brewery specs:

Kettle size: 15 BBL.

Size and quantity of fermentation tanks: 2, 15-BBL fermenters.

Size and quantity of bright tanks: 2, 15-BBL bright tanks.

Annual brewing capacity/last year’s production: 3,120 BBL/year of beer. 4,836 gallons/year of whiskey.

Square footage: 4,400 sq. ft.

Years in operation: 2 years (opened August 2013).

Listener question:

From Jimmy Batte: What’s the best advice you have been given or have to give since operating a brewery?

Can’t-go-without tool:

Pallet jack.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Craft beer whiskey

Other resources:

You can reach Tim Obert and Seven Stills of SF at:

Sponsors:

Please support our sponsors.

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 084: A healthy alcoholic beverage: hard cider with 101 Cider House.

MicroBrewr 084: A healthy alcoholic beverage: hard cider

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As soon as Mark McTavish could acknowledge alcohol, he gravitated toward hard cider. Later, he attended beverage management school and opened a craft beer bar in Toronto, Canada. Now in the U.S., Mark owns a cider distribution company and 101 Cider House in Los Angeles, California.

“As a cider maker, you’re not really making anything. You’re more of a custodian to the beverage.” [Tweet This]

 

Mark had a long career in the fitness business, selling exercise equipment and helping gyms get started. He is very health conscious and this comes through in his hard cider.

101 Cider House focuses on a “healthy” alcoholic beverage. All of 101 Cider products are: raw, living, and probiotic.

Some attributes of what Mark calls a healthy hard cider:

  • Wild fermented
  • A living beverage, don’t kill the juice in the process
  • Not filtered
  • No added sulfites

The hard cider market is absolutely exploding, with 500% growth in the last 3 years. Besides the general growth, Mark is tapping the health foods sector.

“From step one,” reflects Mark, “I always wanted to make a healthy alcohol.”

“Here in Los Angeles,” he says, “people are very interested in their health foods. When it comes to alcohol, a lot of people tend to check their standards at the door.”

“We have to show our ingredients in our cider,” Mark says of the labels on the bottles. “Our biggest marketing tool is to show people that we are using 100% raw fruit and doing the natural process like we do.”

They don’t add any unnecessary or unexpected ingredients to the cider, not even yeast.

“Cider is like wine,” he says. “You can press the fruit naturally, let juices sit their and do its own thing with its indigenous yeasts, and it will tell you what it’s going to do with itself.

“And if you wait long enough, it will make something great.”

Brewery specs:

Kettle size: n/a.

Size and quantity of fermentation tanks: 8, 2000-gal (64-BBL) poly tanks; 6, 275-gal (9-BBL) poly tanks; 50, 55-gal (1.75-BBL) oak barrels.

Size and quantity of bright tanks: 0. Not required as we bottle-condition and keg-condition all product.

Annual brewing capacity/last year’s production: 50,000-gal capacity.

Square footage: 7000 sq. ft.

Years in operation: 10 months years (opened December 2014).

Listener question:

From Rob Lightner: Has your brewery turned out the way you thought it would? And if not, how is it different?

Can’t-go-without tool:

Pump.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Hopped cider

Other resources:

You can reach Mark McTavish and 101 Cider House at:

Sponsors:

InMotion Hosting

“Fast, reliable, affordable, web hosting.”

advert-inmotion-hosting_250x250

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 083: Market branding for a cider company with Common Cider Company.

MicroBrewr 083: Market branding for a cider company

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Fran Toves’ son challenged her to enter cider into the homebrew competition. After her 3 entries made it to the top 10, she figured it time to take the product to market and started Common Cider Company in Drytown, California.

“There is no need to start a cider company with a million dollars.” [Tweet This]

 

Cider is not brewed the way beer is made, but similar fermentation tanks and bright tanks are used for making cider as making beer. After the initial attention at the homebrew competition, Common Cider Company started with a 400-gallon (13-BBL) test batch that got picked up by a distributor. They grew to 30,000-gallon (1,000-BBL) batches within a couple years.

Whereas a cidery or a cider house presses the fruit themselves to make juice, a cider company buys the juice pre-squeezed. A cider usually has a base of apple juice, but it can start with other fruits. A perry is made from pear juice.

“Cider as a base,” says Fran, “is a great platform to be able to introduce new flavors.”

Fran’s background in product development for the organic food industry is helping her with Common Cider Company. She emphasizes the importance of branding.

Fran says a small company can easily spend $50,000 to $100,000 on high-quality branding design for all promotional materials. With such a significant investment, it is very important to consider your message and what your company is about. If you want to take more time to learn about your customers and find your voice in the market place, just get simple logo at first. Then budget up to $100,000 for a re-branding.

That’s the route Fran planned for Common Cider Company. “I wanted to spend some time with our customers an just spend some time in the marketplace,” she says. “before investing in the brand.”

