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  • Compensation and Startup

    Hi,
    Sorry for the long post, but I wanted to provide background information.

    I’ve been approached by an investment group of 4-5 people to be brewer of a startup. The model is slow growth nano. Their initial goal is 100, 000 pints/year or 400-450bbl/year. I’m a pilot system brewer without any professional experience, and I’ve won a number of BJCP style contests for what’s that’s worth. I’ve got a degree in biology and worked as a chemist for over a decade, so I’m familiar with GLP. I’m also a university professor at a very small university, which is my “day job,” and it gives me lots of flexibility in my schedule [summers free], benefits for my family of four, and job satisfaction. I make in the mid 60s and live in a suburb of Philly. My much-needed side hustle is teaching as much as I can online and during summers, but brewing sounds better.

    The group wants to start a brewery with a tap room to begin cash flow and keep expenses low. They are initially interested in retail sales only—no keg distribution because the margins are very low. They have money to invest. The group is all business people: bar owner, scrap metal owner, printing/graphic design company, accountant and former bar owner, and [maybe] marketing executive. Their model is to get the tasting room going and open 1-2 satellite brewpubs long term and provide product exclusively to these satellites.

    They’ve been drinking my beer and going out to the area’s “Ale trail,” only to say my beer is better. Only one is a friend. The group is looking currently at 3-8k foot spaces to launch the brewery/tasting room. No formal documents have been issued for the business. PA is relatively liberal in their tasting room protocol.

    Besides a million questions, a few seem to come first.

    1. My compensation. Informal talk has been that I would be an equal equity partner—if 5 owners, I would be one of 20%; if 6 owners, I would be 16.6%.—without capital investment on my behalf. In other words, if each owner puts in 20K, I do not have to do the same for an equal percentage of the equity. If I am an equity partner, am I responsibly financially if the business fails and owes money? Can I structure my equity to eliminate that risk? The group plans to reinvest capital to grow the business “for a few years,” so I assume that I would not see dividends from that equity, but I do not want to be responsible for any debt acquired. Has anyone benefited from equity sharing?

    2. My compensation II. Also, informally, I would get compensated for my time to brew, design, and build inventory. What is an adequate hourly or monthly compensation for someone of my background? I would be growing with the business, and the learning curve would be intense. If the goal is 450bbl/year, initially then the size of the system would be relative to the time to brew for me. Should I tie my compensation to production, as ABA standards suggest? I have the advantage of university connections for student internships to help save costs for brewery assistants, so I do have cost-saving to bring to this operation.

    3. Brew capacity. Some owners want to start with a 7bbl system and some want to start with a 3bbl system. My plan is to have 8 beers on tap. 4 regulars and 4 seasonal/exclusive. The mathematical solution is 5bbl, but I wonder, cost wise, what is the best choice? Most threads have noted the desire to start bigger.

    4. Learning curve. Is the learning curve similar of 3, 5, and 7bbl systems? This is a question that the investment group should be looking to me to answer—they know I don’t have the commercial experience—but they will assume I’ve researched it. Probrewer.com research suggests the learning curve is similar.

    I appreciate your input!
    Cheers,
    Robert

  • #2
    Please consider reading this book

    Your situation is VERY similar to the gentleman in this book below (attached link). PLEASE consider reading it before doing anything else. Looks like their brewery is doing ok now (years later) but man it was a rough road getting there! His story in this book is a candid, non-sugar coated, and behind the scenes look at what you are about to get into starting small and with a group of investors. Here’s the book https://www.amazon.com/Good-Hobby-Ma...6W9C/ref=nodl_

    My two cents (and I have read the book above and communicated with it’s author):

    1) If you don’t have the personal cash to 100% fund a nano taproom yourself without investors then don’t do it until you can fund it entirely by yourself. A nano taproom can make some money (but not a lot). If you have investors that all have to get their share from the small profit from a nano you will soon find that the payday isn’t worth the effort or expense, that is if you ever see a “pay day”. If you fund it, no investors, have very few to no other people on payroll, keep overhead very low (no fancy automated name brand nano system and DIY the brewing equipment), and sell pints at a premium then yes you can make some money at the nano level.

    2) Regarding your question about compensation, please read the book above. It’s $0.99 and will answer many of your questions. The author, who was you in your exact situation, goes into full disclosure about the topic. He was the brewer and had investors. Only one person involved really got a payday at the end...and it wasn’t the brewer doing the hard work!!!

    3) In brewing, size does matter. Go 7bbls minimum. If the goal is to have an additional satellite tasting room one day then it would be cheaper in the long run to have a larger system and brew all the beer for multiple tasting rooms from one location.

