New venture starts off on the right foot with a clear business plan, careful planning, and good hires.
Note to readers: This Q&A is part of a series of peer interviews from The Equipped Brewer. Twice-monthly installments will share the key experiences, lessons learned, and advice of owners, operators, and other key contacts at young craft beverage companies as they’ve tackled the challenges of growth.
In this installment, we continue our interview with owners/operators Gregg Wigen and Chris Sherman of Muddy Creek Brewery in Butte, Montana. Muddy Creek not only opened its taproom doors in March of this year, but it also began full brew production in February after many years of dreaming and preparation.
In Part 1 of this Q&A series, we found out how Wigen and Sherman started out in the business. In Part 2, the pair discusses how they set up their business for success.
What motivated you to open a taproom? And why now?
Gregg Wigen: Frankly, the way Montana laws regarding sales and self-distribution are arranged at our size a taproom is the best way for the brewery to produce income. Unlike a tavern or pub, breweries have a massive up-front investment for manufacturing equipment. Furthermore breweries have on-going costs associated with materials and labor in order to produce products of course. A tavern merely needs a bar, tables, chairs, and glasses.
Inside Muddy Creek Brewery taproom.
A brewery our size uses taproom sales to produce some revenue in order to meet regular ongoing costs. Additional income can be made through distribution, but when you’re very small that obviously doesn’t amount to much. Later when the brewery is established and has a large number of accounts, distributors are absolutely vital. The brewery can’t begin to handle the volume and hassle of dealing with all the clients who need their beer.
Once you decided to open a taproom, where did you find information you needed to proceed and execute on the plan? How did you determine which equipment and supplies you would need?
Chris Sherman: We talked with the state. We spent a great deal of time on the phone and doing research in order to determine what was necessary. The state keeps detailed records of how much beer is sold through taprooms in order to assess taxes on each brewery. After obtaining this data, we compiled it into a database so we could analyze sales projections based on breweries-per-capita in specific markets.
After extensive research, Muddy Creek owners set up operations according to projected sales.
Another key factor for our situation was determining the impact on sales for existing breweries based on new breweries opening up in local market. Surprisingly, we found that every time a brewery opened its doors in a market, all breweries in the market saw a boost in production and sales. It seems that as more breweries enter a market, the more the culture around them embraces an appreciation of craft-beer. Based on the figures in the above study, the business justification for opening a brewery in our market was undeniably solid.
How were you able to finance your taproom?
CS: Currently, breweries are a fairly safe bet for banks. And, if you have a well-thought-out business plan with the right people in place to run the brewery, financing is fairly easy to obtain. Honestly, there was nothing difficult in dealing with our bank since we had already done our homework. I supposed the most difficult part aside from writing a good business plan was be making decisions on what assets each owner wanted to use to collateralize the loan. The bank did all the legwork and made this business loan one of the easiest financing transactions I (Chris) had ever dealt with. With such an easy banking situation, we didn't have to have any other outside investors.
What have been the biggest challenges opening your taproom?
CS: We have good relationships with the other breweries in our area. And, we owe a great deal of our startup expectations to those friends that answered all of our questions honestly and openly. For the taproom, I (Chris) asked a lot of questions about taproom processes and supplies:
- What do we need?
- How many do we need of each supply?
- How much merchandise should we stock?
- What processes made the taproom operation easier for servers behind the bar, closing procedures, opening procedures, daily processes, weekly processes, monthly processes, etc.?
The point is that every taproom operates a little differently, but most of the procedures in all taprooms are basically the same. It was important to find out what works well rather than focusing on what doesn’t work. Because we asked lots of questions, there were no significant surprises when opening the taproom.
For taproom staffing, we did not advertise positions. We hired people we’ve known for years because having people you know and trust working the taproom is critical to business success. There are many scams the staff can run to rip off the business. Buy the books on this topic and read up on it.
Another item to note is that procedure lists (checklists) are very important. Don’t leave any processes or procedures in the taproom in doubt. Have checklists in place so processes are consistently carried out.
What has been the best part of opening the taproom?
CS: As an owner, the best part is seeing the taproom do what it was designed to do —provide a great experience for customers. Beyond that, I love to see the staff enjoying their jobs as well as customers enjoying a product we created, the atmosphere of the taproom, and the conversations they have there with family, friends, and staff.
Of course, a couple of the natural benefits of successfully doing all that is a good revenue stream and good community reputation.
Customers packed the Muddy Creek Brewery taproom on opening night.
What lessons did you learn in this process?
CS: We learned that gearing up to brew beer on a large scale is an expensive and complex undertaking. While the general principles of home brewing are the same, the detailed process is quite different when dealing with industrial equipment and massive quantities of energy (heat energy in the brewing process).
Advice: Customer satisfaction is king in the taproom. Make sure the staff has the talents to make customers happy while representing the company well.
Advice: Aside from the brewery, the taproom is essentially an entire business unto itself. In the brewery, you manufacture a product. The taproom on the other hand is a service entity. For most breweries, it would be a wise move to treat the taproom as a separate business that requires personnel with a flair for serving drinks and excellent people skills.
Advice: Acoustics! Conversing with people inside most taprooms these days is like screaming at each other inside a tin can. Do what you can to make conversation easy in the taproom — acoustically treat the room to take the echo out.
How is business so far?
CS: Business is great! Because of our very good products, a well thought out business plan, and implementing a very on-purpose taproom, things are going as we expected they would. As other breweries open up, we expect a temporary dip in business. But in general, we expect business to grow steadily.