Sample Cider Packaging

Common Cider Company packaging cans Common Cider Company packaging cans 4-pack Common Cider Company packaging bottle Common Cider Company packaging bottle

They’re keeping a logo element from the original design scheme and hiring a branding firm to re-design their message. The results have been spectacular and you can expect to see more on store shelves soon!

Fran also has tips for the today’s listener question about budgeting and profit projections:

  • Decide where you are and where you want to be.
  • Put a budget for every core area including, branding, legal fees, sales staff, materials, and all other details.
  • Decide what you can spend on each category of your budget.
  • Use checklists so you don’t miss details.

“Your suppliers will give you pretty good information as far as what your cost of juice is and your yeast and any other adjuncts that you want to add to your product,” Fran suggests. “And that goes from your raw material to your packaging.”

As for projecting profits, Fran always advises starting with small batches. She suggests 500-gallon batches or 1,000-gallon batches at the most. Any larger, and you’ll have too much money tied up in product and it will take too long to sell.

After you sell a few batches to earn some money and build demand, then you start doing larger batches.

“It’s important to start small,” Fran advises. “Just like any business, you’ve gotta kind of walk before you can run.”

Listener question:

From Texas Rüegg: Where  do you find real accurate numbers to estimate cost of operation? I keep building spreadsheets with hundreds of calculations, but at best they are just guesses. I want to be conservative with my numbers and be sure that even the worst case will actually make money. So where do you find real data?

Can’t-go-without tool:

Pump.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Dry ciders

Other resources:

You can reach Fran Toves and Common Cider Company at:

Sponsors:

Audible

Download a free audiobook.

Audible. Download a free audiobook. https://microbrewr.com/audible

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

Subscribe on iTunes             Listen to Stitcher

MicroBrewr 080: Brewing the American Dream winner for 2015 with ChuckAlek Independent Brewers.

MicroBrewr 080: Brewing the American Dream winner for 2015

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A friend asked Marta Jankowska and her husband whether they wanted to use his warehouse space and go pro with their brewing. The warehouse space fell through, but they were far along in the process, so they decided to go for it and opened ChuckAlek Independent Brewers in Ramona, California.

“Your time is so much more valuable actually planning on how to grow the business.” [Tweet This]

 

“Even though that original space fell through,” says Marta, “we were already so far along in planning that we just decided to go for it.”

They had run the financials, lined up some money from friends and family, and were ready to go. They just needed space.

They found the permitting requirements in the City of San Diego to be cumbersome and expensive, so they finally settled in Ramona, a little town in San Diego County wine country.

“More importantly,” Ramona explains, “we never wanted to be a warehouse brewery. We always wanted to be kind of a main street brewery. Something that was integrated in with community and surrounded by other storefronts.”

By chance, Marta was a tennis partner with one of the founders of Stone Brewing. He told her that over a hundred breweries were starting or being planned for opening in San Diego.

“How are you going to differentiate yourself?” he asked Marta. “The way that I see a brewery doing well in this town is having a really solid background story and a really solid concept. You need to come up with something that has a compelling story that you can tell to the consumer.”

To come up with a compelling story, Marta suggests you think about:

  • What you want the brewery to encompass
  • What message you want to communicate to the consumers

“A flashy label will get you that fist glimpse from a consumer,” she says. “But people are finicky these days, they’re not super brand loyal, they’re not going to remember something unless it really stands out in their brain, or you give them that nugget that they’re really able to hang onto.”

ChuckAlek has gotten some notoriety this year by being selected as the 2015 recipient of Samuel Adams Brewing the American Dream “experienceship.” They beat out others for apprenticeship, partner brew with Sam Adams, and a trip to Germany with Pink Boots Society.

Other tips from Marta:

  • Set aside time to plan for the growth of the business during the next few years.
  • Enroll yourself in a business mentorship program.
  • Start with the barebones, just to get off the ground. Then buy more equipment when you have the disposable income.
  • Build a nest egg for repairs and other unexpected expenditures.

Marta’s suggested software systems for a startup nanobrewery:

Brewery specs:

Kettle size: 1 BBL.

Size and quantity of fermentation tanks: 6, 3-BBL plastics; 1, 2-BBL stainless; 1, 4-BBL stainless; 1, 5-BBL stainless.

Size and quantity of bright tanks: 1, 5-BBL.

Annual brewing capacity/last year’s production: 250 BBL. This year on track to be at about 400 BBL.

Square footage: 1,700 sq. ft.

Years in operation: 2.5 years (opened January 2013).

Listener question:

From Grant Aguinaldo: What software systems do you use to manage your brewery?

Can’t-go-without tool:

Brite Tanks.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Lager

Other resources:

You can reach Marta Jankowska and ChuckAlek Independent Brewers at:

Sponsors:

Audible

Download a free audiobook.