    4) If you don’t have experience working with professional brewery equipment and managing production beer for commercial sale then yes there will be a big learning curve. Please factor in your budget money for dumped batches, extra ingredients/chemicals, utilities, replacing equipment you will break etc.

    5) Again, I recommend reading the book above and giving honest thought into this possible endeavor...especially since it sounds like you have a good college teaching job and a family with kids. The author above did as well and I think you would appreciate hearing his experiences on how these two areas of life were impacted by starting the way you have stated.

    After reading the book, the idea of just home brewing and having friends over for a pint might sound a lot more inviting.

    To me, a more lucrative side hustle for you instead of brewing might be to use your science background to sell your services as a lab tech to all the breweries in your area.

    Good luck.
    Last edited by Catfish002; 08-02-2018, 06:55 AM.

    Comment


    • #3
      Have you calculated how often you'll need to brew in order to move enough beer to break even? Because brewing infrequently enough that you can consider this a side hustle sounds a little optimistic.

      I work at a similar operation to what y'all are planning: eight-barrel brewpub, we brew twice a week to keep about eight beers on tap, move maybe a quarter to a third of that in outside sales and the rest on-premise, and are modestly profitable. In order to achieve this, we've got a "full-time" head brewer (read: 50+ hours/week), plus myself and another assistant brewer putting in 25-30 hours.

      You might be able to get away with brewing a little less beer, not being in the SF Bay Area with our insane real estate and cost-of-living eating up the bottom line, but I don't see how you're not looking at 1-2 brewdays of 8-12 person-hours a week, another 8-12 of kegging and keg washing, and another 8-16 of other random brewery tasks, plus keeping on top of inventory, writing recipes and planning the brew schedule, answering emails, doing events... don't get me wrong, this is where I see myself eventually, it's doable, even desirable to the sufficiently twisted soul, but I'm under no illusions that it's something I can do on the side.

      Edit to add: something else you should do ASAP is shadow a few brew days at other breweries! At least in a smaller brewery, they should be happy to let you hang out and see what goes into a commercial brewday, especially if you're willing to shovel spent grain and spray down tanks for a six-pack in take-home pay. Stop in during the early-afternoon lull, the bartenders should be able to tell you when the head brewer will be around but not running around like a headless chicken. A lot of us come to brewing as a second career, and are happy to help others along that path, if for no other reason than to reassure ourselves that we're not nuts.
      Last edited by feinbera; 08-02-2018, 01:49 PM.

      Comment


      • #4
        Book Rec

        Thanks for the book recommendation, Catfish.
        Just downloaded and will start reading this evening!

        Cheers

        Comment


        • #5
          Feinbera,
          The number given to me was 100,000 pints/year [404bbl] in the tasting room, which will be the only outlet for product to start. No outside sales. I think 100,000 pints/year [274 pints/every single night of the year?] is ambitious to start. Obviously, the size of the system will determine the number of brew days, which is why I am lobbying for closer to a 7bbl system. That would approximate 5 brews/month.

          Due to my academic schedule, I have May-August free. I'm thinking that I can build up inventory during these months. During the semester, I have three afternoon/evenings open during the week open and weekends. So, I feel as though I have time for a significant side hustle, especially during summer.

          I was also told that I would be provided labor assistance—how much, I think that will depend on the brewing capacity. No doubt I am underestimating time demands, but the group understands my day job importance.

          Graciously, a local brewer has sent a DM to me about support now and/or when the operation begins, as your edit suggests.

          Best of luck to you!

          Comment


          • #6
            My 2 cents... 300 pints a night can be tough depending on your ... location location location. Are you moving into an area with breweries already in it, or are you moving into a neighborhood that will take ownership of a brewpub? Also, are you planning on having food?
            Building up inventory, you can somewhat but at a certain point old beer tastes...old.
            Joel Halbleib
            Partner / Zymurgist
            Hive and Barrel Meadery
            6302 Old La Grange Rd
            Crestwood, KY
            www.hiveandbarrel.com

            Comment


            • #7
              Thanks Joel,
              The group is scouting locations now, and they are looking for an "in-between" location of other breweries to capture those people in an area who are travelling to other places and create a local ownership, as you put it.

              But, yes, 300 pints/night if we open the tasting room at 4pm until 11pm, earlier on the weekends? I've been trying to get an industry estimate for pints/hour of say a 25 seat tasting room. Any ideas? What is your experience?

              They are also considering buying a food truck or mobile pizza kitchen because it would be less expensive than a build out for a kitchen. The theory being that customers will spend more on a total ticket with food/beer than separate tickets [one to a non-owned food truck and a different ticket to out tasting room].

              Regarding inventory, mainly stronger Belgians, winter warmers, and barleywines to cellar, and inventory like grains, hops, and other ingredients that can be purchased on a bargain and stored properly.

