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An interesting post on ADI that I took a lot from. I've been there done that with the mistakes and this is a good reminder of some things on basic business operations and the pathway to success. I find that as I get older I am starting to delay purchases so I can see if the need is truly there. I've been stuck without cash flow but heavy into assets enough times that I would like to minimize that.
Anyway. Here's the link. I encourage you to look at the discussion as some good comments are made disputing some of his assertions that bear consideration.
I'll cross post it for convenience and discussion of experiences of our guys here.
Post below from Joe Dehner:
It seems to me that we all need to batten down the hatches and pre-pair for the fallout. I feel that the distillery bubble is just about ready to burst. This year (2017) will be by far the biggest year on record of distilleries going out of business. There are many factors why I feel this way bust just to name a few.
Two main reasons to always reflect on.
The battle for Shelf Space, and Operating Capital.
And a couple more.
- To much bourbon. I believe that this is the year that the larger number of distilleries will for the first time be trying to sell there brown spirits. The problem is not there local area it would be everywhere else they are trying to sell the brown juice. The Distilleries will be battling in a marketing game, and that in it self requires MONEY and TIME, and time cost MONEY. To put up all that bourbon cost Money straight out of the operating capital. When product does not move as quickly thought. The R.O.I. Is much greater and the hit is much harder.
- I Deal with people from every corner of the world, in every facet of this industry. I deal with people that have big budgets and small budgets. I am aways blown away when someone just wants to make a little booze and thinks they have got to have a $200,000 dollar still, or pay $75,000 for a 50 gallon pot. The reason for item # 2 is the spending of MONEY in the most stupid ways possible. People don't stop and think that some of the biggest components of equipment are truly the least important. People think the need the biggest and baddest still but forget about the boiler, chiller, mash cooker, ferm tanks, bottles, labels, and all the small things that nickel and dime a start up. Stop and think "how many bottles do I have to make to pay this off".
- Sell out, sell off. One of the biggest mistake someone could make is to sell off the larger part of stock in the company to get to the place they need to be or get the equipment they think they need. When you realize that you are not really the owner and your are more a employee that person cares a little less and gives up quicker. When you work the hours we all do at a distillery and think...."I could be making more money flipping burgers".....how much heart do you have really in it. People have medical problems but I am floored by how many distillers are selling out because of it. I get it no one on earth want to admit "I Failed". So don't sell your soul just to crush your dream.
- This one will be easy. Operating Capital- how many times have you looked around your distillery and saw a piece of equipment that you bought a while back and thought "man, I wish I never bought that" Or "I would like to have the money I spent on that". # 4 = Don't buy stupid Crap. THINK. It comes right out of your Operating Capital.
- Distilleries trying to do something so so different that they Distill there way right out of a business. Think about what you do before you spend the money. I just checked yesterday and let me see, time, grain, water, labels, bottles, and corks still are not cheap. So is it a good idea to have 100 cases of something that won't sell. Please, impress the bank with your massive over stock of junk.
- This one is kinda like # 5. Not listening to your patrons. People that will go out of business are probably bull headed and think "If I make it they will come". Make products that is proven that people like. You don't have to copy, put your own spin. Know what is selling on the markets.
- Getting out in front of the public. You may be making booze, but you are also selling your self / story. You spent all this money on a shiny piece of copper, where is your advertising money? Distilleries have to get out in front on the public doing tasting, and ect. I see a trend of people not doing that as much as is needed.
- Part of # 7. I was in a very top self liquor store today and there was 250 different types of brown spirits. Which one do I choose?
- Battle for shelf space. With the gates opening on distilleries all over the us and more imports coming in, the battle for shelf space has begun. All the money you spent making that rum, whiskey, vodka, ect, will be for nothing if you can't get it on the shelf. Enough said.
Summary-Rough seas ahead. Tighten your belts. I am all ready seeing lots of used NOS everywhere. It used to be when something was put online it was gone in hours. Now it just sits there...
I wish everybody always thoughts. I wish everyone the very best. Let us all be in good SPIRITS in 2017 and the years to follow.