Audible. Download a free audiobook. https://microbrewr.com/audible

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

Subscribe on iTunes             Listen to Stitcher

MicroBrewr 074: Contract brewing for homebrew craft beer club with Noble Brewer.

MicroBrewr 074: Contract brewing for homebrew craft beer club

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Noble Brewer is an online craft beer club featuring homebrewers’ best beers. It’s not exactly legal to sell homebrew by mail, so Claude Burns at Noble Brewer connects the homebrewer with a commercial brewery. Then they ship great homebrew from their base in Oakland, California.

If you want your homebrew to be featured in one of Noble Brewer’s quarterly shipments, here’s how Noble Brewer picks the homebrewers:

  • Homebrewing competitions and BJCP results
  • Willingness of the brewer to share her story
  • Whether the recipe will scale
  • Style variety in relation to the past picks

Read: Homebrew craft beer club. And then I never left the house.

I think it’s pretty aweome, but the main reason we talked with Claude is to find out for to start a contract brewery.

“There are a lot of great brands and great beers out there that are made by people who don’t own their own brewery,” says Claude. “There is also a lot of great beer companies that do own their own brewery, but [production of their own beer] is very small. The vast majority of their beer is contract brewed.”

Other contract breweries—or breweries that got their start as a contract brewery—on MicroBrewr Podcast:

Alamo Beer Company

HenHouse Brewing

21st Amendment Brewery

Backshore Brewing Co.

Two Birds Brewing

Craft Artisan Ales

Of course, to sell alcohol, you need to have some kind of license. The process and licensing is different in every state. So Claude advises that you check with a lawyer. Usually a contract brewery is set up like a distributor.

In California, Claude says, most contract breweries would use a Type 17 license from California Department of Alcoholic Beverage Control. This allows you to have beer made for you by another brewery, then you can sell it to retailers.

“The ABC is very willing to work with you,” says Claude. “You go to them, and tell them what you want to do, they’ll be very willing to work with you to make sure you do things the right way.”

Be very detailed in telling your state licensing agency what you want to do. They’ll suggest the license that you need. Then ask a lot of questions to make sure you’ll be able to do the things you intend to with a given license.

Check this page for a list of state alcoholic beverage control boards.

Next you’ll nee to find a contract brewery to manufacture your product:

  • Ask breweries whether they have excess capacity for your beer.
  • Network with other brewers to find a brewery that makes contract beer.

Choosing the brewery to work with:

  • Look for a company that shares your same goals.
  • View the arrangement as a long term, mutually beneficial relationship.
  • Check references of the brewery, and trust recommendations of others.

Depending on your agreement, the different responsibilities will lie with one party of the other. Sometimes the brewery will do more, sometimes you’ll need to do it. So check with your brewery to see whether they’re expecting you to provide your own ingredients and packaging, whether you’ll need to get TTB approval on your labels, or other tasks.

“If you’re a contract brewer, and that’s going to be more of your long-term strategy,” advises Claude, “you’re going to do things like [contract directly with a hop supplier] so you’re going to have your own source of hops for your beers.”

“If you want to put a ton of really restrictive terms in an agreement, as a [small startup] contract brewer you may be less likely to enter that agreement. It’s really about developing that working relationship with each other and making sure that you have the same goals in mind and you’re working toward something long-term.”

“Everybody I have met has been more than happy to share their knowledge.” [Tweet This]

 

Listener question:

From Dan: How hard/easy was the licensing from the state? What local regulations did you have trouble with? Were the locals helpful in setting up the business?

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Saison

Other resources:

You can reach Claude Burns and Noble Brewer at:

Sponsors:

Beer

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

Subscribe on iTunes             Listen to Stitcher

MicroBrewr 073: Contract brewing: quality product with low barrier to entry with Craft Artisan Ales.

MicroBrewr 073: Contract brewing: quality product with low barrier to entry

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David Olsen dives into things all the way. He decided that he wanted to homebrew, so he read about 15 books and took some short classes at UC Davis. Within 6 months he was winning awards at homebrewing competitions. He started Craft Artisan Ales, in Pacific Grove, California, with contract brewing because it was an easier barrier to entry.

“Even to get like a 7-BBL system going, you’re going to need at least a half-million dollars,” estimates David. “Then you have the labor, the insurance, the overhead, the space, the lease, all those other factors that go into it.

“So to be able to go to a facility that can take your recipes and create a quality end product [in exchange] for part of the margin, is definitely an appealing way to get into the craft beer industry.”

Other contract breweries—or breweries that got their start as a contract brewery—on MicroBrewr Podcast:

Alamo Beer Company

HenHouse Brewing

21st Amendment Brewery

Backshore Brewing Co.

Two Birds Brewing

David has some recommendations to nail down your beer styles and recipes:

  • Spend a lot of time working on one single beer, then develop other recipes from there.
  • Take some brewing classes, even weekend classes or 2-week classes.
  • Be super careful about sanitation and temperature control.

