Brewing Up a Biz: Money Hunting

I feel like the proverbial son returning to the blog after a trip to the top of the mountain.  Unfortunately, the “mountain,” in my case, was a trip to the doctor’s office to find out if this flu really was going to kill me. It was not the swine variety.  Doc assured me I would live.  (I really think they should start naming these animal viruses after their respective food groups, i.e. not avian flu but chicken soup flu; not swine flu but bacon flu—much more appetizing.)

So although I have been plugging along on “all things business,” thankfully, my illness did somewhat coincide with “the end of the business plan.” I had a chance to convalesce in peace, not that the business plan will ever be “finished,” per se. But there comes a point after weeks and months of sitting at the computer—working and re-working charts, facts, and figures (and, yes, a little BS, although I prefer “colourful motivational detail”)—when you say, “Hey, this thing just might get the job done.”  And by  “get the job done,” I mean “convince someone to give me money.”  Because in spite of all of my drive and desire to make the best beer EVER, the ugly truth of a lack of capital keeps rearing up.Many options exist for start-up financing.  Banks, rich uncles, investment groups, private investors, federally-funded SME funds, etc.  Maybe someday VC will be added to that list, but not until I can guarantee a $2 million return on a $1 million investment after the first six months of operation. Thankfully, I’ve been working with some fantastic organizations to this end.  I don’t mind mentioning one in particular:  Community Futures.  And I offer my praise even BEFORE I find out if they’re lending me any cash! (We haven’t quite gotten that far yet).  If any of you are in a similar mid-start-up stage of any small business in rural or smaller urban areas of the province (or even existing small- and medium-size businesses looking for a little help), I highly recommend them.

Now, there are various financing sources for small- and medium-size enterprises. You’ll want to really consider your options, as I have learned to do.  This is where reading about other start-ups (brew biz or not) has been a benefit.  The obvious place to start is with your banker, but have thick skin before you do.  Rejection is par for the course, even before our current economic situation. The boys from the Brooklyn Brewery were rejected upwards of 15 times before securing financing—one of them was a banker!  But if you do secure a bank loan, guess what?  They’ll want money in 30 days. Then again in 60, 90…  Get the picture?  They won’t have much of a sense of humour for the argument, “But I haven’t made any money yet!”  Too much conventionally-borrowed money could be the end of an enterprise before it begins.  It has happened to others.

Community Futures, on the other hand, understands this.  Their purpose for being is small business.  They offer flexibility in repayment which may revolve around your sales “high” and “low” seasons, for example.  And they don’t just offer money.  They truly offer assistance.

Back to my business plan: I had a general idea as to what I was doing and had worked with various on-line templates, etc., but my rep at Community Futures really helped me “flesh it out.” Online is good;  face-to-face is fantastic.  We met regularly. And in those meetings, I took many great ideas back to my desk and incorporated them into my plan.  I didn’t take them all, and he understood that.  After all, it was MY business plan. Sometimes I just had to say “No, that’s not the vision I’m striving for.” Community Futures got that.  They weren’t driving the bus, but they were a great passenger to have—a personal GPS, if you will.  Oh, and if your personal credit history is less than spotless, apply anyway.  It’ll just mean that your business plan will have to be better than everyone else’s—not a bad approach either way.

Regardless of what source of financing you use, you’ll need some of your own.  (I recommend the rich uncle route if that option is available to you. Then again, mixing money and family could make bank dealings seem a “calming” experience.) Consider a loan-to-equity ratio of, at most, 3:1 (lender will give you three bucks if you already have one).  2.5:1 is better.  The more you put in of your own money, the more serious you appear, especially if you also have a good business plan.  Create a simple spreadsheet and record everything that you purchase which is business-related, e.g. equipment, business cards, even homebrewing equipment and supplies—you’re in training, right?  It adds up quickly.

Now, I haven’t gained all the capital I’ve been seeking yet.  I’ve already tasted rejection from more than one source.  WHEN you experience the same, ASK for the details as to WHY you were rejected.  Don’t just hang up the phone in disgust of their ignorance of your amazing idea.  This will help you tweak your business plan appropriately for the next attempt.  It may mean making changes that are less than palatable, e.g. bringing in another partner who has more equity.  But whatever has to be done, don’t quit.  Even the source that rejected you may not reject you forever.  They might just be saying, “Not right now. But if you get more experience in _______ and up your personal investment by $___, come talk to us again.”

Well, I started today’s blog by procrastinating on a run with the dog in the rain.  The rain has stopped and now my dog is eating his own furniture.  So I’d better end here and get to it.  Happy money hunting!

~ Rod Daigle, Triple Island Brewing Company