Datsun1500 wrote: If the net profit is $300k, you get $3,000. You break even on year 9.
What is a good time frame to shoot to break even?
Datsun1500 wrote: If the net profit is $300k, you get $3,000. You break even on year 9.
What is a good time frame to shoot to break even?
Given that most companies don't make it past the first three years even if they're well funded, that's what I'd be shooting for.
Focus on this:
Beer Baron wrote: Get an understanding of what my investment in the company actually gets me. How do I make my money back if I invest? How do I get out? What happens if I leave? What is my liability if something happens to the company?
The money questions are too easy to answer, but also too easy to fake (intentionally or unintentionally). Plus, you are not qualified to assess them well (an accountant can help you, if you get to that point).
I don't think he is going to want your $5K. It's too small an amount to mess with.
In reply to SVreX:
The business/money sense guy on the team is trying to pull together a small group of people able to invest $5k+ each. Not sure how much total funds they want to raise how quickly or what it will specifically be used for. I suspect for the next expansion.
You sound too emotionally attached to this- almost a little defensive, or at least protective.
Never fall in love with an investment.
Datsun1500's comment about the net profit was spot on. Please note, he said NET- that's AFTER ALL expenses.
His example showed a 12% net return (assuming a $2.5 million dollar value), which was a 9 year payback.
12% of your $5K is $600. That's all you'd get per year.
12% net profits in the first year would be incredibly strong. Sustaining 12% net profits for 9 straight years would be glorious.
There is another way to look at this...
You believe in this. You can afford to loose the money. You want to be vested in it, but not beyond what you are willing to loose.
Then buy in.
Not to MAKE money, but to align yourself with something you believe in.
Wanna invest in my business? I'll gladly pay you 12% interest for a loan on $5-$15k, and the business has net profit in its first year so you'll be getting your payments back ;)
Im sort of kidding, but sort of not. What I am trying to do is highlight what the other people in this thread are; there are much better ways to use your money with a lot less risk.
Based on the info you've provided so far: I'd work there, but wouldn't invest there.
SVreX wrote: There is another way to look at this... You believe in this. You can afford to loose the money. You want to be vested in it, but not beyond what you are willing to loose. Then buy in. Not to MAKE money, but to align yourself with something you believe in.
^^^ This makes sense. It sounds like you WANT to do this and you already said this is $$$ you can afford to lose. So, at that point you go with the gut and roll. Worse case you paid for experience and education going in next time.
Beer Baron wrote:Datsun1500 wrote: If the net profit is $300k, you get $3,000. You break even on year 9.What is a good time frame to shoot to break even?
Compare this to what else you could do with the money? This is saying that in 9 years you'll have your money back. What do you think you could earn putting the money somewhere else? At 7% return by year 9 that $25k would grow to $46k. Do you believe you can do better here? I used "better" because you can define that on your own terms.
I would be concerned having that small of a percentage in a small business. To most of us commoners, $25k should be more "important" than that.
Ever watched "dragons den"? Or the american equivalent?
There is a reason why the " dragons" offer everyone so little money to purchase a part of the company for a minimum of 25% ownership. The risk is great, but if there is reward, everyone should get rich. And it is a lot of faith to put in someone to not stupidly spend YOUR hard earned money that you basically gave them for ($500 per year).
Like I said, for a $25k personal loan, I'd gladly pay up to 15% interest annually starting my business... Its chump change in the grand scheme of things if the business model supports it.
$450/month payments over 5 years... $2250 per year of net money in your pocket. ;)
Microbreweries = over saturated market with no ability for price differentiation to make up for the exotic ingredients used to create demand. Also there is the distribution thing.
My brother in law did a consulting engagement with a big microbrewery in PA. His recommendation, continute with the beer but expand with oddball brewed sodas to actually make money.
Don't treat this as an investment. If you believe in it do it but kiss that money goodbye.
Tldr. It's a E36 M3 market. Invest elsewhere.
If I have read this correctly, we're talking about a 1% ownership stake in a company that is not yet in the black. Not sure how you value that company, but I'd expect a lot more than 1% for any kind of money that I would deem significant. Especially if you have more in reserves than the owner.