You’ll need to have accounts confirmed to buy your beer when it’s ready from the brewer. Here’s what David did:

  • He pushed the local angle in his products by using local names and themes.
  • Friends who owned restaurants agreed to carry his beer on tap.
  • The owner of the homebrew store helped make other connections.
  • He put samples in a cooler pack and walked into stores to talk to the manager.
  • He provided a sample, sales sheet, and business card everywhere he went.

Contract brewing is a much easier way to enter the craft beer market. The cost is a tiny fraction of what it costs to open your brewery. The time that you would have spent brewing can be spent marketing, delivering product, nurturing relationships, and all the other things required when you own your own brewery.

Brewery specs:

Kettle size: 25-BBL contract facility.

Size and quantity of fermentation tanks: 25-, 50-, and 100-BBL tanks available.

Size and quantity of bright tanks: Same.

Annual brewing capacity/last year’s production: Capacity is 15-20K BBL for the contract facility. Last year Craft Artisan Ales produced about 1,000 BBL.

Square footage: 80,000 sq. ft. at the contract facility.

Years in operation: 18 months (opened February 2014).

“I don’t have an exit plan because I want it to be a career. All I have are expansion plans.” [Tweet This]

 

Listener question:

From The Beer Sommelier: What is your exit plan?

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Sour beers

Other resources:

You can reach David Olsen and Craft Artisan Ales at:

Sponsors:

Beer

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

Subscribe on iTunes             Listen to Stitcher

Homebrew craft beer club. And then I never left the house.

Homebrew craft beer club. And then I never left the house.

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UPDATE 1/7/2018: Noble Brewer is no more. Sadly, they closed shop, but you can hear founder Claude Burns’ tips about permitting on MicroBrewr Podcast 074.

It’s not exactly legal to sell homebrew and send it in the mail. But Noble Brewer, the brand new craft beer club, figured out a way to do it in accordance with all laws, and boy am I glad.

Full disclosure: Use of the Noble Brewer coupon code below will give me a small commission. This does not affect my superb review of Noble Brewer’s service. I think it’s awesome. That’s why I signed up. That’s why I called up the CEO, Claude Burns and asked him to give MicroBrewr audience a discount.

Anyway, I saw Noble Brewer on Twitter, and I didn’t really get what they were up to. Months later, after some more Twitter action, I went to their site, and my jaw dropped.

How the craft beer club works

Noble Brewer sends quarterly shipments of homebrew to your door.

Noble Brewer sends quarterly shipments of homebrew to your door.

Noble Brewer interviews dozens of homebrewers and selects the very best. Then they connect the homebrewer with a commercial brewery to make a limited-release batch of the homebrewer’s award-winning recipe.

And you get it at your front door.

Your beer subscription arrives each quarter, with two beers in four, 22-ounce bottles. It comes with a short bio of the homebrewer and cards for taking notes, so you can fill it out and send it back to the brewer and let them know what you thought of their beer.

I’m glad somebody finally figured out the whole TTB, brewery license, alcohol-across-state-lines thing. Because I have a few friends who home brew, but now I have more friends whose homebrew I get to try!

Can you tell I’m still a little excited about beer by mail?

Listen to: Noble Brewer on MicroBrewr Podcast.

What’s in the beer subscription box?

Noble Brewer Dudeling was brewed by Jonathan Fuller.

Noble Brewer Dudeling was brewed by Jonathan Fuller.

A few days ago I received my second shipment of my craft beer subscription box. It came with my free t-shirt and two Spiegelau IPA glasses. After a frenzy of excited social media posts, I sat back in the shade of the back porch and enjoyed a California Farmhouse Ale by Jonathan Fuller.

Who’s Jonathan Fuller? Get to know him or any of the brewers on Noble Brewer’s website. I filled out the card and sent back my detailed assessment of his handiwork. It’s great, by the way!

It’s a craft beer club. With homebrew.

That’s homebrew. To your door!

Homebrew, presents in the mail, what could be better?

 

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MicroBrewr 067: How to find investors for a brewery with Jenny Kassan.

MicroBrewr 067: How to find investors for a brewery

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UPDATE: Mistakes and clarifications have been corrected, per Jenny Kassan.

You planned the brewery of your dreams. You researched the market and you know it will be profitable. But you don’t have a million dollars under your pillow to start it. Now how to find investors for a brewery?

Jenny Kassan, an attorney and consultant in Oakland, California, graduated from Yale law and worked for 11 years helping to build really small businesses. For the last 9 years she worked in securities law, “the very highly regulated world of raising money for a business.” Now she does consulting and teaches classes on how to raise funds for businesses.

As soon as you ask someone to invest in your brewery, you’re conducting a “security offering,” which is regulated by the U.S. Securities and Exchange Commission (SEC), as well as the securities regulators in each state where you offer the investment.

