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Matt S
06-09-2011, 12:47 PM
I have been approached to be a Brewmaster at a start up, small craft brewery. By small, I mean maybe 200-400 bbl a year to start max. We have not discussed any compensation yet, the business is still in the planning stages. I prefer to defer compensation and receive an equity stake in lieu of pay as I will be keeping my day job, which is not brewing. I will be responsible for all of the brewery duties as far as I know including recipe formulation, brewing, and quality control. I will not be making any monetary investment, only my time and talent.

What is an average or reasonable equity percentage to expect in a situation like this? I am also thinking about some kind of quality based bonus structure. Has anyone had experience with this sort of situation? How are quality based bonuses structured along with equity stake profit payments? I want to go into this knowing what I would be getting in to. Our overhead is very low and I would expect we would be profitable shortly after start up.

fa50driver
06-09-2011, 02:34 PM
Have you seen their business plan? I would be a bit skeptical of anyone making a profit on 400 bbls per year, even if the overhead is low. What size is the brew system? Why only 400 bbls per year? What do they have in capital to invest?

I don't see how anyone could afford to pay anyone a salary on 400 bbls per year, unless the owners do not need to take distributions and they have plenty of reserve capital.

Not sure about using quality as a measure to figure bonuses. If the quality was anything but good, I suspect that he/she would be looking for another job at most breweries.

Matt S
06-09-2011, 03:48 PM
Have you seen their business plan? I would be a bit skeptical of anyone making a profit on 400 bbls per year, even if the overhead is low. What size is the brew system? Why only 400 bbls per year? What do they have in capital to invest?

I don't see how anyone could afford to pay anyone a salary on 400 bbls per year, unless the owners do not need to take distributions and they have plenty of reserve capital.

Not sure about using quality as a measure to figure bonuses. If the quality was anything but good, I suspect that he/she would be looking for another job at most breweries.

The business plan is being worked on. There will be no employees, thus no salaries at this point. AFAIK the owners have the capital and won't be financing. The building is already owned and all there is to do is a few alterations and bring in a brew house/equipment. All parties are going to keep their day jobs and this will be a part time adventure until things get off the ground.

All I really want to know is what is a normal equity stake to expect in this type of situation where the owners are not going to be doing any of the brewing duties, only the administration duties. I am not expecting any salary due to the small size of the brewery, but rather sweat equity for the work that I would be doing in building the beers and the brand. 10%, 20%? I am guessing owner investment will be in the 100K-200k range initially. The owners are rather successful business men and are not some fly-by-nighters, that is why I am taking this offer seriously.

The plan will be closer to a brewpub model. Basically a small brewery with a taproom and growler sales select hours. 200-400bbl a year is just a very rough estimate that I pulled off the top of my head just to give you an idea of what I'm looking at. It will be small, but we will be able to sell our beer by the glass at retail prices with very little overhead.


As far as quality, I was talking about some kind of bonus structure for winning awards.

liammckenna
06-09-2011, 08:07 PM
Are you a brewer or a partner in business?

Two different things.

Go for the cash.

Equity doesn't feed the kids.

Brewers should be primarily concerned about the beer.

Equity is largely worth the paper it's printed on in my experience. There are a few exceptions.

Don't drop the soap.

Pax.

Liam

fa50driver
06-09-2011, 08:44 PM
Sorry to dig into details of the business plan, but as an owner I find those details pretty important, and you should be concerned too.

1) if everyone is working day jobs, who is going to be there to oversee the build-out? We had to have one partner quit his job and eat PB&J for a year so that he could be at the brewery all day 6 months before we ever brewed a batch of beer.

2) once you are producing beer, someone is going to have to pour growlers/pints - they will expect to be on salary

3) $100k won't get you much in this industry. We dropped about $250k on our startup and that was mostly used equipment and not enough of it.

So, as a business owner and brewer I would tend to choose the equity. You already have a day job, and if you don't have a family or any other hobbies then you likely have the extra time to devote to this venture. I would look to get a good chunk of the equity, and I think that 10 to 20% would be fair for a start-up venture such as this if you are not investing any capital.

However.......

The amount of beer that is brewed will be very important, because from the sounds of it you will be responsible for doing everything. If you can get by on one brew per week on a 7 bbl system, that is great, but that will be your Saturday. Then you can plan on spending around two to three weekend nights after work dealing with all of the other issues at the brewery - prepping tanks, perhaps filtering, kegging, etc.

You should plan on the business being successful, therefore, your duties will increase by year two. I would put into writing that the amount of equity that you would receive would be based on a certain production level and anything beyond that would require additional compensation.

The problem is that if the workload should increase beyond your ability to work part time, yet not pay enough to make it worth giving up your day job - that will be an issue for both parties....

As far as the awards, if you can get the owners to buy into it then sure - try to get a bonus from it.

From personal experience - I work a full time job during the day to support the brewery and brew on weekends and work weeknights, and I can tell you that after 8 months of it..... well lets just say I miss having free time.

Good luck!

Matt S
06-10-2011, 08:15 AM
Are you a brewer or a partner in business?

Two different things.

Go for the cash.

Equity doesn't feed the kids.

Brewers should be primarily concerned about the beer.

