Want to know what has sucked up the most time for us as we worked to build our Cabin? It wasn't raising money. It wasn’t searching for property.
It wasn’t the hours upon hours of tossing and turning in bed in the small hours of the morning, nor shopping for materials for the taproom or dreaming about beer recipes (we wish we had more time for this).
It was writing our business plan. Many, many, many drafts. Hours we spent on this. Hundreds of hours. Late nights. Early mornings. For about three months we wrestled with this. It was all consuming.
It was drilled into us early by those-who-know-best about starting a business (and later proved to be true in our case) that you shouldn’t start a business without a business plan. We heeded this advice and we are glad that we did.
Regardless of your venture, you should be mapping down on paper what you want to do, why you want to do it, how you will do it and – most importantly – how you are going to succeed.
This document is where you articulate your vision for your business. It is your roadmap for where you want to go and how you will get there. It’s something you will keep coming back to, and updating, and referring to. It’s essentially a how-to of your business; it is your play book.
For some ventures, you may get away with a quick one or two-pager, back-of-the-envelope kind of deal. We learned quickly that if you’re starting a brewery, a business plan is not only important to articulate your vision - it is an essential document that you will be required to provide to all manner of people to prove you will be able to do what you say you are going to do.
Consider our experience: The first group that wanted to see our business plan was the team at ATB Financial, who we worked with to secure a Canadian Small Business Financing Loan and a line of credit. They wanted to make sure we would be able to turn a profit and pay back the loan they were giving us. Key to them were our financial projections – would we make money? Were we realistic? They gave us a loan, so I guess the numbers stacked up!
Second was a string of landlords who we had negotiated with on numerous properties (there will be a later blog post about finding a property – one of the toughest things we went through). They too wanted to be assured that we weren’t just a bunch of amateurs with a dream and little else. They don’t care about how much you know about hops or what shades of grey your merchandise is going to be. They want to know that the wide-eyed, bearded newbies with no track record in business about to dig up your floors, rip down your walls and tear holes in your ceiling are going to be able to pay rent on time, every month.
Third were investors. If you are raising money from outside parties like we did (again, there will be another blog post about this process, which was a fascinating task in its own right) they’re going to want to know your vision for success and be sure they are not throwing away their money. A chat over a beer is one thing and may be good enough for some: a formal document that delves into intricate detail is another and is what most investors that are being asked to pony up thousands of dollars will want to see.
Finally, AGLC needs to see a business plan as part the liquor license application. They too want to know what what you are planning is legal and viable with the regulatory framework of Alberta’s liquor laws. They look for flaws in your plan – ways in which you could trip up and run afoul of the law.
As I mentioned, we literally spent hundreds of hours on our business plan. It is 25 pages long. We had it drafted in Google Docs so that we could each make edits simultaneously and see what each other was doing. We’d leave notes or ask questions for the others to ensure we were all comfortable with the content.
In hindsight, armed with what we know now, we could have been more efficient and done things better. But hindsight is wonderful – the reality of starting a business is that you don’t know what you don’t know, and learning what you need to learn takes time.
Based on our experience, here are some quick tips to making sure your business plan is an effective tool in helping guide your business.
Be realistic: This is the most vital step! Inflated forecasts or false expectations won’t cut it and only show that you are in above your head. The bank, landlord and even investors will see through any discrepancies. And really, if you have to inflate anything, do you really want to start that business? Be realistic, which leads to the next point.
Consider every eventuality and focus on the worst case scenario: We went through this exercise before we approached investors, to make sure we had spelled out everything that could go wrong so everyone fully understood the risk. It’s scary, but invaluable. Unless you have considered all eventualities, you really aren’t ready for business.
Create a template and then fill in the gaps: Ours looked something like this:
· Executive summary
· Our brand
· Mission and vision
· Ownership team bios
· Taproom vision
· Measures of Success
· Beer lineup
· Industry analysis
· SWOT analysis
· Production plan
· Sales plan
· Personnel plan
· Brewery construction plan
· Marketing plan
· Growth and expansion plan
· Exit strategy
· Financial plan
· Financial estimates
Get someone who is financially literate involved: We’re not dummies, but we’re not financial geniuses either. That meant that understanding financial forecasting requirements and best practice was a steep learning curve. Every change in cost meant laborious updating of multiple spreadsheets because we were too stupid to link sheets and formulas. We missed critical things that dramatically affected our bottom line, including GST rebates and the ability to carry forward losses. I was chatting to Steve Fawkes, a friend from our homebrew club the Cowtown Yeast Wranglers about our process and he offered to help out by scanning financials and offering advice on how we lay them out in our business plan.
One thing led to another and Steve became an investor and is now Cabin Brewing Company’s financial controller. He makes sure we are spending smartly and tracking every dollar that come and goes. It’s easy for this to get away from you – having a third party as that voice has been critical to our ability to stick to budget. We wish we’d recruited a financial controller from the start.
Seek feedback: We shared our business plan with close to 20 people – friends and associates – and asked them to be hyper-critical and provide hard feedback. Some of it was great. Some of it was brutal. Some of it was unbelievably detailed. One associate gave us 11,396 words of feedback spanning 18 pages! We were told our target market was wrong (we’re pretty sure we have it right based on social media interaction so far), that the beer styles we were focusing on sucked (I guess some people don’t like hoppy beers…) and that our projections were all wrong (to be fair some of them were wildly inaccurate in earlier drafts…).
While we didn’t take everything at face value, we did rewrite our plan dramatically. We simplified complex beer terms that we took for granted, added footnotes and references for any data and facts stated and built out additional sections that spoke to risk mitigation.
Do your homework: Don’t make assumptions about anything and don’t rely solely on what you find online. Get quotes to justify any prices you have - every cost is unique, according to what you want, where you want it and how you want it. We were surprised by the cost of some things and the variance in costs too. For example, we had two quotes for boiler installation that were about $20,000 apart. $20,000! It pays to shop around. We had a general rule of getting at least three quotes for every piece of work.
We started the process believing that we were writing our business plan for someone else – that it was a box to tick. In some ways that is true – as I mentioned earlier, there are lots of people that want to see your plan. But they only want to see certain parts of it – they don’t read every word, and in most cases will simply flip through to the financials at the back.
By the end of the process though, we realized we had written our business plan for ourselves. In our view, it’s not a nice to have; it’s a must have, and remains today a document that we refer to regularly.
A Chinese proverb states that the best time to plant a tree was 20 years; the second best time is now. If you want to start a brewery, you probably should have started writing your business plan a year ago. It’s never too late though; start now, and be prepared to update it often.
What are you waiting for?