Three Crosses Distilling Company

Bootstrapping Our Distillery to ~$700K In the First 18 Months

John Davenport

One of Virginia’s most awarded new distilleries and on track to hit $1M in 2020.

John Davenport

Three Crosses really started as a hobby that continued to grow until my wife, Michelle, told me to ‘get it out of the house’. It was at this point, we also realized what we were making in the garage was a ‘no-no’. She thought I would give up the hobby. Instead, I stuck her on a plane to Kentucky to learn both how to distill and to run the business half of a craft distillery.

The Three Crosses name comes off of the imagery found on the Davenport family crest...our last name. There are three cross fitchees on our crest. The crosses were carried into battle during the crusades and would be used to mark holy ground as the armies marched and fought. Given my military background and our faith, the three crosses represent: faith, family and service.

Three Crosses Distilling Company John Davenport

We announced our opening date for the distillery and on opening day we had a line around the building. We are the only craft distillery in the county. We nearly make $700,000 in revenue in the first 18 months in business. We make and sell whiskeys, rums, vodkas, gin, and moonshine.

How did you validate the idea?

We spent almost five years visiting other craft distillers, researching the market, and continually revising our financial projections until we thought we had a tight handle on the opportunity and risks.

I have a business/finance background and distilling is part of my family heritage...I grew up around it. At the outset, we took on three silent partners. We didn’t need the money so much as they also saw the vision and had some expertise in areas we did not.

Who is your target demographic?

Our target market is the 21- and over crowd. We find that we have two distinct markets. First, we have the ‘locals’ that come to our tasting room because we have become a neighborhood gathering spot. Second, we have the customer that is purchasing our product through liquor stores and are looking for ‘local, craft’ spirits...folks that are looking to connect with a brand.

We really haven’t had a funny or weird customer requesT other than someone wanting us to make a raisin flavored moonshine. What I do get a lot is that people don’t understand what a ‘distillery’ is. They will come in and try to order wine or beer. And when we tell them we don’t make that, they want to know why.

How did you fund the idea initially?

We funded the initial start-up via savings and creative financing. A large part of our equipment cost we were able to lease. This allowed us to keep a large part of our war chest in reserve for all the surprises we encountered along the way.

Where did you meet your cofounder/founding team?

  • We are the founders and management team.

    • Veteran and female-owned. Family-run.
    • We have two full-time employees.
    • We all do a little bit of everything.

In terms of finding first employees, you must vet them well. In a small company trust is everything.

Did you run any companies prior?

Other family members had run companies. Plus, my father, sister and I had bought a kid’s sports franchise. So some of the ‘ins and outs’ of running a business were familiar.

I was motivated to start my own business because:

  1. Wanted more control over our financial future.
  2. Finally found something that we were passionate enough about to invest our time and money to.

What were your family and friends first thoughts on your company?

They tried to have us declared mentally incompetent. I believe most thought we wouldn’t really go through with it. They couldn’t see the same vision. Now that we are exceeding our projections, everyone is on board.

What motivates you when things go wrong? What is the end goal?

What keeps us going is knowing that ‘this is ours’ to make of it what we will. When you’re working for someone else, it’s easy to not commit 100%. When it’s yours, you commit fully and find energy reserves you never knew you had.

For some who are just starting out, you have to plan, plan, plan. Research, research, research. Know your market, know your vision. And when you think you have everything worked out….do it all over again. Keep refining until you think you can’t possibly add or change a thing.

What has driven the most sales?

We do in-person tastings at liquor stores. This helps create a personal connection to the product. Other than that, Facebook and instagram are our primary means of communicating with customers.

There are two things that are stopping us to becoming 3x the size of what we are right: One, we could not physically produce enough to triple in size at this point. The cost of equipment and simple square footage limitations slow our growth. It will take time and a lot more capital. Two, the state of Virginia takes 54% of our spirits sales. Plus, we have to send 100% of our bottle sales to the state for them to return our portion at a later date. It creates a serious cash flow issue.

How do you protect yourself from competition?

This is a very competitive space. Our protection is only as good as our product and our connection to the customer. Whether in-person or through our marketing efforts, we really strive to make a connection to the brand for customers. Our recipes are tightly guarded.

What are the top 3-5 apps your business could not run without?

  • Facebook and Instagram are our primary means of communicating to customers.
  • Quickbooks makes accounting and bookkeeping so much easier. It automates so many of the bookkeeping transactions.
  • Hoochware… an industry specific distillery management software

What are your favourite books?

  • Richard Branson’s ‘Virginity’
  • One Minute Manager
  • Outliers
  • Freakonimcs

What are your favourite podcasts

  • Distillery Nation
  • Thats How I heard It
  • Tim Ferris Show
  • How I Built This

What are your next steps for Three Crosses Distilling Company?

Our Gin and Pepper Vodka are to be released soon. We have rye whiskey finishing in port barrels. More flavors are in the works.

Our 5 year projection is several million in revenue with very little outside investment. We did nearly $500,000 in our first full calendar year. And are on track to do close to $1million in 2020.

You come to me with a check with enough commas in it, yes I would sell.

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