6 Strategies Billionaire Jim Koch Used To Build Sam Adams

Drake BaerMay 20, 2014, 02:14 IST

AP Photo/Christof StacheJim Koch

Back in 1984, Jim Koch founded Boston Beer Company. Weeks later, a brew of his called Sam Adams was called the best beer in America. By 2013, Koch was a billionaire. Now, Boston Beer Company makes more than 60 beer varieties and brings in over $600 million in revenue a year, with 1% market share of the U.S. beer market. At its heart, Boston Beer is a family company: The Kochs have been brewmasters for six generations. The Sam Adams recipe itself came from Louis Koch, Jim's great-great-grandfather. On Friday at a National Small Business Week event in Washington, D.C., Koch shared a few of the realizations that made the company what it is today. Here are the takeaways.

He thought people might like a better beer, so he created one.

Koch says that when he first started Boston Beer in the '80s, the American beer scene was "basically a wasteland." Beer drinkers had two choices: mass-produced American beers that weren't rich in flavor or imported beers, which were often stale due to travel time. "There really wasn't an alternative that was rich, flavorful beer delivered fresh," he says. So he made one.

He didn't build the company with elites.

Though Koch himself has a prestigious background - including an MBA and JD from Harvard and six years spent at the mega-competitive Boston Consulting Group - Boston Beer was brewed with salt of the earth. His founding partner was Rhonda Kallman, a 23-year-old secretary at BCG. "Had I picked as my partner one of those high-powered MBAs, I would never have gotten the energy, the drive, the creativity that Rhonda brought," Koch says. "She had a different experience set than I did. She knew people, she knew bars, she knew what it was like to be at the bottom of the totem pole." To this day, Koch says his first hire was his best hire.

The company grew due to sales, not marketing.

The company didn't hire a single marketing person for its first 10 years of existence. "I'm not a big believer in marketing; most small businesses succeed without it," Koch says. "We had sales." When he and Kallman were starting out, they just went from bar to bar with cold beer and a sleeve of cups. "Rhonda built her sales force; she didn't have a big fancy degree," Koch says. "She identified with everybody, the barback to the owner, and built rapport. I learned that by watching Rhonda do it. Sales drive, not marketing, was what made Boston Beer Company what it is to this day."

Boston Beer is highly selective about who it hires.

Boston Beer has a simple stance on hiring: Never hire someone unless they raise the average for the company. So while jobs may be left unfulfilled for a while, they don't budge. It's a way of avoiding what Koch calls "desperation hires," where a company just hires a candidate because a job needs filling, rather than waiting for the best fit. "We don't allow ourselves to do that," Koch says. The record time for an unfilled position goes to a sales gig in Arizona. "It took us 18 months to hire that person," Koch says. "Her name is Andrea - that was 15 years ago. Andrea's still with us today. Was it worth waiting a year and a half to hire somebody who's going to be with you for 15 years and just gets better and better and you promoted her four times? Absolutely."

Boston Beer asks job candidates to "audition" for the role.

Koch doesn't rely on the traditional hour-long, in-person interview alone. Boston Beer also brings people in for a day-long "audition," when candidates come in and do the job they're being considered for. That way the employer - and employee - get to see what the job truly is and whether it's a fit. Take the job of selling beer. Sounds like fun, right? But Koch sketches the reality: You're in basements lifting kegs and checking freshness dates. "Floors are slippery, nobody speaks English, you get treated like crap," Koch says. "That sorts out people."

The best employees aren't motivated by money.

You don't have to overpay for top talent. "The people you want are not coin-operated," Koch says. You can easily spot the people motivated by money, he says - they'll have taken five jobs in the past 10 years. But "it's hard to pry really good people out of really good companies," Koch says. To do that, you have to make yourselves attractive as an employer. That requires being innovative, exciting, and committed to your employees. "You've got to model the behavior of the people you want in your hiring," he says.

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