Beating the Odds: Founding a Craft Distillery in a Recession
Can you make it as a small business entrepreneur when you seemingly have three strikes against you when you’re just starting out? Not long ago I talked to Catoctin Creek Distilling Company co-founder Scott Harris, and it seemed that when he and his wife Becky started their company, they were facing some very long odds. Here’s what they were up against: They started Catoctin Creek Distilling Company in 2009, the heart of “The Great Recession,” Small business loans had dried up because banks were under severe economic and regulatory pressures, and They were breaking new ground as the first distillery in the area since Prohibition. However, Scott and Becky have defied the odds and achieved some remarkable growth in their business. When I talked to Scott he has some excellent, actionable tips on piloting a startup to small business success and beyond. Funding With banks holding tightly onto their purse strings, Scott and Becky had to go “all-in” themselves by personally guaranteeing their loans. “We were personally securing everything that we had in our business and we were very lucky and had a very solid business plan that the bank really understood and stress tested, and still liked it. So they gave us a loan, SBA loan at the time and then we secured collateral with our own house and everything else,” Scott explained. Here’s the lesson: You need to have a solid business plan – one that gives you enough confidence to bet your house on, and one that lets banks know that you know what you’re doing. Realistic expectations and growth It took Scott and Becky a while to realize that their original business plan was unrealistic. “The first version of it (the business plan) was some $10 million wonderful distillery with gleaming stainless steel and all kinds of automation and we quickly realized we were not going to raise money from investors to build that business,” Scott told me. Further, today he says if they had built their initial vision it would have been a big mistake. “We had to scale it back to make a small business that was operated by just me and just Becky, in the early days and then scale it and grow it as we have the capability,” he related. In the longer term this had an additional benefit. Because they didn’t get investors and they personally guaranteed their loans, they kept full control of their business. When they did start to gain some notoriety and were ready to take on investors, they were dealing from a much stronger position. Minimize overhead You probably already have the sense that Scott and Becky run a lean and mean operation and a major part of that has been to keep expenses down. Early on they came up with a unique way to accomplish this. “Becky and I could most of the work ourselves, but then you come to something like bottling and we had a big order and all of a sudden (we needed help) out of necessity. We put out a call on Facebook and say, ‘Hey, we’ve got to have some stuff bottled. Does anybody want to come in? I’ll give you free pizza.’ And people came in and it just turned out to be such a fun event,” Scott said. Frankly, I don’t know...
read moreLooking for the Healthiest Locations in Storefront America? Here They Are.
Let’s go on road trip! Uh-oh! It’s time to go off the highway and suddenly we’re rolling through a typical town in the heartland. Hmmm. It looks like this place has seen better days. The commercial strip has quite a few small business storefront vacancies. Nonetheless, we find a good local burger joint, have a great meal and hit that long ribbon of highway again. (Four hours later.) Time to refuel – both the car and our stomachs – so we again point ourselves to the off ramp. Ah-ha! This town has it happening. The small businesses are hopping and people are out on the sidewalks enjoying themselves. Do either of these towns sound like yours? Fortunately for our country, it seems like more communities have active and healthy storefront (small business) economies, according to a new study by CAN Capital and PYMNTS.com. The companies looked at the growth of the businesses that typically make up the heart of a community’s commercial life blood. The quarterly Can Capital Store Front Business Index (SBIF) slices and dices this growth data in three basic ways: By industry (eating establishments, professional