Day 524

It’s still all about hiring people in Human Resources. First the application, then the first interviews to weed out the people who didn’t read the ad, possibly some sort of test to ensure the remaining applicants actually know what they are talking about–apparently a test increases the chances of picking a qualified candidate by 50% to 60%–then final interviews by the supervisor to actually pick one of the final candidates, reference checks and finally a decision. Pretty straightforward.

In Brewing Industry, Jason Fisher wanted to talk to us about competitive advantage. What is the thing that will give us an edge in a crowded marketplace? Price? Location? Energy? Authenticity? Brand? Style of beer? Partnerships?

How can you tell if one of these should be the important factor in your business? Well, for one thing, someone has probably already tried it. Look around, see who was successful  (and who wasn’t.) Don’t try to re-invent the wheel–emulate the success story. Jason quoted Steve Jobs quoting Pablo Picasso: “Good artists copy, great artists steal.”

But before you decide what you are going to make your competitive edge, find out if anyone cares. Suppose you’re going to be the first brewery in Ableville. You market yourself as “the first brewery in Ableville!” (Ta-dahh!) Do people in Ableville really care? What happens if a second brewery moves in? Get out into Ableville and poll some potential customers: Do they care whether you’re the first brewery there? Is that why they would buy your beer? If they say yes, then being first will give you a competitive edge over the second brewery. If they say no, you’d better start looking for a different competitive edge.

Price is often the first competitive edge companies think of, but it can also be the most vulnerable–all it takes is for one other brewery to underprice you, and there goes your edge.

Brand is another tricky one because it requires total commitment. If you’ve decided you are going to be the weirdest brewery with the weirdest beers, you will have to fulfill that branding each and every day. If you ever do anything ordinary–or brew anything ordinary–you’ve just destroyed your brand.

Jason also gave us another useful tip: when you are testing your business model–running some assumptions on potential production, sales, cost of goods sold and fixed costs through a spreadsheet to see if your business will soar or plummet–many entrepreneurs believe their own hype. They start with the assumption that, for instance, they can sell to 10% of the bars in the area. They run those numbers through the spreadsheet, make a few adjustments, and voila! They have a viable business model. That’s the top-down approach. Don’t do that.

The bottom-up approach simply addresses reality: the day you open your doors for business, you are going to have no sales accounts. So between making some beer, fixing the boiler that wasn’t installed right, painting the office and phoning to find out where your yeast shipment is, maybe you’ll also convince two bar owners to buy a keg each by the end of the first week (and then maybe one of them phones back and changes his mind). Maybe you’ll add two more accounts the second week. And maybe another two the third week. Okay, plug THOSE figures into your spreadsheet and see what bank balance rattles out the far end. It’s guaranteed that the number you produced using bottom-up assumptions will bear little relationship to the figure you produced from your top-down assumptions.

So okay, you may not want to present that exact bottom-up figure to potential investors–perhaps you can be a bit more optimistic during your pitch. But keep it in mind. You, the owner, should have a realistic idea of where you’re headed, and what it will take to soar rather than plummet.



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3 Comments on “Day 524”

  1. Interesting to read your post as I am brewing my very first homebrew as we… write, and am testing the waters for a fermented foods dish. Do you have a name for your brewery yet? An approximate date when you’ll be opening your doors? Love being able to support small breweries with a zappos-style approach to their customers and its product.

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