Money

Here's what Sam Adams founder Jim Koch learned from losing $2 million

Jim Koch, co-founder and chairman of the Boston Beer Company
Source: The Boston Beer Company
Jim Koch, co-founder and chairman of the Boston Beer Company

In 1984, Jim Koch left a $250,000-a-year consulting job to start brewing beer in his kitchen. "My dad told me this was about the dumbest f---ing idea he'd ever heard," the entrepreneur says, and, for a while, it looked like his dad was right.

In the early days of Koch's business, The Boston Beer Company, he was using a brewery in Pennsylvania to make his beer, but "I wanted to expand the brewery in Boston so I could make all my beer here," he tells CNBC Make It.

Koch, who was in his late 30s at the time, put together an engineering plan for the brewery and starting buying the equipment. But what he originally estimated to be an $8 million project quickly became a $15 million one.

At that point, "I'd already sunk $2 million" into it, he says. "So I had to decide: Am I going to take a risk that will probably sink the whole company and go for it, or do I pull the plug on it, write off $2 million and continue making my beer in what was actually a perfectly good brewery?"

He pulled the plug.

"I realized at that point in my life — I think I was 38 or 39 — that all the money I had made in my life plus all the money that the company had made since I started it didn't equal $2 million. So there I was in my late 30s and I was net negative as an economic being."

While "it was kind of depressing" at the time, he recalls, "it was the right decision."

About three decades after losing millions, Koch had built a $2 billion craft beer empire. And he went from "net negative," as he puts it, to landing a spot on Forbes' billionaires list in 2014 and 2015.

When asked how he made the high-stakes decision to write off a small fortune, he credits a mentor: "I got very good advice from a friend of mine. He said, 'Jim, don't risk what you have to get what you don't need.' And that hit the nail on the head."

Like this story? Like CNBC Make It on Facebook!

Don't miss: Self-made billionaire Jim Koch says this book taught him more than Harvard did