Chapter 2: Financing and Real Estate

In this Chapter

  • Breweries Don’t Grow On Trees or, Uhh, Something
  • Everybody’s A Liar-And That’s the Truth
  • A Handshake Isn’t Worth the Paper It’s Written On
  • On the Other Hand…
  • Do Your Homework or You’ll Pay Your Lawyer to Teach You
  • Money Isn’t Everything, But It Sure Beats What Comes In Second
  • People Are Very Protective of Their Money
  • Money Talks, But Bullshit Talks Even Louder
  • If It’s Such A Great Idea, How Come You Thought of It?

Breweries Don’t Grow On Trees or, Uhh, Something

The further we progress with this project, the more we realize the logistical, physical, mental, emotional and psychic demands starting a brewery requires. Even if you have all the cash up front (which we didn’t), it’s still a difficult process. It’s really easy to criticize any brewery’s product, but the founders went through a heck of a lot to get up and running and they deserve credit for that. So when you meet someone who has opened a brewery and makes great beer, bow down and kiss his/her feet. Well…maybe just offer a hearty handshake.

Everybody’s A Liar-And That’s the Truth

It may sound cold-hearted and cynical, but better to be pleasantly surprised than unpleasantly ripped off. When you live and breathe a project every day, it’s a nice respite to find a soul who states that he or she has the building/money/investors you need. But you really have to train yourself to step back and ask what’s in it for them. Very few people are going to help you out for the sake of basic human kindness. As long as you realize that they have their own agenda and are putting the best spin on what they’re telling you (which is exactly what we’re all doing, too), both of you can proceed to have a productive, professional relationship. Heed the words of B.B. King: “Nobody loves me but my mother and she might be jivin’ too.”

A Handshake Isn’t Worth the Paper It’s Written On

Even the most skeptical among us don’t like to be on guard all the time, but…always get everything in writing. We’re fortunate that our landlord has a reputation of being a straight-arrow man-of-his-word type. So I was not about to nitpick a couple of slightly vague points of our lease, until our attorney in his “doom and gloom” mode, pointed out that if something happened to our landlord, his successor may not be so much on the level. Which would leave us locked into a vaguely worded long-term lease that would probably generate some precisely itemized legal fees. Get answers to all your questions up front and in writing. It’s not fun, it’s not comfortable, but it’s business. This way, when a SCUD missile crashes into your parking lot, everyone knows who’s responsible for what.

On the Other Hand…

Our same “gloom and doom” attorney said that there’s no better situation than when people can resolve problems with a handshake agreement and that’s how you should always approach things. It’s a fine line between protecting your interests, yet keeping things somewhat casual. We solved it by blaming all the nitpicking on the lawyers and maintaining a friendly relationship with the landlord. It worked.

Do Your Homework or You’ll Pay Your Lawyer to Teach You

Whether you’re raising money or negotiating a lease, do your homework. Learn the basics of securities regulations and how they apply to your proposed offering. Learn what stuff you’ll be putting down the drain so you’ll be able to talk about the environmental portions of your lease. If your lawyer is a good one, he or she will be happy to explain it all to you in minute detail. Of course, nobody works for free (except fledgling entrepreneurs).

Money Isn’t Everything, But It Sure Beats What Comes In Second

This is a capital-intensive business. The days of starting on a shoestring are pretty much gone. People are still doing it, but they’ll be the first to feel the pressure in the event of any economic downturn. Don’t underestimate your capital needs or you’ll be playing a game of catch-up that might never end.

People Are Very Protective of Their Money

…and they will say all kinds of things to avoid giving some of it to you, gosh, even after they said they were very , maybe even extremely, interested. Some real life examples, all beginning with, “We’d love to, but”: “you’re asking for too much,” “you’re asking for too little,” “my accountant said…,” “there’s risk!,” “we’re buying a house,” “we’re selling a house,” “the kid/cat/car/other is sick.” Think about it-for most people, investing in a mutual fund is downright daring and here you come, asking them to kick in for something that doesn’t exist yet. The best success we’ve had is with other entrepreneurs who have made money starting a business, know the risks and know the rewards.

Money Talks, But Bullshit Talks Even Louder

A lot of people, enthused about your project, will generously offer to put you in touch with folks who may be potential investors. Some people will follow through, but be prepared for most people to get cold feet. For some folks, talking about money is like talking about sex, so they don’t. Then there are those who like to brag about money and sex, but who come up zero in the action department. Be persistent and pursue these avenues, but just be aware where most of them lead.

If It’s Such A Great Idea, How Come You Thought of It?

You’ve put a lot of work into your brewery project. You did your research, laid out the financial projections, thought about financing, marketing and distribution. In short, you have your act together. So why then, when you present to potential investors do they wonder (aloud), “There really seems to be an opportunity here, (pause) so why hasn’t anyone else done it?”

The best comeback is to say, “Well, when I founded Boston Chicken/Starbucks Coffee/Snapple Ice Tea, yadda, yadda yadda.” Of course, if you didn’t found any of those companies, it’s slightly more difficult. Just smile and graciously and patiently explain, that this is exactly why there’s an opportunity. At the same time you need to throw sand in the wheels that start turning in the prospect’s head as he/she thinks “Hmmm, if this character can do it, why can’t I and keep all the profits.”

So you say, “Of course because it takes so long to get one of these projects started we have the advantage of having a several-month head start on anybody who today may be thinking of jumping into the industry.”

After that, you’re on your own. This question doesn’t make or break a deal, but it is certainly one that will keep your life interesting-and your stomach churning.