This is the third instalment in my quest to start a gin brand on a shoe-string budget. If you’re just joining us now you should probably read the first two posts: Episode 1: Doing The Research and Episode 2: Creating The Recipe & Branding. It has been almost three months since my last update, mainly because not much has happened. I’m sorry. I don’t really have any excuses, life just got in the way.
This business is something we have been working on part-time while focuses on our main businesses, which means that a week or two could easily go by waiting for us to make a decision. Add to that a variety of legal and admin difficulties and it was the perfect recipe for dragging on and on.
To be honest, this delay has happened with every business I have tried to start. I go in with quite a clear path to market in my mind and assume I can crack it out in just a few weeks. Then a few hiccups are hit, some samples come back bad, I get distracted, whatever and things draw out. Most businesses can theoretically be do done really quickly, but in reality always take longer. I assume I’m not the only one. I always get asked how long does it take to set up an Amazon FBA business. Well you could do it in a month. But in reality it is likely to take 3-6 months.
Everything is always harder than you anticipate. And time goes quick.
Anyway, enough excuses, here is what we have been up to. This is going to be a pretty dry post (pun intended) as most of it is to do with setting up the company and getting all the legals in place.
Because gin and alcohol is a pretty regulated market we decided to form a company from the beginning. This is actually remarkably easy to do in the UK and can all be done online on the government website and costs just £12.
But just because it’s easy doesn’t mean you should do it. Once you have a limited company you are signing yourself up to legally having to submit a variety of accounts every year. Which is a real maze and most people opt to delegate it to a professional and appoint an accountant. Which will cost you about £1,500.
I have quite a lot of experience with running small companies so decided to do it myself for the time being. What is required is pretty boring, but if you’re interested I covered it all in this post:
PIPEHOUSE GIN LIMITED was officially incorporated on 20th November 2017. Woop woop! And thanks to everyone who voted on the name.
Bank Account Set Up
Once we had the company the next step was to set up a bank account to go with it. The best bank account for a small business can change, so check out Money Saving Expert’s best business banking article for the current best. Santander was top but could only be set up if you have 2 or fewer directors. We have four so went for Lloyds which had 18 months free and then a set monthly fee dependant on turnover. I think we’ll end up paying about £6 a month.
The signup process was all very straightforward and done online. But then we had to go into a branch to prove our identities. Yawn. The opening process took about two months due to them losing our IDs. Finally it was open and we received our cards:
It is about ten years since I opened my first company but I still get a thrill seeing something as official as a debit card printed with our company name. How cool is that! Even though we are yet to sell a single thing it still feels like I’m a real important businessman.
Alcohol Wholesale License Acquired
In episode one I did a bunch of research and thought I had found a way to start selling our own gin without needing any licenses. Well although I was theoretically correct, in practice it turned out we needed to get a wholesaling license (AWRS). The distillery we have partnered with to make our gin said that they would only sell to us if we had it, so that was that.
The application was very simple and could be done online. But that was just the beginning, buried on the application page we found this:
As part of the process, we would need to host a site visit, provide a business plan and show letters of intent.
Well we don’t have a site (we are outsourcing everything), or a business plan, or any customers.
It turned out that we could host the site visit at our home, but apart from that there was also very little information on what they wanted to see from the visit. By what criteria were they judging us? There is nothing online but after speaking to a few people who had gone through the process it seemed that government want assurance that:
- You are not going to be part of a supply chain selling alcohol that hasn’t paid its alcohol duty
- You are not going to get into financial difficulties
- You are a real business and not a front for something else
We can tick all those boxes. We put together a business plan with an emphasis on showing how little financial risk there was. And we also did a due diligence document showing our processes and how we are going to make sure we aren’t selling illegal alcohol by accident.
I only really create a business plan when I want to really impress someone. Say potential investors or companies we want to partner with. It is a habit I started many years when I was going to my first meetings at age 22 and trying to overcompensate for being young and immature. When you’re that young it is a struggle to get anyone to take you seriously, so I went the route of overdelivering really impressive business plans.
Back then I came across a bit of software called Bussiness Plan Pro, which I still use today. It’s a wizard that takes you through step by step asking you questions and generates all the nice diagrams and uses all the businessy buzzwords.
When I created my first business plan I had no idea what is meant to be in a business plan or how to write one. This software is a nice crutch to help you through. Now I could probably write one myself but still use it because it speeds things up a lot. Once done it throws it into a word document which you can edit and beautify.
This business plan didn’t need to be investor-worthy but we still wanted it to look the part and prove to the licensing department that this small gin business run by some serious people. The software isn’t cheap (£129.99) and I probably wouldn’t have used it for this small business if I didn’t already own it. Here is the link to our the full business plan in Word, feel free to copy it: Business Plan – Template
On top of the business plan, we also did a due diligence document showing all the research we had done into every step of our supply chain. I won’t post it because there’s quite a bit of sensitive information there, but what we did was:
- Check the AWRS status of all members of the supply chain.