and personal services, construction, remodeling and repair services, fitness clubs, and a wide variety of retailers), By payroll (wage growth and employment growth ), and By region (Northeast, South, Southwest, Pacific West, Mountain, and Midwest). In 2014, the SBIF grew 3.8 percent and is expected to grow by 2.9 percent through the first half of 2015. Here’s how the regions fared in 2014: Pacific West, 5.2 percent growth. Mountain, 4.1 percent growth. Southwest, 4.1 percent growth. Northeast, 3.6 percent growth. South, 3.4 percent growth. Midwest, 3.0 percent growth. If we break it down by industry, here are the 2014 rankings: Building contractors/remodelers, 7.3 percent growth. Fitness, 5.5 percent growth. Professional services, 5.0 percent growth. Service/repair, 4.5 percent growth. Personal services, 3.2 percent growth. Healthcare, 3.1 percent growth. Eating and drinking places, 2.8 percent growth. Retail, 1.6 percent growth. It’s fascinating to me that the construction industry did so well. This could be due to the fact that construction took such a heavy blow after the mortgage industry collapse, so it was starting from a very low number. Further, having been down so long there may have been significant pent up demand. As we saw with the fictional road trip that started this article, small business health can vary widely even in towns that are not too widely separated. When a major industry closes in a small or medium-sized town, the impact on small businesses can be huge. This information is great for budding small business owners. It offers encouragement as well as guidance regarding the best small businesses to start and where to start them. However, I think the study must be missing some points. For example, Texas has had by far the most robust economy in the country over the last several years, yet its region (the South) ranks almost at the bottom of the list. Here’s a recommendation for anyone considering a small business or startup in the near future: Take the information in this study and overlay it with lists that rank the most business-friendly states and towns. That should give you a very good idea where you need to locate for the best odds at small business success....
read moreThis Week in Small Business: The only thing certain is change…and social media marketing!
Change is a major topic this week: changing your habits, changing your reactions and getting the older generation to change are two of the topics you’ll find among the curated contented presented here. We also cover branding, blogging and podcasting. Leadership, management and productivity Small business succession planning adds a major wrinkle to estate planning. Since August is Make-a-Will month, it’s the perfect time to look at the options you have for handling your small business. Setbacks happen. (What’s that bumper sticker?) It’s all about how you react to them. Don’t react in these ways. We are creatures of habit. However, if you have any of the four habits here, you may be dooming your small business. If your small-business loan application was recently rejected by a bank, you’re not alone. The approval rate of small-business loans at big banks was just 22.4 percent as of July 2015. Find out why applications get rejected. And while we’re on the subject, if you need a loan to cover an emergency, here’s the info to get you going. The Leadership Freak talks about how to convince the older generation to change. I’ll read it as soon as I yell at those kids to get off my lawn! Marketing and sales Personal branding is a major component of marketing today. In this YouTube video, I discuss how to build a personal brand with Evan Carmichael. Do you know when a blog is the right form of content marketing for your small business? Read this and you will. Blogs and even more so podcasts are the thing today. Here’s how to use big data to find sponsors for yours. If you use images in your social media marketing (and you should) you’ll want to print out this cheat sheet that gives you the ideal sizes to use. Entrepreneurship, startups and innovation Ben Horowitz, one of the most successful VCs in the United States, has some powerful advice, including (surprisingly) not to follow your passion… Geoff Woods outlines how to make the jump from employee to entrepreneur in five steps…six if your count reading this...
