How Horsforth Brewery used crowdfunding and grants to grow our business: Mark Costello
As a small business owner, a constant internal debate I have is how my brewery funds the next stage of its development.
Growing our capital base sufficiently to make the significant investments required to take us to the next level by retaining profits has proven to be near impossible – especially for a business that only became a full-time enterprise in March 2020.
In early 2023 an area in which we could improve our product quality and packaging efficiency but didn’t have enough retained earnings we could dip into to make the investment required. This left us with a few options that fellow small business owners will be more than familiar with but did not work for us for one reason or another - either investing more personal funds, selling part of the business or taking out a loan.
This left us with two further options – crowdfunding and grants, both of which I’ve discovered are a bit of a dark art and not options many small business fully consider.
Crowdfunding was an obvious choice for us. Our customers have been asking us for a number of years to run a crowdfunding campaign, mainly due to two reasons – they see the struggle we go through without a strong capital base and I think they liked the idea of a bargain with some generous rewards.
We successfully ran a crowdfunding campaign through Crowdfunder which is a rewards-based crowdfunder rather than an equity-based one and raised £25,000.
I’ve since spoken with a number of small businesses considering running their own campaigns and have a few words of wisdom to offer on it.
Firstly, the money definitely doesn’t have to be returned to the people who have supported – it’s not a loan however you do have to give rewards and the impact on cash flow should not be ignored – the people pledging their support to your crowdfunder will be some of your most loyal customers so any monetary reward they receive will be cash lost from your BAU cash flow.
Secondly, a crowdfunding campaign can be great for raising awareness of your business. Running a successful crowdfunder creates significant engagement with new and existing customers.
All of this assumes you have a successful campaign – we went with the option of only being able to keep the funds if we met our funding target. This meant if we were a penny below our initial target of £15,000 we wouldn’t receive any of the money pledged and it would be returned to the pledgers and months of hard work would have been for nought.
There are also a number of grant schemes available and for this project we were successful at claiming through the Made Smarter scheme who match fund 50 per cent of your project spend up to £20,000 (we were able to claim the full £20,000).
Claiming grant funding can be a time consuming activity – you have to submit a business plan, justify the spend, have several interviews and go through a number of panel decisions that you’re not present at.
There seems to be a common misconception with grant funding with people believing it has to be paid back which is not the case at all – once you have the funds it’s yours. However, the big drawback to grants is you normally have to make the spend first and then claim back. This was a very quick process for us but did mean we had to find £20,000 for a week or two.
Using a mix of both crowdfunding and grants we managed to fund the purchase of a new canning machine that increased our filling speed fourfold and gives us a better quality product without the retained earnings to invest. This shows there is still opportunity out there for small businesses to invest in their future.
It may take a lot of behind the scenes work to achieve it, but I often say it’s easier to find money than it is to make it.
Mark Costello is Founder and Owner of Horsforth Brewery