This week, I’m making a different kind of investment recommendation — one that I think you’ll really like.
For the past couple of years, I’ve been looking into investing in small businesses.
Small businesses account for about 44% of U.S. GDP. That’s $10.3 trillion in economic activity. But until recently, most investors were locked out of effectively investing in small businesses like restaurants, coworking spaces, breweries, and energy services — to name a few.
Investing in small businesses is important, though — and not just for the country or the communities those small businesses serve.
Small business investments are a way to add income streams to your investment portfolio.
And even better — you can start seeing returns within months.
Here’s how it works:
- Small businesses that need money make their pitch on websites like Honeycomb or Mainvest.
- Investments are treated as loans.
- Small businesses repay investors either by paying back the loan — plus interest — over a set period of time or by sharing revenue up to a limit.
- Investors know what their returns will be (presuming the business is successful) going into the investment — and how quickly the small business will begin paying them back.
The evaluation process for small business investments is similar to the evaluation process for startup investments. But these investments carry a much different risk-reward proposition.
Unlike startups, small businesses don’t have to turn into $100 million businesses in order to be successful investments. Instead, they need to succeed on a much smaller scale — and do enough to repay the loan (they often make quarterly payments, which are particularly attractive for investors).
Additionally, many of the small businesses asking for investments also have operating histories investors can look at and evaluate. That combination of an operating history and a lower bar for success means you’re dealing with less risk than you would with a typical startup investment. With less risk comes smaller rewards. But that’s okay. The returns come more quickly. That makes them income streams. And a good investment portfolio should have a diversified set of income streams.
So this month, I’m recommending a small business investment opportunity to you.
When I’m looking for small business investment opportunities, I always start with our friends at KingsCrowd. They aggregate all of the small businesses raising capital online, so I don’t have to go searching across multiple websites for them. They’ve also developed a really smart algorithm that rates small business investment opportunities on a one to five scale. I set my filters to list only the investment opportunities rated three stars or higher. That narrows my search. After that, I begin my due diligence. (If you’re interested in small business investing, you should try KingsCrowd out. At $15 a month, KingsCrowd is a bargain. Plus, you can cancel any time.)
Brueprint Tap Rooms, which I’m recommending to you today, is rated a 4.9 by KingsCrowd. But what I really like about Brueprint is its growth potential.
The great American philosopher Homer Simpson best encapsulates our country’s relationship with beer.
“Ah, good ol’ trustworthy beer. My love for you will never die,” Simpson said during the second season of “The Simpsons.”
As a country, we love beer. (For the record, I’m more of a scotch and tequila person, but that’s a story for another day.) And that’s why I like looking at breweries and taprooms as potential small business investments. It’s a proven market. It’s a proven draw. And as long as the business has a good growth plan and can execute at a high level, it should succeed — or at least succeed long enough for investors to get a return on their investment.
Brueprint is a craft beer brewery and taproom company based in Cary, North Carolina. It’s currently operating one taproom and is raising money to build and open a second taproom and expand its distribution network.
It did $224,000 in revenue in 2021 and $275,000 in 2022. That type of growth is decent. But the company has yet to turn a profit. So it’s hard to get too excited about it. What really intrigues me is Brueprint’s growth plans. In January, a distributor helped get the company’s beers on the shelves in Harris Teeters, Food Lions, and Fresh Markets in parts of North Carolina. In April, it managed to get distribution for the rest of North Carolina and all of South Carolina. The company also now has a partnership with Lonerider Brewing Company that will help get it into taprooms in the mid-Atlantic and the South.
Distribution is king in businesses like Brueprint. And Brueprint is gaining traction on that front.
The last thing I like about Brueprint is that some of the funding risk has come off the table. Brueprint has already raised more than $132,000. Its target raise was $70,000. Raising more than the target is always a good thing. It gives small businesses a little extra wiggle room.
The minimum investment in Brueprint is $100. Its return multiple — which determines how much money you’ll make if Brueprint successfully pays off the loan — is 1.5. So if you invest $100, and Brueprint pays off the loan, you’ll get $150 paid back to you. That’s your original $100 and $50 in profit. If you invest $1,000, you could get $1,500 back (your original $1,000 plus $500 in profit).
This is a revenue sharing agreement that ends when Brueprint pays off the 1.5 return multiple. Disbursements are made on a quarterly basis.
If you choose to invest, Brueprint is raising on Mainvest.
Remember, small business investments may not be as risky as startup investments. But it is still a risky investment. So please do not invest money you can’t afford to lose.
And if you’re looking for more small businesses to invest in, you can sign up for KingsCrowd to search for them and see how they’re rated.
Deal Details
Small business: Brueprint Tap Rooms
Investment type: Revenue share
Investment multiple: 1.5x
Minimum investment: $100
Where to invest: Mainvest
Deadline: July 7, 2023