Equity is largely worth the paper it's printed on in my experience. There are a few exceptions.

Don't drop the soap.

I will still be maintaining my full time job, so a paycheck each week is not an issue. I would be brewing and I want to be able to build the brand to where an equity stake would be worth it. The owners have run businesses with hundreds of millions of dollars in annual revenue, so I trust them with the business decisions. They just need someone who can brew beer and manage the brewing side of the business.

I won't have any skin in the game other than my time, so I don't have much to lose in this venture.


1) if everyone is working day jobs, who is going to be there to oversee the build-out? We had to have one partner quit his job and eat PB&J for a year so that he could be at the brewery all day 6 months before we ever brewed a batch of beer.

The property is right next to the owners house.


2) once you are producing beer, someone is going to have to pour growlers/pints - they will expect to be on salary

That will be all of us. We will only be open very limited hours at the taproom and growler sales.


3) $100k won't get you much in this industry. We dropped about $250k on our startup and that was mostly used equipment and not enough of it.

We are still working on that. I just threw out that figure off the top of my head.


The amount of beer that is brewed will be very important, because from the sounds of it you will be responsible for doing everything. If you can get by on one brew per week on a 7 bbl system, that is great, but that will be your Saturday. Then you can plan on spending around two to three weekend nights after work dealing with all of the other issues at the brewery - prepping tanks, perhaps filtering, kegging, etc.

You should plan on the business being successful, therefore, your duties will increase by year two. I would put into writing that the amount of equity that you would receive would be based on a certain production level and anything beyond that would require additional compensation.

That sounds about like I am planning. Brew on weekends, manage other duties during the week in the evenings. It will really depend on how things go starting out. Obviously if business dictates, we will have to look at other options. I am going to recommend to the owner to get a 7 bbl system minimum, but we may be looking at a 3-4 bbl. I still have to go look at the space and everything and get some more information from the owner(s) as to what they want out of the business. This is all very preliminary, I just want to be able to walk into the situation understanding what is a reasonable share of the equity.

CPB BM
08-09-2011, 07:19 PM
Matt,

Any update on the project? I am in a very similar situation right now and I would love to hear what you have learned.

Thanks.

wmeier
11-05-2011, 07:33 AM
We have a successful bottling plant that bottles sodas and runs routes in a rural area near St. Louis, Mo. We have a verbal agreement with a Brewmaster that has a full time job. The plan is two compensate him as a consultant and he will brew once a week or every other week. We are purchasing a 20 bbl system. It the venture is a success, we will hire him as full time employee with better salary and benefits than current job

SRB
11-06-2011, 01:46 AM
....The owners have run businesses with hundreds of millions of dollars in annual revenue,...

I certainly lack details pertaining to this project and I imagine you guys are well under way, but in the spirit of learning.

What kind of profits do these folks expect, and when do they expect them?

From the perspective of my start-up co-ownership brewpub experience, (400bbl's per year, limited self distribution) now four years from conception, depending on their expected profit margins, from a business standpoint if these folks have the money they should spend it on no less than a 7bbl model with room to grow. If food is not an option than 15bbl with room to grow is the right move.

:)
matt g

Larry Horwitz
11-18-2011, 07:30 AM
I'm a little late to the game, but here is my $0.02 worth:

A minority position in a privately held organization is not just worthless (the 51% can do as they please...) It may also COST you money. Plenty of great partnerships have ended friendships, marriages, and retirement accounts.

You will be subject to income tax on the shares you are given. IRS sees it as income...and you will have to pay double tax AND SSI, state and local tax et. al.

You will be subject to cash calls in the event they occur in direct proportion to your ownership stake. This means that if the company need 100k and you have 10% you owe 10K.

You will have no say over if / when / to whom you can sell your shares.

An iron clad partnership agreement MAY protect you from some of these problems, but I wouldn't count on it. See your lawyer for further (more accurate) detials.

It seems you are set on this path anyway because you would like to own a piece of the brewery. If that is your goal, than good luck...just be aware of the consequence of ownership! I'd take the cash.....


cheers

Lagergnome
12-02-2011, 12:39 PM
I can empathize with you...You love to brew and would like to be a part of this chance to grow a company from the ground up. I would lightly suggest you keep your real job...or career so you don't worry about paying the bills. Take a stake in the company, but have that clearly stated in writing by a Business Lawyer and all members of the Corp or LLC sign it. To be a partner means the existing owners are marrying you into the family and it's a legal affair. An equity "IOU" doesn't count and sweat equity does not exist in a court of law.

Second, if you need to make some money, then consider either one of two things. 1-Contract brewing. A set amount to help keep you afloat per brew, not per week. Contract brewing is reasonable at $100 per bbl if you're close. You may want to get that money before the beer sells, but as a stakeholder in the company, you may want to wait until the beer sells to get some cash in hand. 1bbl is 248 Pints x $4=$992. There's a little money to work with if you are going on pint sales. Growlers are a little funny on profit margins, especially if you have a nano-brewery. You want to sell as many pints as possible, but filling growlers all the time means you have to brew your face off! Study up your system and find out ways to maximize your system to get every last drop out without sacrificing quality or cleanliness. The more ways you can save your company money, the more money they have to pay you when the year closes out. Good luck and cheers~