Business in the Time of COVID - Part 1

I’m currently sitting on my couch, crying. I’ve been texting with one of our employees, who we had to furlough shortly after Governor Holcomb’s closure of in-person dining for bars and restaurants in Indiana. A couple weeks ago, I let her and a few other key employees know that we would be able to bring them back because we were approved for the Payment Protection Program. But as time passed, the funds didn’t come, and when they finally did, it was less than we were approved for. Since finding out about the fund reduction, I've been kicking myself for mentioning anything about returning to work in the first place. Why did I make promises to people about their livelihoods before all of the details had been clarified? Why, as a business owner, was I regularly frustrated with my previous self for saying too much, promising too much, being too transparent, when it consistently meant I had to come back and say, “Well, actually, things have changed and that’s not really the case any more.” In one of these hard conversations over the years, I told the person that I have a problem of falling in love with people when I talk to them and I want to give them everything in that moment, and instead of thinking it, I say it out loud. It’s a bad trait for a business owner, and a person. When would I learn? 

I finally worked through the self loathing and started to break the news to each person that we actually wouldn’t be bringing them back as soon as we hoped. We had to keep our production staff working, and that plus staffing our bar for limited carryout hours would exhaust the PPP funds. Without a date for reopening on the table, it felt foolhardy to spend more than absolutely necessary right now. She let me know that she’d just gotten her first unemployment check and that she and her family would be fine. And then she thanked me for all the hard work I was putting into trying to do the best thing for our employees and to make sure we’d be there with a good job and steady pay on the other side of the COVID-19 pandemic. That’s when I started crying. She couldn’t know what a relief that was, to know that she could see I cared, even though I was delivering bad news.

As a business owner, I’ve really struggled with decisions that mean choosing between profits and people. I want everyone to make a truly liveable wage, even in an industry where that isn’t the norm. I want to give people raises who work hard and have been loyal to us. I want our employees to get to do work that is meaningful and exciting, even if it isn’t exactly what they were hired to do. But it’s really hard to do that when your company still isn’t making enough of a profit to upgrade needed equipment, for example. It’s really hard to do that when you yourself haven’t taken a salary in 5 years. The most stressful moments of owning a business can all be tied to moments like this. I want to be seen as a competent leader who knows how to navigate the realities of starting a business and who is caring and generous with our employees, but sometimes it is truly the wrong decision if we want to keep operating. 

The COVID-19 pandemic has really brought these kinds of decisions to the fore, with an added layer of uncertainty about the future that is unprecedented and fully out of our control. When the noise about COVID-19 started to pick up in early March, I felt like I was making life-altering decisions on behalf of our employees every day. In early March, before mandated shutdowns were announced, I read articles chastising people for going out to bars. They blamed the people, yes, but they also blamed the bar owners for not shutting down. I have a Master’s in Public Health and a concentration in Epidemiology. I actually know more than the average person about the spread and mitigation of diseases. From that perspective, the answer was clear. But as a business owner, it was murky. Should we shut down? Should we reduce our hours? Is it fair to ask an employee to deal with the public, even if I wouldn’t be comfortable doing so myself? Is it fair to tell someone we’re prematurely closing and effectively fire them, even though other bars and restaurants in our city are staying open until the bitter end? They have kids, and bills, and they want to keep working. How do I, a measly person who opened a small business a few years ago, have this kind of power over someone else’s life? 

So far, all of our staff understands that the circumstances we’re under aren’t normal; of course we wouldn’t have chosen to have a pandemic just as our business was starting to really take off and make some important strides. They’ve been kind and understanding about how complex and difficult these choices are, and graceful when we’ve had to give them bad news. I wouldn’t wish this situation on others, but the silver lining, at least for me in the present moment, is a renewed gratitude for our team, our customers, and our friends who have been so kind even in the midst of their own stresses. 

This wasn’t really the COVID-19 blog I set out to write, and I hope to do another one that’s a little more objective and business-focused, but this is the blog that came out of me today. Thanks to everyone who has supported us over the last 6 weeks, especially our employees who keep showing up to work and have thanked me for a continuing paycheck, and those who have stayed away and reassured me that they will be happy to return once we are ready. It has been one of the few things keeping me from losing it and I can’t be more grateful, no matter what the future holds.  

Starting a Business = Being a Circus Performer

You know the guy at the circus who somehow manages to spin multiple different plates on his fingers, nose, kneecap, and elbow all at the same time? That might be the best metaphor for small business startups that I can imagine. I’ve realized that, though my previous jobs have been in some ways multi-faceted, the scope of those job descriptions are nowhere near as varied as what we’re dealing with now as we get our business off the ground. Luckily, I spent two years in clown college, so everything is going okay. Here are our current spinning plates (cue Radiohead soundtrack):

The Law – Not a plate you want to drop. Federally speaking, we finally received our Federal Alcohol Permit from the TTB at the beginning of December. That was an awesome day, and I think we celebrated by sending a series of emoji-laden texts back and forth for several hours. Our state Alcohol and Tobacco Commission permit is under review at the moment, and once we receive that, we can actually produce and sell cider legally! As soon as that paper comes back, we start our first large(r)-scale test batch on-site.

The Finances – Closing on loans, securing the last bit of private investor money, making sure our budget is on track, trying to anticipate money-pits in advance…fincances are another set of plates that can’t be dropped. The reality is that there are probably about 20 finance plates going at once, and we already know some will drop, but which ones, and when, and can we maybe catch them before they hit the ground? This keeps me up at night.

