Markets In Your Community

8º Plato Beer Company & Goldman Sachs 10,000 Small Businesses: Crafting a Growing Small Business

The path from stand-up comedy to owning a craft beer retail store may not sound like a natural career progression, but for Tim Costello and Brigid Beaubien of Detroit’s 8º Plato Beer Company, it made sense.

For 25 years, Tim made a living as a road comic, making audiences laugh on tours around the country. A fan of offbeat locally brewed beers, he would often plan stops between gigs to sample the products at independent breweries, collecting samples to share at home.

“Way before craft beer was a thing, he would go to local breweries when he was doing his comedy, and he would bring some back,” Brigid explains. “And over the years, what developed was that we would all meet at the end of our driveway on Sunday night when he got back, and we would share the beer with the neighbors.”

In 2011, the married couple decided to take the plunge into small business ownership, and 8º Plato Beer Company was born. The first location opened in 2011 in Ferndale, MI one mile outside the city limits; a second, in downtown Detroit, recently opened in September.

While 8º Plato is enjoying steady growth and boasts a fiercely loyal local customer base, it hasn’t always been easy.

Following a passion for craft beer

Brigid and Tim were fortunate to catch the craft beer wave as it was first building in Michigan, now home to 159 independent breweries.

“Part of the reason we’ve been successful is that we started at the base of the growth -it’s an exciting time in the craft beer industry,” Brigid says. “We happened to be passionate about something that other people were becoming passionate about.”

According to the Brewer’s Association, craft beer consumption is rapidly growing-measured by sales volume, craft beer saw a 17.6% increase in 2014, and now commands 11% of the U.S. beer market sales. Small and independent breweries contributed an estimated $55.7 billion to the U.S. economy in 2014, along with more than 424,000 jobs, the trade association reports.

Lacking small business management experience, Tim headed back to school for a degree in entrepreneurship at Eastern Michigan University (where Brigid still teaches as a professor in the College of Education). He developed the 8º Plato business plan as part of his coursework.

They now had the concept, but getting it off the ground would require capital. That came in two parts: first, from cashing out Tim’s 401(k) and secondly, from a loan by a community bank that had faith in the couple and their business plan.

“We were very lucky that we had a community bank that saw that craft beer was beginning to take off in Michigan, and that we were two upstanding citizens, and that they might be able to take a small gamble on us,” Brigid says. “We continue to have a very good relationship with that bank.”

Building a sense of community

They knew when they started that they wanted to recreate and nurture the sense of community they had enjoyed standing in the driveway and tasting the craft beers Tim brought home from his comedy tours, Brigid explains. That meant building relationships through social media, as well as through more hands-on avenues.

“One of things we stumbled on, just trying to get people into the store when we were brand new, out of pure desperation we started doing Friday night beer tastings,” she explains. “We have people who have come to almost every single one of the beer tastings over the four years we’ve been in business. It’s become very much part of the community in Ferndale.”

As craft beer gained popularity, it’s brought on more competition, Brigid notes, as other types of stores have begun carrying larger inventories of products from small and independent brewers.

To meet that challenge, Brigid says, their stores intend to offer a richer customer experience. The stores are designed to be inviting, attractive and comfortable, as opposed to a typically utilitarian convenience store. The beer inventory is carefully tracked to ensure variety and freshness, with a strong representation of labels from local and regional brewers.

It’s the commitment to a “combination of knowledge and personalized service,” Brigid says, that helps the stores appeal to both knowledgeable consumers of craft beers and newbies.

8º Plato has also made an effort to work closely with Michigan brewers, serving as “the link between them and the customer,” she explains. “That’s something that grocery stores can’t offer.”

Meeting the challenges

But like any new business, 8º Plato couldn’t always count on smooth sailing. Brigid admits that in the store’s early years, cash flow was a persistent challenge-particularly since Michigan law requires immediate payment for beer deliveries.

“Every week we were growing, it meant we needed to buy more beer…and so it became this cycle that we needed to have the cash on hand to purchase the amount of beer we needed to fuel the growth,” she explains.

While the company has survived tough times and posted modest profits, most of the earnings have gone back into launching the second location. Brigid says the challenge now is to manage the growth in way that doesn’t compromise what customer’s value about the stores.

Tapping a broader network for small business expertise

To better prepare to meet the challenges of running and growing their small business, Brigid participated in the Goldman Sachs 10,000 Small Businesses (10KSB) initiative.

Launched in 2009, 10KSB provides a program of training and education for entrepreneurs, in partnership with local community colleges; builds peer-mentoring networks between business owners; and helps businesses get access to the capital they need to expand. The goal is to help business owners expand their companies, increase revenues and spur new job creation.

The 10KSB program is now active throughout the United States, ranging from large metropolitan areas like New York and Chicago to smaller cities like London, Kentucky, and Missoula, Montana, as well as four United Kingdom locations. The program’s footprint in Southeast Michigan has been particularly pronounced.

“What was really good about [10KSB] was that it taught us that we knew more than we thought, and showed us what we didn’t know,” Brigid says.

Her participation in the program came at a good time for 8º Plato. Now with two locations, the company has grown to 15 employees, which brings new challenges.

One key lesson she gleaned from the 10KSB program was the need for a strong set of employee systems and procedures-handbooks, training materials, regularized payroll procedures and so forth-to ensure consistency in service and operations as the company expands.

But most valuable of all, Brigid admits, was the opportunity to tap into a network of small business owners who are facing similar challenges and opportunities.

Katherine Jollon Colsher is the National Program Director for 10,000 Small Businesses and maintains great enthusiasm about the program’s footprint in Southeast Michigan.

“Businesses like Brigid’s confirm that Detroit is a city of hard work, determination, and resiliency,” Jollon Colsher says. “We are excited that 10,000 Small Businesses has already served nearly 200 businesses in Southeast Michigan and counting, and are proud to partner with local leaders and the community to help drive Detroit’s revitalization by supporting one of its key growth engines – small businesses.”

A Babson College analysis of the 10KSB program published this summer found the following:

  • More than two-thirds of the participants (67%) reported increasing their business revenues within six months after completing the program. Eighteen months after completing the program, that number had risen to 76%.
  • After 18 months, 57% reported adding new jobs to the business (compared to 22% of all U.S. small businesses surveyed by the National Small Businesses Association).
  • The 10KSB program maintains a 99% graduation rate, and a reported 84% of the graduates collaborate on business opportunities-an important network effect that drives revenue growth and job creation.

The Babson College study also points toward an underappreciated aspect of a program like 10KSB-it’s not simply a philanthropic endeavor, but also a real-world laboratory for determining the conditions that create success for small businesses.

Like many entrepreneurs, Brigid and Tim have found small business ownership to be fraught with risk and anxiety-but it’s also brought big rewards as they’ve watched 8º Plato thrive and grow, and they remain optimistic about the future.

“[Launching the business] was probably one of the scariest things that we’ve ever done, and it’s probably been one of the most rewarding things we’ve ever done,” she says now. “And even though we were scared, it really helped that we were never scared at the same time. I’m glad that we did it.”

And given the difficulties Detroit has faced in recent years-8º Plato launched two years before the city filed for municipal bankruptcy in 2013-the craft beer retailer’s promising future could be symbolic of an outlook for the Motor City. Brigid affirms that the city is a welcoming place for entrepreneurs.

“There’s an energy about Detroit that’s really phenomenal,” she says. “It’s an interesting combination of people who’ve spent their lives here growing more committed to their city, and new people coming in. And I think it’s just a really exciting time for Detroit.”