“Even if the regulators don’t catch you and fine you, you have created this liability for your company,” cautions Jenny. “If, for example, one of your investors was unhappy later and wanted their money back because you couldn’t afford to pay them or something, they could complain. And then it would be uncovered that you never did comply with those laws. And they would have a pretty good case against you.”

First, some background info.

There are generally 2 kinds of investments:

  1. Equity – ownership in the company
  2. Debt (loan) – must be paid back

There are 2 kinds of investors:

  1. Accredited investor – A person with a net worth of $1 million (excluding his or her primary residence) or annual income of $200,000, or an entity with $5 million in assets.
  2. Unaccredited investor

If you offer a security only to accredited investors, the legal compliance hurdles are generally fewer. However, there are legal ways to include both kinds of investors in your offering.

 

Until you have ensured that your offering is legally compliant, don’t solicit investors directly. Also don’t advertise your offering publicly unless you have done the legal compliance that allows advertising. At this point, don’t solicit investors directly, just ask general questions.

Anything other than one-on-one communication is considered advertising, which is regulated by the SEC.

“Have some informal conversations with potential investors,” Jenny instructs, “and say, ‘I’m thinking about raising some money—I’m not doing it now, but I’m thinking about.’”

Then ask general “if scenarios.” For example, “If I were to offer an investment opportunity in my brewery:”

  • Would you be more interested in equity or debt?
  • How would you expect to get paid back?
  • How long would you be willing to have your money tied up?
  • What kind of perks would you want?

The laws are flexible enough that you can design your investment agreement in lots of different ways.

“There’s a lot of kinds of equity that can look a lot like debt,” says Jenny. “There’s also debt that can look more like equity, where the payment that you make to your investor can vary based on the success of the company.”

After both parties come to agreement, they each need to talk with an attorney to make sure their desired agreement is legally compliant.

Most investments require some kinds of securities filing at the state or federal level or both.

After you figure what you’re willing to offer, you might be ready to conduct an offering. Talk to an attorney to help you do the necessary filings.

Direct Public Offerings

If you want to do a Direct Public Offering which allows you to do public advertising and include unlimited number of both accredited and unaccredited investors, you may need to file a Form D with the SEC and register with your state regulators. The filing requires attachments such as:

  • “Prospectus”
    • Risks
    • Business Plan
    • Description of management team and qualifications
    • Anything investors would need to help them make a decision
  • Sample security to be offered
  • Organizational documents for the company
  • etc.

The filing fee can range from a few hundred to a couple thousand dollars. Legal fees usually range from $15,000 – $30,000. It sounds like a lot, but if you’re opening a million dollar brewery, it’s a worthy 3% of the overall budget.

“I think it’s possible to do without an attorney,” speculates Jenny. “It’s certainly not the best strategy. It may take you twice as long and it may be a nightmare, but you should be able to get through the process.”

If you go at it without an attorney, remember that the regulators are there to help. So work with them, respond to all of their questions, and make their requested changes.

Once you get approval from the regulators for your Direct Public Offering, now find money!

Advertise your offering:

  • Talk to media
  • Get in the newspaper
  • Put it on your website
  • Send mass emails
  • Host parties and events
  • “Set up a million meetings”

Have your investor packet ready for when people want to know more.

“The best thing to think about,” says Jenny, “is to put yourself in their shoes and ask yourself, ‘What is everything I would want to know if I were them, before making a decision?’”

Include anything to help them make a decision, even the risks.

“If they find out later that you didn’t disclose something that was material to their decision,” cautions Jenny, “they could sue you and say you misrepresented what the opportunity was.”

Vet your investors

Another important thing is to make sure each investor is a good fit.

“You don’t want to accept the first investor that says ‘yes,’” cautions Jenny.

Find investors with whom you get along, and with whom your values and vision for the business align.

“When you are bringing in a fairly large investor,” says Jenny, “they may have a pretty big role that they are playing in your life for the next 10 years.”

And maybe we should saying something like… Of course this is lot legal advice. The laws are highly complex and vary from state to state. You need to speak to an attorney about your specific situation.

“You really have to vet your investors in the same way that they’re vetting you.” [Tweet This]

 

Listener question:

If you could ask one question to every brewer or brewery owner, what would you ask? Let me know.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Cider

Other resources:

You can reach Jenny Kassan and her legal work at:

Sponsors:

Audible

Download a free audiobook.

Audible. Download a free audiobook. https://microbrewr.com/audible

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 066: How to get an SBA loan for a startup brewery with First Community Bank.

MicroBrewr 066: How to get an SBA loan for a startup brewery

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Kris Kennedy works in the Small Business Lending Group with First Community Bank in Roseville, California. They were the first financial institution listed as an allied trade member of California Craft Brewers Association.

