How to start a winery

DFN: Insightful information about the wine business and generally applicable to starting any business.

How to Start a Winery
3 simple steps to be a winning vintner
Fri, 12/11/2009 – 11:43 am
http://www.mademan.com/how-start-winery

Considering breaking out of the office rat race and heading into business for yourself? Why not start a winery? If you tour fertile valleys in California and Washington, you’ll run across plenty of small boutique wineries. You’ll likely even get to meet the owners, at which time you’ll think, “If these schmucks can do it, why can’t I?” Here are the steps you need to take to get started.

Define the type of winery you want

Consider your winery business. Will you be growing your grapes or purchasing them? Obviously, growing your own grapes, requires the land to do so, along with some farming expertise. Such a location is referred to as an Estate Vineyard or Estate Winery. This option also affords you a great deal more control over your business, as you are ultimately responsible for the quality, supply and type of grape. Location of your business is very key. You’ll be looking for an area with good soil and adequate water. Your grapes need a climate with high and low temperatures. Ideally, the pests in the area will be manageable and the land will be close to utilities. To keep your land purchase costs down, and avoid competition, consider markets less served by wineries (ie go to Idaho or Montana and stay away from California).

Be ready to pay, $6k-$15k per acre, and wait, for your grapes, as vines generally require 3-5 years to mature and produce a usable product, according to the Arizona Wine Growers Association. For any business, the SBA recommends starting small, thus purchasing grapes will be the quickest method to get your wine to your customers. This will allow you to establish your business and brand while your own crops readies. Research the quality of local growers and look into the terms of contracts they offer. You could learn a bit about farming from your relationship with the grape producer as well.

Make a business plan

After you get a sense of the commitment (time and money), necessary, you must outline your company. Creating a business plan accomplishes two goals. First, it will force you to spend time truly researching and detailing your winery – organizational structure, marketing, distribution, staffing, financial info, etc. Second, the plan will be used to convince banks and/or investors that you are a great place for their money. Think about your cheap uncle, the banker; he is the one you want to try to impress. If you are winning over people you know to be skeptical, that is a sign of a good plan. In the book “Small Business Management,” Michael Ames writes that a lack of money is one of the most common reasons for failure. You may need to convince a number of sources to ensure you have adequate funds.

Find your niche

While formulating your plan, consider what wine market you intend to serve. Will you be producing premium or economically priced products? Research your intended geography to see what the area(s) demands or is currently missing. Talk to restaurant owners and get to know distributors. Both of these groups will be vital to the success of your winery. Restaurants can request wines they enjoy from distributors and distributors will carry wines they believe will make them money. Learn about your state’s alcohol laws. Most states differ, some wildly, from each other (another terrible hangover from prohibition). This is also key to understand if you plan to sell into multiple states.

With a pile of grapes in one hand, and cash in the other, begin putting the pieces together. Secure your land and equipment. Let your target market know you are in business and will be serving them soon. Also, ask for help. Dogfish Head Brewing Company owner Sam Calignone mentions in his book, “Brewing up a Business,” that although he understood he could make beer that people would love, he lacked other business skills. To solve this issue, he formed a board to assist with important decisions concerning the company. If you know all about wine, but nothing about agriculture, you’ll need to seek out an expert. Maybe you have the business licked, but must hire a top winemaker. This is not an admission of inferiority, but rather a savvy business practice that will lead to the sale of many cases of vino. Go now, find that fertile frontier.

Of course, it is best not to call your boss during such a vacation, shortly after an extended tasting, and declare your independence. Head back to the office, and mull a few things over first.

The Small Business Administration (SBA) reports that about 70 percent of firms last two years, about half make it to year 5. Assuming you do not want to shamefully beg for your job back, you’ll want to weigh your chance of success. Once you realize that owning a business does not necessarily equate to working whenever you want, do you have the desire to put in long hours? Are you willing or able to sacrifice income if you must. The SBA warns of such situations. Not afraid? Cheers!

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