read more3 Reasons To Hire an English Major
There’s an old joke that goes like this: A recent graduate with a bachelor’s in philosophy goes into McDonald’s and applies for a job. The shift manager takes the application, thanks the applicant and says, “Sorry, we’re only hiring philosophy majors with a master’s degree, or higher right now.” It’s a fairly funny joke – if you aren’t a philosophy major – and in reality, it may pack more humor than truth; just ask PayPal cofounder and venture capital heavyweight Peter Thiel, who studied philosophy at Stanford. The conventional wisdom today is that the STEM (science, technology, engineering and math) areas of study are pretty much the only subjects worth pursuing. English, philosophy, history and the other liberal arts scarcely prepare you for more than a job in the fast food industry, so the thinking goes…even if I exaggerate a bit. However, it seems to me that this outlook is just another one of those waves that sweeps through our culture that turns out to be totally wrong. I’m basing this judgment on some very good reasons – reasons that are founded in enduring truths. (And I must disclose I have a liberal arts education.) EQ vs IQ Emotional intelligence (EQ) is proving equally valuable or even more valuable than IQ. Anyone who has worked with computer programmers or other scientists knows that many seem unable to communicate and this can lead to projects that go astray and cost overruns. When you find someone who is a great communicator and also well-versed in technology, you feel like you’ve discovered a gold mine. The English major who picks up some tech skills later will be a real keeper. Frankly, I don’t see anyone walking that path in the opposite direction: being a tech specialist and then going back and picking up the overview and communication skills of a liberal arts education. Robots and AI will be the STEM stars Remember the men who landed on the moon and brought home rocks? Today we have robotic landers that can venture much further from Earth, last far longer in outer space and conduct much more sophisticated experiments. As computers become more powerful and artificial intelligence improves, a lot of technological development will be automated. While it’s true that today’s robots are putting assembly line workers out of jobs, tomorrow’s robots will be putting the people who design today’s robots out of jobs. However, no robot will ever make a sales call to an old client who, for some reason, jumped to a competitor. That will always require an individual with a deep understanding of how humans tick. Harvard University’s David J. Deming wrote a paper on this where he explains that performing simple human interactions has proven difficult to automate. Great tech is artistic, human tech Why do consumers love Apple products? There are other brands that are just as functional, and less expensive. However, Apple products are also beautiful and elegant. Steve Jobs once said: “It’s in Apple’s DNA that technology alone is not enough. It’s technology married with liberal arts, married with the humanities, that yields the results that make our hearts sing.” Developing the sense of aesthetics and human needs that bring these elements to consumer technologies isn’t something that can be accomplished with one or two courses tacked...
read moreForget Studying with a Swami: 5 Self-Discoveries of Entrepreneurism
Humans have been wrestling with their self-identities ever since they stopped worrying about being eaten alive by saber-toothed tigers. Looking deep into ourselves to discover who we really are and what we’re really made out of is an exercise many experience at different times in life. But while some climb mountaintops in India to study at the feet of a revered swami, I think trying your hand at entrepreneurism or running a small business is a far more cost effective way to really discover who you are. Coming up with an idea of commercial value and then taking all the steps required to realize that value will force you into discovering your true strengths and your true weaknesses. Look at this list of five skills, talents and attributes you’ll hone as you start walking the entrepreneurial road to founding a successful small business. The ability to visualize. Swamis and Eastern gurus will have you doing various meditation practices to develop your ability to visualize internally. When you conceive an idea and work to take it to market, you have to be able to see into the future and visualize how your product or service will best interact with consumers. You are truly creating something from the void and that requires real imagination and the ability to visualize. An understanding of your place in the universe. As an entrepreneur you’ll quickly develop an appreciation of how small your efforts are when compared to the complexities of the universe – especially the business universe. To be successful, you’ll have to discover your place within this universe and put your personal stamp on it. The ability to solve difficult riddles. A Zen Buddhist koan (philosophical riddle) asks, “What is the sound of one hand clapping?” As you develop your entrepreneurial skills and establish your small business – with the intent to become a bigger business – you will be forced to solve equally paradoxical riddles, such as “How can I spend $1 and get a return of a $1.25?” The ability to see the truth. People walk around with blinders or rose-colored glasses on all the time, refusing to see the truth that lies before them. Entrepreneurs and small business owners cannot afford this luxury. True truth is not judgmental; it just is. The important thing for an entrepreneur is to be able to recognize the truth, understand it and react to it properly. Use the truth to your advantage, the way a martial arts expert uses the movements of his opponent to gain an advantage. You can’t fight the truth. An acceptance of your own limits. None of us alone comprises an entire “universe.” We are incomplete without others. Wise entrepreneurs and small business owners recognize their “incompleteness” and see it as an opportunity to develop relationships with others. This can involve finding the ideal co-founder, your first employees or creating strategic alliances with other businesses. The small business owner who chooses to “go it alone” is a lonely and incomplete small business owner. I offer this list as both an encouragement and a word of caution. Should you decide to start your own small business – or you feel like you are struggling with your current small business – rate yourself on these qualities. Where do you need to improve?...
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