No, not me personally – I can only dream. But Jacob McKean, founder of Modern Times Beer in San Diego, CA, did. And he wrote a cool editorial for Beer Pulse. Check it out.
Nice article…
So…what does it take to pay back your investors and turn around to make your own $1.25 million off your brewery?
$2.5 million + interest.
I have been tempted by a couple investment offers and have so far managed to stay away from it. I have had two loans and am getting ready to have a third (and we are upping to 30 bbl tanks in the next 6 months w/new glycol unit … yay!). I see other breweries with bundles of investors and I see how much problems it causes especially with different opinions of directions. One new brewpub opening in H’ville had one investor that insisted they had Bud Light on tap so that he and his buddies could come in and drink, other investment partners that fall apart or show up every six months and act like they own the place, etc, etc… OTOH you get money right up front and don’t have to dig and dig and dig for several years to make it happen.
When we build out our new facility in the next couple of years we may have to get some investors but our plan is to simply get investors for the property and have them lease it back to us. After this loan from the bank is paid off we should be in a position to pay off a 1-1.5 mil. loan and the bank said they would give it to us due to our track record so, just sayin’, it can be done without going down the road of having investors it just may take a little longer.
I wasn’t really clear, was the investment by selling stock in the company (ownership) or simply notes payable? It sounded like the guy who wrote the article was selling the company to investors.
We just got a bank loan through a local bank to buy our business, but it was an already profitable business, with no liquor regulations/liability issues to deal with.
… But only if you personally have some money. 
One also needs to keep control of the company. A guy here was forced out of his brewery when his investors for an expansion forced him out. That is about all I know about that one, but it should be thought about when taking on investors.
Yeah, that’s what I was getting at with stock vs notes. You need to offer a really high return (10%+) if you want individuals to loan you money. We were looking into that before we got the bank loan. If you start selling stock to anyone who will buy it, you’ll quickly be outvoted.
But a good business is less risky than some stocks, and with a good ROI you can find people willing to loan you cash.
Well, yeah Good point. I also have 3 partners w/equal ownership.
If we could make that work, that’s how I’d like to do it. The way it’s going to shake out is my business partner and I owning roughly a third, close family roughly a third, and about twenty other investors the other third. Maybe not ideal, but at least my parents will have to vote to fire me. :
Having co-owners is worse than being married. All of the sharing responsibility/liability, splitting profits, and none of the “fringe benefits ;).” In the case of splitting up a business, it can be just as messy as a bad divorce. So, I guess like with marriage, make sure you really love your partner(s), and have explicit contingency plans in place if the love dies. Communication is key. You need explicit delegation of responsibility and time, because if you feel like you’re picking up the other’s slack you’ll grow resentful.
It’s important to get the right ones. Works perfect for me. Each of us has a job to do (which is why I am not always clear on TTB issues - I don’t deal wioth it ) I will say, it is important to have the right partners and make sure that you are all moving in the same direction. Otherwise, it will not work.
Another important item to implement is to make sure that there is 100% consensus. We have to agree 100% between all of use to move forward. You don’t want one person constantly outvoted or there will be major discord.
I think it’s important to keep a controlling interest (51% min.) when going down the investor road. This will assure your control of the brewery. This is not to say one won’t have hurdles from other interests, but at least the controlling interest in the decisions at bay.
Interesting article. Thanks for posting Matt.
I think a lot of it depends on how much money you’re trying to raise. If you’re starting relatively small, you might be able to gather some friends and family to sign promissory notes for your startup capital. You’re not transferring any ownership and assuming things go well, they will net a decent return on their money. If things don’t go well, it can be structured as an unsecured loan and you won’t be on the hook to pay it back (though you might permanently damage friend/family relationships). Hopefully you incorporated and they are entering into agreements with your corporation.
As you look to get bigger and raise more money, there are lots of clever structures that can work without ceding operational control or even ownership in the brewery itself. For instance, an LLP could buy/own all the equipment using the equipment as loan collateral within the LLP and then the LLP could rent the equipment to an operating LLC. This has lots of advantages, perhaps the biggest being if the LLC goes belly up, the equipment is still safe with the LLP. Plus the LLP can’t necessarily exert any real operational control over the LLC. So you’re a little better insulated against investors trying to impact brand/marketing/etc.
Again, hopefully if you have business partners, you’ve incorporated and you’re bound by an operating agreement that you all agreed to; an operating agreement that you had your personal attorney review to be sure your personal interests were looked after. Further, if one or more of your partners will be doing duties day-to-day at your brewery, while others may be in a more visionary/investor/hands-off role, hopefully you drafted an employment agreement that outlines what your responsibilities are, what your compensation is, and what the procedures for amicably splitting up, etc. are.
Don’t forget, you can always sell shares in your brewery that are not voting shares. You may have fewer takers, but it is one way to retain control.
Very true. There is a little place called BBC that did that.
Even without an offering of shares, you can still structure your operating corporation so that managers have the majority of control and members essentially only vote to replace managers. Plus Larry has spent the last several years trying to buy those shareholders all back out again. Aside from the complexities of doing a stock offering, a lot of thought should be given before bringing on any sort of equity partner, be it voting or non-voting.
Before I put my brewery plans on hold, I was planning on starting one business to buy the equipment and then renting that equipment to my brewery business. I thought it was a little bit silly and maybe overly complicated, but I’m glad to hear a lawyer came up with the same idea.
I was talking about the Boston Brewing Company. Jim Koch has all of the voting shares.
Don’t know how Bells is set up for voting shares. Larry Bell has been trying to buy all shares back so he can leave the brewery to his kids. You can read more here -
Summary: Know lots of rich people who will lend you money. Thanks for the tip, Einstein.