Ash & Elm Cider Co.

Rooted in Tradition. Crafted for Today.

Filtering by Tag: Indiana

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!

Where Will We Get Our Apples?

A lot of people ask us where we’ll get our apples from. When we started working on this project a year ago, our plan was to work with local orchards to source apples for our cider. We met with an old friend whose family owns an apple orchard, and she dropped some wisdom on us that was a bit surprising: Indiana sells all the apples they grow, and in fact, we have to import apples from Washington state and China just to supply everyone with enough apples to eat! In other words, while we have several orchards sprinkled throughout the state, we don’t come close to having enough extras laying around to fuel a large cider company.

Another issue: the great majority of apples grown in Indiana are considered dessert apples - the kind you can pick up and eat or use to make an apple pie. Historically, those aren’t the kinds of apples that are used in traditional cider-making. Now, lots of cideries in the States use dessert apples to make their cider. We plan to, too, for a lot of our products. But having traditional cider apples available can bring a complexity to cider that is hard to get with dessert apples alone. Can’t we have both?

Luckily, our friendly neighbor to the north, Michigan, is an apple powerhouse. They are usually tied for second place in the nation with New York (behind Washington) in apple production in the States, and they also have the infrastructure to package, store, and ship their apples. They have a seemingly endless supply of dessert apples, but they also have a lot of folks growing traditional cider apples as well plenty of apples that are good for cider-making as well as eating, like Northern Spy, Jonagold and Gold Rush.

So, what’s our plan? For the majority of our ciders, we’ll ship juice down from Michigan. We can get different blends to fit with the style of cider we’re making and get a good mix of sweet, tart, and bitter to make a flavorful cider with a lot of complexity.

We’ll also work with those Indiana orchards as much as possible. The busy season for apple orchards usually runs from Labor Day weekend through Thanksgiving, but come December 1st, people aren’t thinking about apples anymore. Unfortunately, plenty of apples are still on trees in December, so orchards end up pressing the juice to stock their shelves throughout the winter or having an excess of apples that they can’t sell. This is where we hope to come in and help them extend their growing season by buying up those late winter apples so that we can showcase the orchards around the state and make a truly local cider. We can’t wait to share it with you!

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