Cracking the Craft Beer Market

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Craft beer bars and microbreweries are all the rage in the United States. Many modern consumers would rather try a local brew, than the same old beer from the big boys. But how do you break into the craft beer market?

In may seem like it is too late to open yet another craft beer bar. While it is true that there are a lot of places out there, it doesn’t mean there aren’t opportunities available.

Having the right product is vital in the craft beer market. Entrepreneurs need to distinguish themselves from both the known beers and the local competition. But there is another factor that will be just as important for your success.

Location, Location, Location

As the old adage goes, location is everything. We are not talking about where in your local city, but in which city is such a business needed by its residents. You may think your product will succeed in your city, but even with a superior product it may fall victim to over saturation.

Let’s look at a test case of Gilbert, Arizona. According to the data on LaunchScore.com, the town of Gilbert is ripe for the picking for the next craft beer place. You can view the details yourself here.

Gilbert is within the Phoenix metropolitan area, and its local business scene downtown has been on an upward swing over the past few years. Many new, local, and hip eatery’s are seemingly popping up overnight. If there is one thing people in the area like to do, it’s to eat and be seen at these restaurants and pubs in the downtown.

With the explosion of interest in the craft beer market, a city like Gilbert is a perfect opportunity for such a business. There is currently limited competition in the area, and are in need of businesses like a microbrewery. There are events held every weekend in the area to promote local shopping and spirit of community. Both of which would help any new and upcoming bar that brews locally made beer.

According to LaunchScore, the right craft beer bar in Gilbert could potentially make a net profit of $129,839 in just its second year. With profits growing continually from there.

Community Growth Nourishes Business

As the cities such as Phoenix continue the mad dash of outward growth, opportunities for new business will also grow in places like Gilbert. There becomes a necessity to feed and entertain the people in these new places in new ways.

The price of rent in Gilbert is still fairly reasonable, and now is the time to get in the market and make a name for yourself. The demographic of Gilbert is getting younger, hip, and they are typically transplants from other parts of the country.

Craft beer bars are great places for locals in any community to get out and network, get to know their community, and create new friendships. What better way to beat the heat and broaden horizons than sharing a cold beer and some food with fellow like-minded people.

So when considering the craft beer market as your next business venture, be sure to keep such factors in mind. A move to Arizona might not be possible for you, but this was just one example. You can always check the score of this or any other business idea in your city on LaunchScore.com.

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Health Club Near Me Business Opportunity

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Where is there a health club near me? This is a phrase often heard when people move into a new neighborhood, or finally get into the work force after years of schooling.

As people settle into their new lifestyle, they start looking for their morning coffee shop, favorite restaurant, local pub, and also their new gym. While a lot of the others mentioned may be numerous, research shows that health clubs are a business opportunity that is needed in specific parts of the United States.

One such location is in Rochester Hills, Michigan. Statistics indicate the quality of such an investment ranks in the 98th percentile compared to other business opportunities in the same area. You can see for yourself in the detailed market analysis provided on LaunchScore.com: https://launchscore.com/opportunities/health-club-in-rochester-hills-michigan

Growing Population Means Growing Opportunity

The reasons for the quality of this business opportunity are clear when you look at the data. The area of Rochester Hills is growing and is popular with college-educated, white-collar employees, who work in the tech industry, automotive design, or healthcare. Its residents earn consistent middle class incomes, with a median income of $80,000.

Most of Rochester Hill’s residents are in their late 20s and up, with a current median age of 43.1. Many have started families and are planting roots in the area that they plan to live long term. This indicates a growing base of potential long-term customers who have a distinct interest in maintaining their health, as well as physically working off the stress of mentally demanding careers.

As a side benefit of this, many stress the need for fitness to their children as well, providing you with potential employees as they reach college age. Not just “people you can hire,” but people you already have a relationship with, whose knowledge, skills, personalities, and work ethics you’ve already seen for yourself.

Health Clubs Make Your Finances Fit As Well

Financially, the outlook for a new health club in Rochester Hills is strong, with a likely Potential Yearly Earnings, or PYE, of $190,375. The net operating profits in the first year is estimated to be $95,188, with a startup cost of only $173,622 (based on the larger of PYE and median income multiplied by the cost of living).