              Thank you,
              Robert

              Comment


              • #8
                Thanks for the book mention!

                Feel free to PM me Robert or email

                Chris
                _______________________
                Chris Burcher, Wolf Hills
                Abingdon, VA

                Comment


                • #9
                  Originally posted by burcher View Post
                  Thanks for the book mention!

                  Feel free to PM me Robert or email

                  Chris
                  I just found this post a few hours ago and now I'm on chapter 7 of your book, LOL. It's weird as I read your experiences and realize I'm going through many of the same defining moments in my own company. So far it's been a good read!

                  Comment


                  • #10
                    Originally posted by ficbrewing View Post
                    Hi,
                    Sorry for the long post, but I wanted to provide background information.

                    I’ve been approached by an investment group of 4-5 people to be brewer of a startup. The model is slow growth nano. Their initial goal is 100, 000 pints/year or 400-450bbl/year. I’m a pilot system brewer without any professional experience, and I’ve won a number of BJCP style contests for what’s that’s worth. I’ve got a degree in biology and worked as a chemist for over a decade, so I’m familiar with GLP. I’m also a university professor at a very small university, which is my “day job,” and it gives me lots of flexibility in my schedule [summers free], benefits for my family of four, and job satisfaction. I make in the mid 60s and live in a suburb of Philly. My much-needed side hustle is teaching as much as I can online and during summers, but brewing sounds better.

                    The group wants to start a brewery with a tap room to begin cash flow and keep expenses low. They are initially interested in retail sales only—no keg distribution because the margins are very low. They have money to invest. The group is all business people: bar owner, scrap metal owner, printing/graphic design company, accountant and former bar owner, and [maybe] marketing executive. Their model is to get the tasting room going and open 1-2 satellite brewpubs long term and provide product exclusively to these satellites.

                    They’ve been drinking my beer and going out to the area’s “Ale trail,” only to say my beer is better. Only one is a friend. The group is looking currently at 3-8k foot spaces to launch the brewery/tasting room. No formal documents have been issued for the business. PA is relatively liberal in their tasting room protocol.

                    Besides a million questions, a few seem to come first.

                    1. My compensation. Informal talk has been that I would be an equal equity partner—if 5 owners, I would be one of 20%; if 6 owners, I would be 16.6%.—without capital investment on my behalf. In other words, if each owner puts in 20K, I do not have to do the same for an equal percentage of the equity. If I am an equity partner, am I responsibly financially if the business fails and owes money? Can I structure my equity to eliminate that risk? The group plans to reinvest capital to grow the business “for a few years,” so I assume that I would not see dividends from that equity, but I do not want to be responsible for any debt acquired. Has anyone benefited from equity sharing?

                    2. My compensation II. Also, informally, I would get compensated for my time to brew, design, and build inventory. What is an adequate hourly or monthly compensation for someone of my background? I would be growing with the business, and the learning curve would be intense. If the goal is 450bbl/year, initially then the size of the system would be relative to the time to brew for me. Should I tie my compensation to production, as ABA standards suggest? I have the advantage of university connections for student internships to help save costs for brewery assistants, so I do have cost-saving to bring to this operation.

                    3. Brew capacity. Some owners want to start with a 7bbl system and some want to start with a 3bbl system. My plan is to have 8 beers on tap. 4 regulars and 4 seasonal/exclusive. The mathematical solution is 5bbl, but I wonder, cost wise, what is the best choice? Most threads have noted the desire to start bigger.

                    4. Learning curve. Is the learning curve similar of 3, 5, and 7bbl systems? This is a question that the investment group should be looking to me to answer—they know I don’t have the commercial experience—but they will assume I’ve researched it. Probrewer.com research suggests the learning curve is similar.

                    I appreciate your input!
                    Cheers,
                    Robert

                    I would like to add that I have recently taken over a 2bbl nano system as a side gig as I do not have any plans to leave my full time job. I grossly underestimated the amount of time, outside of brew days, that I would need to be at the brewery. I am pretty much there everyday to handle something and it gets very tricky to balance with a full time job and a Family. My FT job is very flexible so that helps but it is still very hard to maintain balance. Its also easy to underestimate the amount of time you will spend cleaning. LOL
                    Last edited by JD Vasher; 10-31-2018, 12:30 PM.

                    Comment


                    • #11
                      Originally posted by JD Vasher View Post
                      Its also easy to underestimate the amount of time you will spend cleaning. LOL
                      The guy who founded the place I work put "brewing is what you do when you're not cleaning" in big ol' letters stuck right to the CLT. I thought it was cute when I first started. Today, I regard it with the respect due to the First, Last, and Only Commandment of Brewing.

                      Comment

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