Small Business and Franchise Success Stories

Small business irony at its best: Including the word “Dry” in the name of your small business when you open the first distillery in Washington since prohibition.

Although the connotation wasn’t lost on entrepreneurs Don Poffenroth and Kent Fleischmann, founders of Dry Fly Distilling, Inc., the company’s name actually stems from their shared love of fly fishing.

These entrepreneurs didn’t come up dry in terms of their success: Their first whiskey release sold out in ninety minutes. After just three years Dry Fly products are now available in eighteen states and three countries. And to top it off, Dry Fly Distilling won “best vodka” and “double gold medal” awards for its Washington State Wheat Vodka at the recent 2009 San Francisco World Spirit Competition – beating out Grey Goose, Belevedere and more!

Like many entrepreneurs their success was in no way assured, even though the partners had significant business experience. “My business partner Kent Fleischmann and I both were in the food business,” says Don. “I was the director of marketing for a large food company. Kent worked for the food distributor Sysco as Vice President of merchandising and marketing in Minnesota. I think we both hit terminal corporate burnout within about a week of one another.”

Where did their small business dreams start? “I think the business sense you get working for a large corporation is always a good experience,” Don explains. “I think what it does is give you the motivation to get the [heck] out. After awhile my thought process was that if at the end of the day everything sucks, it’s because I made it suck. But if everything’s great, it’s because I made it great. The only way to accomplish that is to start your own business.”

The old fly fishing friends spent a lot of time on the river together hashing out what they wanted to do with the rest of their lives. “I came up with this idea,” says Don, “since I used to be involved with a brewery in Montana. I initially looked at that business, and when I started to look into brewing I was led to check out distilling by some of the vendors I had worked with. That’s where the idea for distilling started.”

After further research Don put together a business plan, ran it by Kent, and asked if he wanted to be an investor. “Instead of just investing,” Don says, “Kent said, ‘Why don’t I just do it with you?’ The rest is history.”

While Kent was excited by the small business opportunity, Don’s wife was more sceptical. “I’d worked for a company for nineteen years,” says Don, “and was earning a great six-figure salary, and there I am telling her I want to take a 70% cut in pay... to make booze.”

“She pretty much said I was on drugs. But she still supported it.”

Plans in place, the two entrepreneurs still faced two significant hurdles. First, they needed small business financing. Distilling is a capital intensive industry due to the equipment and resources necessary. The partners sought help from Guidant Financial Group. Instead of traditional small business financing, they learned they could invest their IRA or 401(k) in their business without taking a taxable distribution or incurring penalties. They loved the idea of investing outside the stock market into a small business they controlled. Those assets created the bulk of their start-up capital. They also tapped personal savings, were able to obtain a working line of credit with a local bank, and borrowed a small sum from one outside investor who, due to their rapid success, will be repaid in the near future. “We started out lean,” says Don, “But we were still able to make some capital expenditures that allow us operate with minimal staffing.”

Small business financing in hand, the entrepreneurs faced one other major challenge: while each had significant experience in the food services industry, neither had a background in the distilling industry. For example, Don had worked for the same company his entire career, starting out in local sales, advancing to a regional position, until finally taking over marketing responsibility for North America. Yet neither felt inexperience would stand in the way of success.

“Our history is in marketing,” says Don, “which in this business is crucial. Remember, we’re dealing with an industry that has a lot of old, established brands, which makes it prime for small niche manufactures to get in and carve a nice little piece of business. For the most part everything has been the same in the liquor business for the last 100 years. We felt a small manufacturer could create products the large guys can’t and build a great [small] business.”

To gain the knowledge they needed, the small business owners studied with Kris Berglund at Michigan State University and trained in distillery operation with Alexander Plank and Nick Haase of Christian Carl Distilleries in Germany. Their learning curve was steep but their success curve was equally steep: Starting with premium vodka and gin – and an array of branded shirts, hats, shot glasses, and playing cards – and expanding their product line to include premium whiskey has helped fuel a 100% small business growth rate.

“We’ve grown a lot,” says Don, “But we haven’t needed to grow our employee base. We’ll make 6,000 cases with just three employees – including Kent and me.” Instead of adding employees Dry Fly uses volunteers to bottle their alcohol; by creating a fun social experience the invitation-only Saturday bottling events have been fully booked through March 2010.

The two entrepreneurs use a “divide and conquer” method to run the business the rest of the time. Kent runs the sales and marketing side and spends time with customers while Don takes care of production.

So what were the entrepreneurs’ biggest concerns when they started their small business? The same as any new business owner has. Don explains, “Our biggest fears at the beginning were, ‘Can we make a product the market is going to come to? Can we compete? Do we have enough knowledge to run a small business and make it work?’

“I think were lucky enough to have a product that gained great acceptance out of the gate, and when we won some national and international awards for our products, that sure helped.”

“In the beginning we had to beg for distribution, but now we’ve reached the point where we can control our own distribution and choose where to and not go,” Don continues. “Now that we have enough national exposure distributors are coming to us. And we’ve learned to manage the business – it wasn’t always easy, and we definitely had some lean times, but I think that’s all part of the adventure. If everything goes perfectly you don’t learn what being a small business owner is all about.”

Don also offers advice for potential entrepreneurs who dream of starting or buying a small business. “I’m a voracious planner so I think detail planning to the nth degree is really important. Having a [small] business plan that creates a blueprint for what you actually plan on doing is an important aspect. Then I think you just have to have what I call “entrepreneurial blindness” where you’re all in, you’re going, and failure is not an option.”

Speaking of planning, Don and Kent follow a simple growth strategy. “We manage new opportunities by working them into our manufacturing plans to ensure we take care of our customers, stay creative in the marketplace, and build our brand. That’s what we’re all about.”

And Don’s wife? “You know, now she probably thinks I’m brilliant (for starting the business),” he says,” but three years ago when we started that probably wasn’t the case.”


Post a Comment