The Product – The product keeps Aaron up at night. We have our suppliers, we know what equipment we’re going to use, we have great recipes that we’ve made dozens of times on a small scale, but will it all come together when we’re using new equipment in a new environment? We’ve had great reception when we’ve shared our ciders at events over the last year, but everyone loves free alcohol! Will people actually leave their house, drive to our tasting room or to a bar with dozens of beverage options, choose ours, and pay for it?

The Facility – Some pieces of equipment have a six-month lead time. Others you can go buy at Lowes. The rest fall somewhere in the middle. We don’t need all of our equipment to get started, but will need it eventually, so when should we order it, and in what order? Plus, the building is under construction. What if the tanks we ordered in July ship before the new concrete floor has been poured? Where will we put them? Does it really matter if our cinder-block walls are cleaned and painted? Does it $4,000 matter? Should the ADA bathroom go here or there? What grade of insulation do we need, and what grit of epoxy should we put on the floor? Stainless steel floor drains, right? How do we get a sign on the door? Should we get barstools with backs or without? And where will we put the purse hooks (purse hooks matter a lot to women at bars)?! Honestly I could go on forever with the kinds of minute decisions that need to be made Every. Single. Day. I have a whole new respect for anyone who opens a brick and mortar anything.

The Nameless Plate – “I KNOW I’M FORGETTING SOMETHING HUGE BUT WHAT IS IT?!” – me, almost every minute of every day.

So there’s a bit of insight into our lives at the moment. It sounds fear-laden, but it isn’t. It’s invigorating, with a tiny bit of fear and a pretty large dash of manic energy mixed in. And neither of us could be happier.

PS, I didn’t actually go to clown college.

How do you Finance a Craft Cidery?

Finances are a tricky thing. Talking about money is generally considered poor manners, and asking other people to give you money is straight uncomfortable, but if you want to start a business, you’re going to need some cash. There are a few ways to finance your business, including funding it yourself, bringing in investors, or taking out loans, and there are plusses and minuses to each option. Here’s a brief rundown of our thoughts and experiences with each of them.

Self-Funded - If you fund a business yourself, you have to either be wealthy, or you have to start on a small scale. This is especially true in the brewing/fermenting industry. While it’s possible to start on a shoe-string budget, you’d still need upwards of a couple hundred thousand dollars to be on the safe side. The amount of capital equipment you need to get started is expensive, and for the permitting process to even begin, you have to have a signed lease, meaning fronting at least 6 months of rent before you can make your first sale (unless you have a real estate agent who makes some good negotiations on your behalf). If you can manage to fund your business yourself, your growth can only occur by reinvesting your profits into the business. But one of the down sides of starting small is that you can only sell what you can make, and with small equipment, you probably won’t be able to make enough to grow quickly.

Pros: You own 100% of the business, and it’s a much less risky venture than the other options – in some ways! It might not feel less risky to put your life savings into a business, but at least if things go south, no creditors will come looking for you.

Cons: You’ll only be able to start as big as you can afford, and in this industry, that won’t be very big. Growth will be slow and there’s no room for error.

Investor-Funded – If you can’t finance the whole thing yourself, another option is to bring in investors who get a percentage of ownership of your business for the funds they give you. If you’re well-connected to people with both wealth and an entrepreneurial spirit, raising your funds this way can be relatively quick. If you aren’t, it may take a while to reach your target. Luckily, with the rise of successful craft breweries in Indianapolis, investors around here are familiar with the model and in some cases, are itching to get involved.

Pros: You’ll have more funds to get started, and it takes money to make money. You may also benefit from the networks of business contacts, accounting, legal services, etc. your investors bring to the table. In some cases, they can even act as a board of advisors.

Cons: You own less of your company, and someday when you hit it big, you only get a percentage of your earnings. If you don’t maintain majority ownership you could also run into conflict, or in the worst case, be cut out of the management of your company by the other owners.

Debt-Funded – Getting a loan to start your business is a feasible way to raise money, but in today’s climate, small-business loans are fewer and farther between than they have been in the past. Plus, with debt comes interest and repayment terms. One the plus side, the equipment needed for your business has a great re-sale value, which makes a loan a lot less risky from a bank’s perspective. If things go bad and you have to go out of business, you can sell all of your equipment for close to what you paid for it and may be able to walk away cleanly.

Pros: You don’t give away any equity in your business when you take out a loan, so you still own 100%. Banks can also be good partners for the future of your business, so establishing this relationship will help when you want to fund future expansion or get a line of credit opened.

Cons: Making debt repayments early-on, especially as you’re just getting started, can be a tough pill to swallow if you aren’t meeting your sales projections, and defaulting on a loan is scary business.

So what are we doing? Well…all three of course! We put a chunk of our own savings into the business to get things off the ground at the very beginning. We were able to cover the costs of hiring a graphic designer, a legal team, some expanded equipment for testing our recipes, and a fair amount of research and development (traveling to visit cideries and attend conferences). We have some investors on board who believe in our business and also see an opportunity to get a good return on their investment. Finally, we are working with lenders who think we’ll be a good addition to their portfolio.

We’re about 85% of the way funded now, which is happening at just the right time to take this show on the road.

The business side of small business ownership may not be as fascinating to everyone else as it is to us, but we’ve found it to be a constant and rewarding learning experience. If you enjoy learning about business startups, here are a few of the resources we've found valuable:

•  StartUp Podcast -  This podcast follows the ups and downs of starting a business.
• SCORE - A branch of the Small Business Association pairs retired former business executives with new business owners. Our SCORE mentor has been a huge help to us.
• Indy Chamber - The Indianapolis chapter of the Chamber of Commerce provides business support as well as networking opportunities with other business owners in the city. 

Here’s to getting fully-funded in the near future and to entrepreneurship!