The U.S. Small Business Administration’s loan program makes it easier for small businesses to get funding from traditional lending institutions. Kris teaches us how to get an SBA loan for a brewery.

All participating banks must go by the SBA guidelines. There are typically 5 criteria to judge worthiness for a loan:

  1. Cash flow – This could be historical or projected. Can you repay the debt?
  2. Economic environment of the industry – Also includes changes to the industry such a new regulations or supply issues.
  3. Collateral – Can include business assets and personal real estate.
  4. How much the borrower is investing – They typically require 20-25% for startups.
  5. Character – They check your credit score including public records such as judgments and liens. Credit score must be at least 680.

Loan funds can be used for a variety of things. Eligible expenditures include:

  • Operating equipment
  • Real estate
  • Tenant improvement to real estate
  • Construction of a new building
  • Refinancing for business debt
  • Purchase of an existing business
  • Working capital

Loan amounts can range from $350,000 to $5 million dollars. Loans are offered in 10-year and 25-year terms. They’re fully amortized, meaning that the monthly payment will be the same through the life of the loan. There’s usually no pre-payment penalty after the first 3 years.

Kris says the ideal candidate should have experience working in a commercial brewery. Planning on opening a brewpub, have restaurant or hospitality experience. Basically, show that your past experience applies to running a brewery.

If you’re a homebrewer wanting to get an SBA loan, it could help to have awards for your beer. So start entering in contests!

Lastly, Kris says, it’s good to work with a lender that has experience in the industry. If you’re in California, Arizona, Nevada, Washington, or Oregon, and you need funds to start or expand a brewery, get in touch with Kris.

“Not every startup is something that a lender is going to be able to finance.” [Tweet This]

 

Listener question:

From Josh Button: How much business experience should I have? What kind of experience or education would you ecommend?

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Pale ale

Other resources:

You can reach Kris Kennedy and First Community Bank at:

Sponsor:

Beer

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 064: How to write a business plan for a brewery with Growthink.

MicroBrewr 064: How to write a business plan for a brewery

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Dave Lavinsky went to business school at University of California at Los Angeles. After he won a business plan writing competition, he wrote a few for other businesses. Then he started Growthink, in Los Angeles, to help entrepreneurs and business owners develop their business plans so they can raise capital and grow their business.

3 reasons why people don’t do a business plan:

  1. No time
  2. Don’t know what to write
  3. Don’t know how to do the financials

Dave is steadfast that you shouldn’t take too long to write a business plan. “To spend more than 2 to 3 months to create your business plan is foolish,” he says, “because there is diminishing returns. After 3 months it’s not going to get all that much better, it just means that you’re probably procrastinating.”

Here are the essential parts of a business plan that you must have:

  1. Executive Summary
  2. Company Overview
  3. Industry Analysis/Market Analysis
  4. Customer Analysis
  5. Competitor Analysis
  6. Marketing Plan
  7. Operations Plan
  8. Management Team
  9. Financial Plan
  10. Appendix

To help explain how to write a business plan for your brewery, here are some notes on the outline above.

Think of the Executive Summary as the sales piece to convince investors that you can execute this plan. It should be 1- to 3-pages in length. Do this last to summarize the whole thing. Write it in very approachable language.

“It doesn’t need to be beautiful Shakespearian prose,” says Dave, “It needs to be something that’s accessible.”

Be sure to include what Dave calls the “success factor line.” Write, “We are uniquely qualified to succeed because…” Explain any of your unique skills, expertise, or resources that will guarantee your success. This might be background or expertise, products or services, location, systems, intellectual property, or a built in customer base.

The Company Overview is where you note the organizational structure and type of business entity.

The Competitor Analysis should describe both direct competitors and indirect competitors. Your direct competitors are nearby breweries. Indirect competitors might even be supermarkets, taverns, or liquor stores that carry a good selection of craft beer.

The Marketing Plan is where you talk about product and pricing, and how you will promote your product.

In Management Team, of course describe who will be running the company. But also explain the gaps in management and how you will fill those gaps. Maybe you will find another partner, hire a manager, or outsource some roles.

The Financial Plan has 3 spreadsheets:

  • Income Statement (Profit/Loss)
  • Balance Sheet
  • Cash Flow Statement

The Appendix has your supporting documentation. Include anything additional to help make your case that you can successfully execute on this plan. Some examples might include: lease agreement for the location, interior design plans, letters of commitment from buyers, customer surveys or other market data.

Lastly, be sure to have somebody edit the entire business plan. You could pay a professional to give it a once over. At the minimum, ask a friend to check it for readability, grammar, and typos.

Now you know how to write a business plan for your brewery. Let’s both take Dave’s advice and commit to finishing our business plans within 3 months!

“Running a business is not doing everything yourself.” [Tweet This]

 

 

Listener question:

If you could ask one question to every brewer or brewery owner, what would you ask? Let me know.

