How to Launch a Profitable Craft Distillery
This latest boom in the craft spirits industry means that across the nation, hobbyists and industry pros are realizing their dreams of owning and operating a distillery. Read on to find out the basic steps of how to launch a craft distillery and make it profitable, and how you can go about raising the money to get started!
How to launch a profitable craft distillery
Decide what craft spirits you want to sell and when
The first step to launching a craft distillery is deciding the niche you want to fill with your spirits. Will you work with the old standards, or get experimental with your products? Will there be some kind of theme to your distillery, and will that affect the kinds of spirits you’ll be making? Having these factors decided will help clarify your production, sales, and marketing strategies.
One way that many distillers start out their business is by selling clear spirits at the beginning of their business journey while also aging them. That way, you can start generating some revenue now, and save the stuff that benefits from aging further down the road.
However, if selling aged whiskeys or other spirits is going to be a part of your strategy from the start, sourcing already-aged spirits from other distillers is another way to get you started until you can age your own product.
How are you going to sell your craft spirits?
The next step is to determine what your sales strategy is going to be for your distillery. Will you be just a production space, and sell your products through distributors to consumers? Or will you open up your own bottle shop for customers to come in? You could also open up a bar area for your distillery if you’d like, but that’ll definitely be a much pricier investment to make.
Each of these options have their pros and cons, and it depends on the regulations of your area and how they determine what your distillery can look like, from a sales perspective.
Decide where you’re going to launch your craft distillery
As we mentioned before, where you live is going to have a major influence on what your distillery looks like. For example, some states require distilleries selling drinks to also have food on-hand in their venue. Others won’t allow you to sell your spirits through any old retailer, so you’ll have to find a state store or other licensed establishment to sell it through.
Additionally, if you’re planning to have a brick-and-mortar store, where you decide to locate it will matter a lot. You’ll want somewhere with high foot traffic and a demographic that will complement the products you’re selling. Also, will this brick-and mortar store require a build-out? That’s something to factor into the startup costs of your distillery.
Source your ingredients and equipment
Another step in getting your distillery launched and ready is to decide where you’re going to get your ingredients and equipment from. Both are going to be major parts of the startup costs for the distillery. The equipment will be a major up-front expense, while the ingredients will of course be more recurring.
The question of where you want to source your ingredients from is also a good factor of your distillery’s branding strategy. Is part of your mission to support local? If so, sourcing local grains and other ingredients for your spirits would be one way to do so.
How to finance your new craft distillery
We go into a bit more detail about financing your craft distillery in another blog post, but here are some basics to keep in mind as you’re trying to figure out where you’re going to get the funding to launch your business.
Crowdfunding your craft distillery
One way you can finance your craft distillery is by crowdfunding! Crowdfunding is especially advantageous for startup craft distilleries because it gives you a chance to get the word out about your distillery and attract customers right off the bat!
This is especially true if you run a crowdfunding loan campaign, because you can invite community investment into your distillery. That will turn your potential customers into advocates for your brand before you even open your doors.
Finding a Small Business Loan
Another means of financing your craft distillery is by finding a small business loan. We should warn you though, loans for startup businesses are often very hard to get from banks. They want to see the financial history of your business, and most of the time don’t lend to any business younger than 2 years old.
Often, distilleries choose to get a small business loan and supplement another part of their raise with a crowdfunding loan. Western Reserve Distillers in Cleveland did this when they chose to expand, and they raised over $100,000 from their community investors to support the SBA loan they also got.
Connecting with Investors
Distilleries are also a hot item for investors right now. With the burgeoning craft distillery industry, many people who might not have the time or knowledge to fully operate a craft distillery choose to invest in them.
There are some drawbacks to finding investors for your distillery. For starters, it’s a partnership and you’ll most likely have to share profits and even decision-making power with whoever invests in you. If you choose to run an investment crowdfunding campaign, however, you’re paying back a loan and not sharing profits. This means you get to keep your slice of the pie and also benefit from all the other perks of having investors in the community on your team!
We’ll be clinking glasses in no time with you
Now that you have a roadmap to how to start your craft distillery and make it profitable. Find out more about how you can use a Honeycomb Credit crowdfunded small business loan to not only get funding for your distillery, but also get it set up for success as soon as you open your doors!