Net revenues and earnings should more than double by year 5, and terminal value should be nearly $600,000 by the end of the 5th year. It’s safe to say opening a health club in Rochester Hills, Michigan, is one of the most promising opportunities currently available.

If you don’t live in the Michigan area, you can do a search of this business type in your city on LaunchScore.com to receive the same detailed opportunity information. Just be sure to act on a good opportunity like this quickly, so when someone asks “where is there a health club near me”, you are there to greet them when they arrive.

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Business opportunities in O’fallon, Missouri

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O’fallon, Missouri is a wonderful city just a short drive from Saint Louis, Missouri. With a population of over 80,000 people, O’fallon is a bustling city full of opportunity!

The residents of O’fallon are busy, working adults looking for better ways of living. Health food stores are desperately needed here. There are the usual stores, including GNC, but O’fallon residents are tired of the same old chain stores. They are looking to get healthy, fit but also feel more than just a numbered customer that the big businesses treat them as.

They love good, small business, with a B rating for small business friendliness. These residents are friendly and expect the same from their local businesses. They are so friendly, in fact, in 2006, Money Magazine named O’fallon #39 out of the 100 best places to live in the entire United States of America! With a medium income of $78,634 the consumer is able to afford the healthy lifestyle, and just need a business to help their journey along. As American’s waist line expands, health care costs are rising, and many are questioning the safety of genetically modified foods; opening a health food store has vast potential in this market.

Considering the increasing concern over health, countless numbers of people are looking for ways to increase their energy, improve their sleep, lose weight, etc. Any research will show, the easiest way to better these things is through a good, healthy diet. By opening a health food store in O’fallon, Missouri you will not only be helping people but also be enjoying watching your own business grow. The residents of O’fallon are loyal consumers and are just waiting for a new friendly face to move a healthy business into town. Taking all into consideration, you could be looking at $141,173 in yearly earnings! Are you ready to succeed?

The blog post Business opportunities in O’fallon, Missouri was initially seen on The LaunchScore Blog

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Microbrewery opportunities in the Washington DC area

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A new microbrewery in the DC area could be yours if you choose to make a great investment. In between the two states of Maryland and Virginia this area is prime real estate to start a business you want to see thrive.

With a positive net cash flow projected within the first five years of opening, it is a great opportunity knocking at your door. DC is accustomed to hosting politicians, world leaders, and tourists from around the globe. From the locals to the tourists you will always have a steady stream of customers wanting to experience DC’s beers to the fullest.

Big companies like Budweiser and Coors have been losing business to the microbreweries that have popped up. Being a microbrewery the options of selling beer straight to the customer or to local restaurants is a huge plus. Companies like Flying Dog and Dogfish Head see sustained success year after year following this model. They have huge followings all along the east coast.

With the amount of people visiting DC you could spread the name of your microbrewery far and wide in a relative short amount of time. While growing your sales and influence, the microbrewery would be in the perfect area to become another powerhouse on the east coast. The microbrewery would become well known relatively quickly in Virginia, DC, and Maryland through word of mouth and various beer festivals. The spot in DC would also allow for the microbrewery’s clout and sales to expand easily into West Virginia, Delaware, and Pennsylvania. In those five states and one district alone the company would be able to prosper and see huge revenues. When it is time to finally break through and reach states like New York in the north and Florida in the south, investors will truly see why buying into this microbrewery was the best choice of their lives.

Microbrewery opportunities in the Washington DC area was first published to blog.launchscore.com

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Don’t quit your day job!

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Entrepreneurs holding down day jobs to pay the bills face a dilemma. In the macho-startup culture, risk is do or die, you have to be “all in”, you have to put in 80 hours a week. Some investors don’t take your seriously if you don’t kill yourself for your startup, or if your passion isn’t constant and unwavering.