- Check the balance sheet of all members of the supply chain to make sure that they didn’t have unreasonable levels of debt.
- Checked the beneficial owners of all our suppliers to make sure they look legit.
- Put descriptions of the site visit and our findings we did to all suppliers.
- Put together a plan in case one of our suppliers hit financial difficulties (ie find a new supplier).
That all sounds complicated but most can be done easily and for free on the companies house website.
Letters of intent
Letters of intent were a bit more problematic. It’s a chicken or the egg problem, why would someone agree to buy from us if we don’t have a product to sell? But why would we create a product to sell if there’s a chance we could be turned down for the license?
I asked a few people what to do and the advice was mixed. From “just get your friends to write one for you” to “beg local businesses to do one and promise them they don’t actually need to buy any”. Neither of those sat very well with me so in the end we didn’t get any letters of intent. I printed off a few emails from readers of this blog saying they’d buy a few bottles just in case it was needed, but the plan was to just explain to the alcohol people that asking for letters of intent was a stupid requirement for a business at our stage.
The site visit
The site visit went very smoothly. Two people showed up who were both very friendly and actually seemed pretty interested in our business. We went through our business plan and talked about due diligence and making sure that we were compliant. When it came to the letters of intent I said that we didn’t have any and explained my reasoning, the seemed happy enough with that.
A few days later and a couple of days before Christmas we received the email. We are now fully licensed to sell alcohol to other businesses! Booyakasha!
Personal Alcohol License Started
We also decided to get some personal alcohol licenses, that would allow us to sell our gin at markets and places like that. With a personal alcohol license, you can sell alcohol 50 times over the year at venues who don’t have a premises license (50 total with a max of 15 per venue).
To get a personal license you need criminal record check and a relevant licensing qualification.
So Emma and Katie went off and got a BIIAB Level 2. The course cost about £120 each and took one day with a test at the end. They both passed. Now we are just waiting for their criminal checks come back and then they can apply for the license.
Perfecting The Recipe
Although we had landed on a recipe back in episode 2 we have still been tweaking and improving it. Our primary flavours are Earl Grey and Cucumber. The cucumber flavour was pretty straightforward but we were struggling to get the earl grey right.
We wanted the citrus flavours from the bergamot flower, but also the distinctive crispness that you get from a cup of earl grey. All without being too overpowering. We tried a few things, from adding a pot of brewed tea after distilling (which gave a strange yellow tinge to the liquid) to steaming the gin through the bergamot flower (which you couldn’t really taste). In the end, we found a craft tea supplier who makes excellent loose leaf earl grey tea and added it straight to the still. After experimenting with quantities we now have a London Dry gin that is truly unique and delicious. (check episode one for what London Dry means).
As chores go, testing lots of gin variations is a pretty good job!
Logo and Label Design
All of the above sounds incredibly complicated and tiresome. But it is actually the stuff that has gone smoothest. What I assumed would be the easy part, creating a label, is where we have really struggled and what is currently holding us up.
We are selling a premium product and so our design needs to be premium. I am all for just trying to create something ourselves in Paint, but apparently, that doesn’t really cut it. We spent the last couple of months of 2017 contacting design agencies who have done the labels for brands we like to get quotes. Unfortunately, they were all wayyy out of our price range. With quotes starting at £60,000, gulp. You may remember we are trying to start this whole business for under £10,000.
So we decided to take an alternative route and look for freelance designers. 99 Designs* is a crowdsourcing site that lets you host competitions in which freelance designers compete to win your business. They all submit a design, then you pick your favourite (or get a refund if you don’t like any) and then work with them to tweak it. You can get them to design almost anything for you, from websites to packaging to branding and logos.
Warning: there is a money back guarantee but you need to be careful. It is only valid up until you start favouriting or communicating with designers. If you don’t like the designs you get back then submit for a refund without favouriting any.
Initially we went for the cheapest (£229) and although the designs were good they weren’t good enough. But we did find a designer on the site who we thought had potential so after processing the refund we contacted them through 99 Designs* and sent them our brief. I will cost us about £500 and hopefully we will get something really good. That was about a week ago. Let’s see how she gets on!
Another problem we have hit is finding a printer who can make us good quality labels, on good quality paper at a reasonable price with a small minimum order. There are plenty of good printers, but they either charge a huge amount or require a very large order (like 10,000+ labels). That is far too many as there is a good chance we will change and perfect the design as we go. And to make it harder we want copper foiling on our labels which often requires a large set-up cost.
I think we have finally found one with fastlabels.co.uk and are just waiting on samples, fingers crossed. But if you know of any other companies please let me know!
And that is about it. Sorry this post has been so late in coming and that it isn’t more exciting. I am hoping by the next instalment we will be onto the exciting stuff. Selling the gin.
Once we have a label and label printer we will be ready to start producing and selling the gin. The only other thing we need to do is to create a website. And then the marketing can begin.