diff --git a/README.md b/README.md
index 37d4612..c61cbb9 100644
--- a/README.md
+++ b/README.md
@@ -83,7 +83,7 @@ EventSourcery::EventProcessing::ESPRunner.new(
 
 ## Development
 
-After checking out the repo, run `bin/setup` to install dependencies. Then, run `rake spec` to run the tests. You can also run `bin/console` for an interactive prompt that will allow you to experiment.
+After checking out the repo, run `bin/setup` to install dependencies. (This will install dependencies and recreate the test database.) Then, run `rake spec` to run the tests. You can also run `bin/console` for an interactive prompt that will allow you to experiment.
 
 To install this gem onto your local machine, run `bundle exec rake install`.
 
diff --git a/bin/setup b/bin/setup
index dce67d8..0639b80 100755
--- a/bin/setup
+++ b/bin/setup
@@ -5,4 +5,11 @@ set -vx
 
 bundle install
 
+echo
+echo "--- Preparing test databases"
+echo
+
+dropdb event_sourcery_test || echo 0
+createdb event_sourcery_test
+
 # Do any other automated setup that you need to do here