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Double IPA

Other resources:

You can reach Dave Lavinsky and Growthink at:

Sponsors:

Audible

Download a free audiobook.

Audible. Download a free audiobook. https://microbrewr.com/audible

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 061: Use social media to directly interact, with your customers with Untappd.

MicroBrewr 061: Use social media to directly interact with your customers

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Tim Mather was just getting into craft beer when he and a friend created the highly-popular mobile app for beer drinkers, Untappd, based in Los Angles, California.

“Neither of us really knew anything about beer,” admits Tim. “I knew that I wasn’t too big into macros. I was just starting to get into larger craft brands. We were both really into social media.”

Tim and his partner, Greg Avola both work full-time jobs during the day. Yet they keep Untappd going in their spare time.

With over 2 million users who “check in” beers that they drink, Untappd is a unique, highly-targeted way to market your beer.

“Social media is important to any business’ marketing campaign,” Tim advises. “If you want to reach someone, you gotta be there. And honestly you gotta be active too. Because if you just do, once in a while you post something, people aren’t going to see you.”

RELATED: My #1 tool for growing an email list

Tim has some tips for interacting with your audience on Untappd or any social media:

  • Take criticism well
  • Toast people’s check-ins
  • Ask for feedback

It is extremely important to take criticism well. Remember, as Tim says, “Your comments are representative of your brand.” So don’t be a jerk, do be professional at all times, and remember that people have different tastes.

It’s okay if someone doesn’t like your beer. Ask the person some questions to get to know her tastes a little better, then think of a different beer to recommend.

Social media is all about relationships. Build relationships to sell more beer and make new friends.

SUPPORT UNTAPPD:

Become an Untappd Supporter

Untappd is run by just 2 people who both have full-time jobs during the day. Yet they work tirelessly to bring us this great app called Untappd. Become an Untappd Supporter to keep it going, say thanks, and help make the app better. Click here to become an Untappd Supporter now.

“Social media is important to any business’ marketing campaign.” [Tweet This]

 

Listener question:

From Mike B.: Was it worth it?

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Session IPA

Other resources:

You can reach Tim Mather and Untappd at:

You can reach Tim Mather and Greg Avola on Twitter at:

Sponsors:

InMotion Hosting

“Fast, reliable, affordable, web hosting.”

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Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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MicroBrewr 058: Be confident to get where you need to go, with Stone Brewing Co.

MicroBrewr 058: Be confident to get where you need to go

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Laura Ulrich is the small batch brewer at Stone Brewing Co. in Escondido, California. She has worked there for 11 years, after working in the bottling line at Odell Brewing Company in Fort Collins, Colorado.

“Twelve years ago,” says Laura, “There wasn’t a focus on having the degree in brewing.” She says she would have liked to take more science classes to understand the technical sides of brewing.

It doesn’t seem to be hindering her. She created the widely popular Stone Smoked Porter with Vanilla Bean.

Laura has worked on the bottling line, in the cellar, and finally in the brewhouse. “Everybody’s gotta work together to make the end product get to the public,” she says.

Brewery specs:

Kettle size: 2, 120-BBL brewing systems.

Size and quantity of fermentation tanks: 68, 400-BBL fermenters; 6, 150-BBL.

Size and quantity of bright tanks: 2, 150-BBL; one, 390-BBL; 5, 650-BBL; 4, 850-BBL.

Annual brewing capacity/last year’s production: Brewed 285,075 BBL in 2014.

Square footage: 55,000 sq. ft. brewery, with 65,000 sq. ft. packaging hall.

Years in operation: 18 years (opened August 1996).

“If you really want it, you can have it.” [Tweet This]

 

Listener question:

From John D.: What’s your least favorite style of beer?

Book recommendation:

  • “I haven’t been reading books, I’m awful. I need to get back into it.”

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Session IPA

Other resources:

You can reach Laura Ulrich and Stone Brewing Co. at:

Laura is on Twitter at:

Sponsors:

Audible

Download a free audiobook.

Audible. Download a free audiobook. https://microbrewr.com/audible

Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

Subscribe on iTunes             Listen to Stitcher

MicroBrewr 056: Applying organic chemistry to brewing, with Golden Road Brewing.

MicroBrewr 056: Applying organic chemistry to brewing

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Nadia Vazirzadeh had only a bachelor’s degree in biology, zero knowledge of beer, when she started working on the quality control team at Golden Road Brewing, Los Angeles, California.

“I knew I wanted to do something the rest of my life that I loved,” she says. “I still had people trying to convince that, ‘Don’t you want to be a doctor? What’s beer really doing for anybody?’ I take pride in what I do in the beer industry. I think it’s really important. I really like what I do and this alone is really fulfilling to me.”

