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  • Writer's pictureDr. Ari Smith Cordtz and David. H. Cordz

The Six Biggest Mistakes Start Up Beverage Companies Make - Pt. 3 Margins vs. Funding

Beverage Formulation Margins

Mistake #3 - They think their startup can be fully funded from the gross margin dollars that are generated from their sales.

The margin your beverage generates will most likely not provide all of the cash you need to move your brand forward in the market which is why beverage companies must plan for appropriate funding. You need enough liquidity to carry your company forward to pay for

  • Producing inventory

  • Purchasing packaging materials

  • Raw ingredients

  • Custom packaging

  • Warehousing

  • Shipping

  • IT/website

  • Legal fees for product compliance

    • Overall corporate structure

    • Copy right research, etc.

  • Setting up your sales organization

This is just to name a few of the things you’ll need funding for.

If you use the 3-tier distribution system (the only system in the U.S. to have your beverage distributed to stores, restaurants and bars), you can expect to have distributors require 60 -90 or more days for paying your invoices. In addition to all of the above items, regardless of how you plan to sell your beverage you will need to allocate significant marketing dollars not only for the launch but, ongoing to keep your brand relevant in the trade.

Remember! The more successful your brand is, the more money you need prior to every production run to “see you through” until the distributor sends the payment on your invoice. We used to jokingly refer to the constant cash need as “feeding the beast”.



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