The first mistake this brewery founder made was not fully understanding the state licensing requirements for his business model and the premises contiguity requirement for the licensed premises. Essentially, this business owner signed a lease on two spaces separated by a common hallway, spent $80,000 in a buildout, and was then subsequently denied a state brewpub license because the two leased spaces were not contiguous.
The second mistake made was that he did not perform a zoning ordinance and code review of the second location chosen after the first space was unable to be permitted. In this second situation, while state law allowed on premises sales at a licensed brewery, a local ordinance required a certain percentage of sales to be derived from the sale of food in a non-industrially zoned area. However, in this instance, the brewery was fortunate that the local municipality was willing to walk it through the conditional use process … though this “mistake” still cost the brewery $75,000 and took 18 months to resolve.
Both of these situations illuminate a multitude of issues that any new business could potentially face. However, it’s important to note that, fundamentally, both could have been avoided, and for less than a few hundred dollars, had this business owner consulted with a subject matter expert. The reality is, this brewery (really its investors) expended six figures on “mistakes” – and had those been avoided, it could have instead invested those very funds into aspects of the business that would have worked for them by generating revenue and long-term value.
Unfortunately, I see situations like this every day. Most are not six figure mistakes, but I have seen early stage companies unknowingly make fatal mistakes – meaning the company is over before it starts because the founding team did not surround itself with the right professionals who know how to both mitigate risks and navigate small business creation.
My advice, whether you are launching a brewery, a mobile app, or anything in between, is simple: from the onset of your business, hire an accountant, an insurance agent, and a lawyer. No exceptions.
If you are in a position where you are considering engaging with a legal professional for your business, allow me, as an attorney who works with breweries, startups, and small businesses, to also offer the following advice: Take the steps to find a lawyer that specializes in the precise area of law you need. If you are starting a scalable venture, hire a lawyer that knows the startup space. If you are purchasing a parcel of real estate for a large multifamily real estate development, find a lawyer that specializes in commercial real estate. This is a critical step that, in the end, will save you time, stress, and potentially, like the brewer’s experience from the podcast, a lot of money.
While you may have noted how specifically I described the areas of expertise above, I did so because it’s worthwhile to understand that just because a lawyer handles certain corporate matters, it does not necessarily mean that he or she understands the specific issues relevant to scalable startup companies. And on that same note, just because a lawyer handles residential real estate closings, it does not necessarily mean that he or she are well suited to handle commercial real estate transactions. In other words, identify a lawyer who is not only technically proficient in the exact area of law you need, but also one that represents similar clients operating in the industry in which you are doing business.
Always ask the experts, because lawyers and other professionals that operate within specific industries will provide you far greater value. These are the professionals who understand the industry, who know the industry trends, and who have successful relationships with investors, lenders, vendors, suppliers, and distributors – all of which, in turn, will be tremendously beneficial to you in the long term.
» Matthew P. McLaughlin is an attorney with McLaughlin, PC in Jackson, Mississippi, and serves as the executive director of the Mississippi Brewers Guild. Matthew’s passion is working with creative and entrepreneurial-minded people and organizations, having worked with and advised hundreds of entrepreneurs, startups, and social innovators throughout the Southeastern United States. He may be contacted at firstname.lastname@example.org or 601-487-4550, or you may visit www.mclaughlinpc.com for more information.
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