As the business plan phase quickly winds down, it’s time to start really thinking deeply about how I’m going to finance this brewery. Here’s my plan: I will acquire a small business loan (hopefully SBA backed) to provide me with the capital to purchase all the equipment I’ll need. As mentioned in a previous post, banks want collateral especially for risky start up loans and the brewing equipment provides that (again, hopefully). If for same insane reason things were to go belly up, the lender would have tangible assets they could sell and recover most of their capital. They won’t want to lend me money for construction, operations, licensing, etc. There’s nothing tangible they could sell. As Panic Brewing grows, I’ll be able to go back to a lender and show them how successful Panic has been which lowers my risk assessment to them at which point I will be able to finance construction costs for expansion.
Getting a loan for the equipment is great, but it doesn’t get Panic Brewing over the goal line. There are other costs that have to be covered in order to get up and running and get to profitability. As I’ve already mentioned, construction will be a significant portion of these additional costs. Depending on the space I find to lease, I’ll need to spend a little or a lot to get the space ready for brewing operations. This includes things like trench drains, adequate sewage drainage and plumbing, 230V 3-phase power, concrete to support the heavy equipment, steam boiler and glycol chiller installation, and more. Where’s that money going to come from? Well, one way or another I’ll have skin in the game, meaning I’ll be ponying up a lot of my own money either for the loan or for the other costs. The problem is that I don’t have enough skin. I’m just a workin’ stiff like you with a family to support and a house to pay for (which I recently refinanced, lowering our monthly payment by 25%!). This is a long roundabout way of saying I’m going to need your help. Yes, you. Or maybe some friends of yours. Or your rich uncle.
I’ve been blessed with having a family that has exactly zero wealthy people in it. None. No rich aunts, uncles, grandparents, cousins. None. Same goes for my wife. We have no wealthy benefactors helping us out in this endeavor, just ourselves, a bank, and hopefully you.
So let’s get to the meat here. I am not ready for investors yet. I won’t know what the investor agreement will look like nor how much investment I’ll require until I know how much capital I can finance. After that, I’ll know. However, based on other breweries’ experiences and research I’ve done I can tell you that the minimum investment will be somewhere around $7,500, possibly $10,000.
Now, if you are one of the folks who’ve contacted me about investing or perhaps are toying with the idea of investing please don’t let your jaw hit the ground just yet. Keep in mind that Revolution Brewing’s new production brewery here in Chicago required a minimum investment of $50,000. Allow me to explain these numbers.
First, if I were to make the minimum investment something like say $1000, I’d never get financed. Everyone would invest the minimum amount and it would take forever for me to get this brewery going.
Second, more investors require more legal documents and more legal documents require more expensive lawyer fees. Tens of thousands of dollars more in lawyer fees depending on the number of investors involved.
Third, there’s a general rule I’ve run across again and again during my research and that is regardless of legal fees, keep the number of investors to a minimum. The reason is because the more people you have involved, the greater the chances of future legal or personality issues. Too many cooks and such. I don’t want to get into a situation where one or two investors start rocking the boat because they don’t think I’m running the business correctly. I need people who are committed to long term rewards and trust that I know what I’m doing, which brings me to the fourth and final reason.
Fourth, I want investors who are serious about being a part of something great. This is more than just a business. This is a journey, a culture, and a helluva lot of work. I need investors who understand what I’m trying to do, appreciate my passion for brewing great craft beer, and trust that I know how to get that beer to the market and make a profit. I want folks who are not only passionate about craft beer, but are passionate about being a part of a community and a movement to bring back authenticity and humanity to something that’s been commoditized and denigrated to nothing but yellow piss water being held by a hot bikini chick during a football game. That was a long sentence.
Let’s be clear about one thing though. This is a business, and investors should rightfully expect a fair return on their investment over time. Panic Brewing is not a charity (although I’ll certainly be supporting local causes). The brewery will be run efficiently, marketed strategically, and be successful financially. The difference between Panic and most businesses, however, is that Panic will be ruthlessly focused on authenticity, craftsmanship, honesty, and, well, fun.
So if those things sound like something you or someone you know might want to be a part of and you have the resources, you can send me a message using the contact form or just keep an eye on the blog. My guess is that I’ll be actively seeking investors in a couple of months. Cheers.