You know beer better than anyone on this board, but probably don't know business as well as a lot of folks here. Be honest, do you think that this brewery has the capability to become the next Sam Adams or Sierra Nevada, from a beer context? If so, you better have a damn good Pilsner/Lager/Pale Ale type beer, and one other really good beer. Ok, so it has the capability. From a business context, does it? I would personally bet against it unless you have the next Lee Iacocca running it.
I'm the guy that you are trying to sell beer to. I love beer, I drink quite a bit of it. I currently have about 6 different brands in my fridge. And I'll have trouble finding them again. Not a business I would invest in--way too much competition on the craft level, and all the crafts are going to always compete with the Macros. And no one is ever going to take down the Bud/Miller/Coors trilogy.
If you believe in it, invest in it. But invest in it like you would a charity or a country club. Don't expect to get it back.
Oh, also--I'd expect to see the salary of the majority owner, and I'd want to see the salary be low and the rest coming in from a set percentage of profits. And I'd ask for that same percentage of profits, obviously scaled down to your ownership stake. I want to see the majority owner with both feet in, otherwise I don't believe in him/her.
NOHOME wrote:SVreX wrote: There is another way to look at this... You believe in this. You can afford to loose the money. You want to be vested in it, but not beyond what you are willing to loose. Then buy in. Not to MAKE money, but to align yourself with something you believe in.^^^ This makes sense. It sounds like you WANT to do this and you already said this is $$$ you can afford to lose. So, at that point you go with the gut and roll. Worse case you paid for experience and education going in next time.
Perfectly said
NOHOME wrote:SVreX wrote: There is another way to look at this... You believe in this. You can afford to loose the money. You want to be vested in it, but not beyond what you are willing to loose. Then buy in. Not to MAKE money, but to align yourself with something you believe in.^^^ This makes sense. It sounds like you WANT to do this and you already said this is $$$ you can afford to lose. So, at that point you go with the gut and roll. Worse case you paid for experience and education going in next time.
This is pretty much what I'm thinking. I want this business to succeed and would like to help it through this critical growth and teething period. It would be great if I could do a bit better than break even in the process.
As for the nature of the craft beer market and our position in it. I see the markets in a definite period of change. Craft beer is continuing to see yearly double-digit market growth, but consumers are changing where they look for beer. Markets are moving more local, and even the "big" craft guys have seen it, as evidenced by all the new breweries they are starting up in the midwest and east coast (Ashville, Chicago, etc.). People want fresh, local beer. We don't need to make products that no one is making anywhere else, but we need to make ones that we are the only fresh supply to our local consumers.
Along those lines, we are trying to stay ahead of the curve and be genuinely unique. That does not mean finding the next weird or intense thing to put in beer. Pretty sure people are getting worn out on over-the-top. They want high quality, they want flavorful, but they want drinkable. We are being unique by being much more moderate and interpreting different traditional styles from other people. We are focusing on our Ameri-craft interpretations of German and Belgian styles.
This means we already have two full-time brands on market that are top quality and unique for the region: our hefeweizen and Belgian IPA. The hefeweizen is super approachable and fills a niche on tap lineups that nothing else around does. It is a total lady killer. The most similar brand is Weihenstephaner Hefeweizen. We do not necessarily do a better job than them, but our's is fresher, less expensive, and comes in kegs that use the standard American connector instead of the German style. Our IPA is also popular because the Belgian yeast strain allows us to make something with as much flavor as what people want from IPA's, but in a less aggressive overall package. People can drink more of it before getting pallet fatigue. We also did an Oktoberfest that was killer. It was so good and so popular that we're looking to bring it back year round, but find a less seasonal name for it.
We will not grow to be the next Sierra Nevada, New Belgium, or Boston Brewing (Sam Adams). That place and time has passed. I don't think we could become the next Lagunitas, Stone, Rogue, Brooklyn, etc. I do think that if we stay smart we could become the next Bell's, Great Lakes, Ninkasi, etc. We don't need to take over the world. Just have a strong showing in a moderate sized market.
This has reminded me I need to start stopping by on my way home from work.
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