Well, seems there is emerging evidence that the macho mentality is wrong-headed. University of Wisconsin professors studied this issue and found that entrepreneurs that keep their day jobs are more risk-averse and have lower core self-evaluation (i.e., aren’t overconfident) than those that take the full plunge. But the kicker is that these day-jobbing entrepreneurs (they call them hybrid entrepreneur) are more successful when they do finally commit to their ventures—they survive MUCH longer.

“we find evidence that individuals who enter full-time self-employment in a staged entry process through hybrid entrepreneurship survive significantly longer than individuals who enter directly from paid employment.” – Raffiee and Feng, 2014, p. 958.

They also find that the positive effect of hybrid entrepreneurship is stronger for more experienced entrepreneurs and individuals of lower intelligence. So unless you are a born genius, keeping your day job till your venture starts to pay dividends may be wise.

I thought this tidbit was extra-interesting in light of the recent push-back against the macho-entrepreneurship Zeitgeist. Check out this TED talk about the virtues of taking it slow! We always hear about speeding up–get to market–rarely about taking it easy.

Raffiee, J., & Feng, J. (2014). Should I quit my day job?: A hybrid path to entrepreneurship. Academy of Management Journal, 57(4), 936-963.

 

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How do venture capitalists make decisions?

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A recent study by Ivy League scholars investigated how 885 institutional Venture Capitalists (VCs) from 681 firms make decisions about their investments and portfolios. The average VC firm in the sample analyzed more than 400 companies per year but made merely five investments during the same period. The main finding is that VCs regard the management/founding team as the most important factor driving their decisions.

The researchers assessed 8 types of decisions, namely: deal sourcing; investment selection; valuation; deal structure; post-investment value-added; exits; internal firm organization; and, relationships with limited partners. They also looked at potential variations in VC practices across industries, stage, geography, and past successes.

The authors observed that most of the deals emanated from the VC’s own networks – more than 30% of deals were generated from professional networks, another 20% referred by other investors, and 8% from companies already on their portfolio.

Overall, VC’s investment selection was primarily driven by perceptions about the management team, followed by business factors (such as the business model, product, market, and industry) and company valuation. Notwithstanding, the authors found some variations, namely that the management team tends to be the most important factor for early-stage and IT investors but for late-stage and healthcare investors business factors outweigh the importance of the management team. Interestingly, the fund’s fit and ability to add value to the deals was perceived as the least important factor overall.

Another relevant finding is that few VCs use discounted cash flow or net present value techniques to evaluate their investments. Instead, the most commonly used metric is cash-on-cash return or the multiple of invested capital. However, some do use the internal rate of return (IRR) as an evaluation metric.  Concurrently, very rarely do VCs adjust their target returns for systematic risk. Curiously, 9% of the overall respondents and 17% of the early-stage VCs do not use any quantitative deal evaluation metric.

In relation to the deal structure, the researchers found that VCs were relatively inflexible on pro-rata investment rights, liquidation preferences, anti-dilution protection, vesting, valuation, and board control though they appeared to be flexible in relation to the option pool, participation rights, investment amount, redemption rights, but mostly about dividends.

On the other hand, VCs do provided a significant number of services in the post-investment stage, primarily consisting of strategic guidance, connecting customers, operational guidance, and hiring of board members and employees.

In terms of exits, the data suggested that VCs exited about 75% of their deals through acquisition, instead of IPOs. About 10% of the deals made 10 times their investment but about 75% of the remaining lost money.

The average VC firm on this study’s sample had 14 employees and 5 senior investment professionals which on average spent 22 hours/week networking and sourcing deals, and 18 hours/week working with the firms on their own portfolio. Lastly, the performance of VCs was primarily evaluated by cash on cash returns and net IRRs, and most of those surveyed were confident in their ability to generate above market returns.

 

Reference:

Gompers, Paul A. and Gornall, Will and Kaplan, Steven N. and Strebulaev, Ilya A., How Do Venture Capitalists Make Decisions? (August 1, 2016). Stanford University Graduate School of Business Research Paper No. 16-33; European Corporate Governance Institute (ECGI) – Finance Working Paper No. 477/2016. Available at SSRN: http://ssrn.com/abstract=2801385

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