Homebrew shop

[SS_Brewing_Co]

Hey guys I've been really really considering opening a homebrew shop. Mainly so I can brew for free or low cost. Does anyone have any idea on start up costs? I emails ATF and they said I don't need any special license from them. Just asking for a bit of advice.

 

[Lumpy16]

Probably a lot a variance depending on where your located. Like building costs and what not.

 

[the_bird]

That seems like a really, really, really terrible reason to open up a shop. Do you have any kind of business background? Have you done any research into what it would cost to open up a store, how much it would cost for things like rent and insurance and inventory and needed working capital? Employees? Are you working full-time now? How big of a market are you in? Are there other homebrew shops in the area? How are you going to market yourself?

I mean, I've heard some crazy things before, but opening up a store mostly so that you can get your hops and grain at wholesale prices is right up there with the craziest. ****, with just the startup costs you'd need to put up, you'd be brewing for years and years.

I've got to imagine you'll have trouble getting the wholesalers to sell to you, anyway, unless they believe you're a legitimate business.

 

[the_bird]

I should say - running a homebrew shop is not an easy business by any stretch. Homebrew shops fail all the time, shops that are run by dedicated people who are treating it as a real business, not as a slight extension of their hobby. I don't imagine that even the best shops earn their owners a lot of money. With all the competition from the online stores, the business isn't going to get any easier in the future, either. If you want to do this - more power to you - but make sure that you know what you're getting yourself into. It's a business, and needs to be treated as such.

 

[ACbrewer]

First you can contact the distributors for information. IF you can't get a distributor to support you, you can't start a buisiness. I talked to LD Carlson once, and they had several requirements, a minimum distance of 10 miles from any other store they supported. They recommened you were in an area with about 200K people to support the store.

As to your idea of doing it for cheaper buys, that has worked for one of my 2 lhbs stores. BUT... wait that isn't large enough BUT! (there we go) he was able to get space about 8 by 8 in an existing store (one his wife owned/ran). It now is its own little business (still in the same small quarters). He is howerver making $$. I don't know how much.

So yes your idea can be done, however a HBS or any business has one purpose, to make $ or better $$$

 

[WesleyS]

Just to add to what has already been posted above, the owner of my LHBS told me one time he almost never has the time to brew anymore.
So I would think the motivation to open a store would have to be more than just cheaper ingredients for yourself.

 

[KNOTSANE]

Another thing to consider is the knowledge you have about your business. As the owner of any business you must have complete knowledge of services or products you are selling. If a customer walks in and starts asking questions about water ph, alpha's on certain hop strains, flocculation questions.........you get the point. You had better know a whole lot about brewing. My LHB owner has probably forgotten more about this hobby than I have even learned yet. There are some things in life you just can't fake your way through.

 

[nukebrewer]

If your main goal is just to brew for cheaper, you'd probably just be better off not having an actual storefront. Just order a bunch of stuff, brew like mad and write off all your brews as product testing. I'm not sure about the legality of that, but there's no law that says a business has to be profitable. I'm no lawyer, but I'm fairly sure an individual can incorporate to claim the tax benefits of business ownership. But, as previously stated, you would need support from suppliers, so there's that.

 

[45_70sharps]

What do you want to carry for stock?
What is the competition where you are?
How many homebrewers are in your area?
Tough business to open. I drive nearly two hours to my "local" homebrew shop. It's in a much bigger town and draws from a wide area. They still don't have two customers in there at the same time very often. They have plenty of time to talk to me about brewing ( as in not too busy with other customers ).
If you expect your business to do well, you are going to have to pop for three or four barrels of LME, probably 50 to 100 pounds of DME ( each type ), 10 or 15 bags of specialty grains, a couple bags each of base malts, maybe start with a pound or so of each type of hops. You will probably need 10 or more types of hops to get going. Then maybe half dozen carboys, a dozen buckets, probably $1000 - $2000 in things like air locks, stoppers, thermometers, hydrometers, muslin bags and so on.
You will need to stock a couple stainless pots even though they probably wont sell well. You need to have everything a guy needs to get started.
Then non product expense.... You will need a very good grain mill, scales, buckets to sell LME in, a lease on a building, business licenses and so on. You may have to do a little remodeling
You will probably have over $10,000 invested in "free" brewing.
Then you have to put in LOTS of hours and hope you can cover expense. You may need to have enough in the bank to live for six months while you wait to have the store be profitable. You wont have time for a second job if you want the store to survive.

You aren't going to make a go of it with the store unless you have enough stock so that your customers don't just order online, and you need to be open enough so that people know they can get what they want, when they want it.

 

[the_bird]

If your main goal is just to brew for cheaper, you'd probably just be better off not having an actual storefront. Just order a bunch of stuff, brew like mad and write off all your brews as product testing. I'm not sure about the legality of that, but there's no law that says a business has to be profitable. I'm no lawyer, but I'm fairly sure an individual can incorporate to claim the tax benefits of business ownership. But, as previously stated, you would need support from suppliers, so there's that.

Actually, there is, kind of. If your "business" is consistently showing losses like that, the IRS is going to deem it a "hobby" and disallow any of those business losses. Probably don't want to **** with the IRS, just as a general rule.

The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

In order to make this determination, taxpayers should consider the following factors:

Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

http://www.irs.gov/uac/Business-or-Hobby?-Answer-Has-Implications-for-Deductions

 

[nukebrewer]

Very interesting. I guess they made it that way for the very scenario I put forth above. Thanks for the edification. Cheers!