As part of her job to make sure that the brewery brings consistently great beer, her daily duties are:

  • Check gravities
  • Get yeast for new batches of beer
  • Use the alcolyzer
  • Conduct grist analysis
  • Check IBUs
  • Put together sensory tasting for staff
Nadia Vazirzadeh, at Golden Road Brewing, convinced the 7 brewers into dressing up like Snow White's 7 Dwarves for Halloween.

Nadia Vazirzadeh, at Golden Road Brewing, convinced the 7 brewers into dressing up like Snow White’s 7 Dwarves for Halloween. Source: Facebook.

Nadia recommends reading about what you’re working with and reading about other breweries. “Everybody does something different,” she says. “Read. That’s really my main recommendation.”

Brewery specs:

Kettle size: 50 BBL.

Size and quantity of fermentation tanks: 16, 300-BBL fermenters, including some conversion tanks.

Size and quantity of bright tanks: 3, 200-BBL.

Annual brewing capacity/last year’s production: About 30,000 BBL in 2014.

Square footage: 32,000 sq. ft.

Years in operation: 3.5 years (founded 2011).

“I knew I wanted to do something the rest of my life that I loved.” [Tweet This]

 

Listener question:

From Pour & Beerded: How did you get yourself to make the leap to go all in or nothing? Especially if you quit a decent job…

Book recommendation:

Check out the entire list of recommended books, click here.

Your Free Audio Book

An upcoming beer style:

Sour beer

Other resources:

You can reach Nadia Vazirzadeh and Golden Road Brewing at:

Sponsors:

InMotion Hosting

“Fast, reliable, affordable, web hosting.”

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Support MicroBrewr

Help keep MicroBrewr on the air. CLICK HERE for ways you can help.

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The Session 97: Up and coming beer locations.

The Session 97: Up and coming beer locations

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Our Tasty Travels is hosting this month’s installment of The Session Beer Blogging Friday. The topic is “Up and Coming Beer Locations.” I might be biased having recently been hired at a startup brewery in the East San Francisco Bay Area (more on that in a future post), but I really see an increase of beer activity in the East Bay.

The eastern shores of San Francisco Bay, or East Bay as Californians call it, is home to a diverse spectrum of communities and people. The ever-progressive Berkeley, often-in-the-news Oakland, and unassuming industrial corner San Leandro are a few of the colorful places. The East Bay has its share of the usual suburbs, and many of those have breweries as well.

The San Francisco Bay area has long history of beer. Anchor Brewing goes back to the late 1800s. Gordon Biersch and others hail form the infamous Craft Beer Class of 88. Of course there’s Lagunitas a little further north and Russian River is not far away. No doubt, there’s a lot going on throughout the Bay Area. Let’s focus on the East Bay a little while.

Small breweries are opening in the East Bay

In Oakland, a physical education teacher and his math professor wife operate a nanobrewery in their basement. To be clear, the basement is the pilot system. Tied House Brewery makes larger batches for Line 51 Brewing that go into distribution.

P.T. Lovern and his wife Leti Lovern both hold their full-time jobs and run the brewery in the off hours. They and 2 employees handle all orders, distributions, bookkeeping and other operations. According to NPR, they don’t plan to quit their day jobs. Nonetheless, the beer is available at an expanding number of venues in the East Bay.

Medium breweries are opening in the East Bay

A little further north, there’s a quiet little town called El Cerrito. Here, Elevation 66 Brewing Company opened a little gastropub a few years ago. They’ve already been awarded as having the best artisanal pub food in the East Bay.

 

They have a constant flow of at least 6 of their beers on tap and some of them are pretty darn good by my estimation. When I spoke with Elevation 66 on MicroBrewr Podcast episode 036, Brian Kelly told me they have trouble keeping up with demand. He wishes they had started with a larger brewing system and he says they’re already thinking about expansion.

Large breweries are opening in the East Bay

In San Leandro, 21st Amendment Brewery is bringing their operations back to the San Francisco Bay with their own production brewery. Many people know that 21st Amendment started with a brewpub in San Francisco. Not as many know that their beers are partner brewed with Cold Spring Brewing Co. in Minnesota.

“We do have people out there,” says Shaun O’Sullivan in MicroBrewr Podcast episode 035. “I have a whole staff that kind of manages that. I’m out there a lot. We have a lot of samples that are sent back and forth. It’s a huge amount of information that goes back and forth. You know, you would think it would be easier, but some ways it’s harder.”

This year, 21st Amendment will open the hundred thousand-square-foot brewery to increase production above what they’ll continue making at Cold Spring. The new facility will have a restaurant, a performance venue, and other amenities that will surely attract visitors from throughout the San Francisco Bay Area and beyond.

The East Bay is already burgeoning a beer scene and even a brewery scene. More venues, beers and breweries are on the way. And it’s going to be a better place for beer.

It better be—it’s virtually mid-way between San Diego and Portland!

 

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