A Guide for Starting a Winery Business

Starting a winery business will require you to be determined and highly passionate about your craft. Owning a vineyard may seem fun, and it very well can be. However, it also takes a ton of work, and the wine industry is much more challenging than many people assume. If you are up for the challenge and ready to get your ventures up and running, you will need to at least know some basics to get started. Be patient with the process and yourself. Here are some steps you can follow to help you kick off your winery business.

Choose a Name and Business Entity

First and foremost, you should come up with a name for your business as well as an entity. Make sure that the name has not already been used by any other winery, as that will be an issue when it comes time to sell your wine since names can go a long way with branding. It is important that your wine stands out and is memorable. You can check the name availability and reserve your name online with the state's secretary of state's office. The domain name you choose should also be available to create a website and social accounts. Next, you will need to figure out your business entity. There are many options available. However, a limited liability company is advised. It offers specific protections individuals do not always qualify for and can allow you to be taxed either as a sole proprietor or corporation.

Establish your Business Plan

Thorough research on industry and competition should be done to start writing your business plan. Begin by writing a summary of the business. The other components of a business plan may include but are not limited to:

• A company overview
• Market analysis
• Future product details
• Financial projections

There are business plan templates available online, or you can come up with your own. The goal is to be comprehensive and include a significant amount of research. Make sure to update the document as your company grows and your goals change.

Understand and Follow Compliances

Licensing and permits can seem quite complex, as this industry is heavily regulated. Even wine-compliance companies are dedicated to helping winemakers navigate local and federal wine regulations. First, you must apply for and acquire a permit to legally operate your winery, then register your business with the FDA, comply with local and state laws. Your wine labels even have to be approved by the Alcohol and Tobacco Tax and Trade Bureau. If you’re selling nationally, you will need to consider each state's laws about direct shipment. Make sure to keep track of your state’s excise and sales taxes on wine as well. Consider consulting a lawyer with expertise in the winery field to help you keep all your compliances under wraps.

Budgeting for the Expenses

Now you will want to create your business budget. In your first year alone, you'll need to invest some serious capital into your wine business, much of which is non-negotiable to be successful. While the expenses are never-ending, most of the investment will be put into establishing the vineyard's infrastructure and operations within the first two years of business. Wine business startup costs to consider:

• Land
• Equipment (refrigeration, cellar equipment, winery buildings, trucks, and receiving equipment)
• Vines
• Fermentation and storage
• Cooperage
• Bottling line
• Office
• Tasting room

Other costs to consider that are more of an ongoing expense include payroll for your staff, shipping, marketing, and winery insurance.

Gather the Funding

Most aspiring vintners need to seek out external funding to get their business off the ground. It is often tricky for new businesses to secure debt-based small-business loans, so initial funding generally comes from equity financing, friends and family loans, and bootstrapping. Regardless of which type of loan you apply for, you'll have the best chances of approval with a high personal credit score, profitability, time in business, and strong cash flow. Therefore, sometimes people apply for a loan after their first busy season.

Bank loan

If you’re set out to secure a bank loan, you may have more luck at your community bank or credit union, as opposed to a large, national branch. Be prepared to provide a hefty down payment, pay a higher interest rate than usual, and get your vineyard apprised. Due to the industry being considered "risky," potential lenders will want proof that you are financially secure enough to repay the loan, regardless of the business makes it or not. So, lenders will want to look at your personal salary and credit score alongside the business's projected income.

Equipment loan

Most of your entail expenses will be for equipment, so you may need to consider an equipment loan for winemakers. If you qualify, your lender will give you 100% of the equipment costs, which you will repay with interest over time. As a start-up, you may find that you have an easier time qualifying for equipment loans over types of loans. Since the equipment itself acts as collateral, lenders care just as much about the equipment value and the business's financial track record.

A business line of credit

As an agricultural business, vineyards will likely experience seasonal peaks and lows. A business line of credit can be especially helpful to get you through those low times, as you can use it whenever you need and are only asked to pay interest on the funds you use. Most vineyards don't grow all their own grapes, so this will allow you to pull down from your line of credit and purchase grape inventory to add to where you are at in your harvesting.

Business credit card

Winemakers often pay for smaller expenses on business credit cards and carry a large balance when they’re first starting out. To help you manage your initial interest charges, choose a credit card with a long 0% intro APR period so that your balance can be interest-free for the remainder of the introductory period.

About David G. Sayles Insurance Services

At David G. Sayles Insurance Services, we help our clients decide which of these options is best for them based on their current situation and risk factors. Contact us at 1-855-977-1842 or insureme@dsayles.mysites.io for a consultation!