Who hasn't gone through the ups and downs of crafting that first successful batch of home-brew and then, satisfied with your work, had that passing thought that you could someday turn around and do this for a living. Well, about that...
The tone of this article is not meant to be rude, condescending or anything other than matter of fact. It is meant to provoke some serious thought into the minds of hopeful entrepreneurs. Consider this a primer to finding more detailed information elsewhere, such as Probrewer.com.
I started home brewing about the time a childhood friend went off to brewing school. It was his dream of bringing a brewery to our hometown that got me thinking about opening and running a brewery. I have always felt a calling to the business world and pursued that through high school and into college. I have been planning a brewery for three years and am about half way there, I keep hitting roadblocks. Will I succeed? Hopefully, but only time will tell. Hopefully this article will help others with their dreams or kick start new ones.
Am I the absolute expert in running breweries and businesses? NO, but I have spent a considerable amount of time researching, writing business plans and consulting with industry members and experts. Will you agree with everything I say? Probably not.
Will it force you to examine your views of brewing as a hobby vs. a career, some of the facets of running a brewery and perhaps more importantly a small business? Absolutely.
I would like to make this a crowd sourced article, so if I left something out or if I am plain wrong, please point it out and it will be adjusted to serve the greater good. Please include a reference for your information.
With that out of the way, the meat and stout of the article:
Making great beer is a small part of running a brewery; a lot of business knowledge is required to be successful for any length of time. A model built around brewing all day, everyday is not sustainable. As we sometimes forget (some long than others) we are only human and NEED to sleep, relax and spend time away from work, no matter how awesome it may be.
Brewing is not a glamorous job, it is hot, wet, hard work. From cleaning big mash tuns to moving full 1/2 barrel kegs, it is fun as a hobby but would you want to do it everyday? Still thinking yes? Well, the not so fun parts of a business: taxes, accounting, marketing, legal paperwork, handling unhappy customers, dealing with suppliers, shipping companies, retailers and wholesalers is almost a full time job in itself. Don't forget maintaining and fixing anything and everything around the brewery. Want to hire all that out? Can you afford to do so only brewing 1/2 barrel batches and justify doing so?
You are going to self distribute? Who is going to clean those tap lines and ensure your product is fresh, properly rotated and stays on tap when the local wholesaler comes knocking with free concert tickets (or other swag) for the manager? Most retailers won't clean their own lines, they rely on someone else (usually a wholesaler) to clean, maintain and fix their draft system: the kicker: they aren't going to pay for it.
Still sound good? Working 16 hour days brewing, serving and business administration functions? Are you ready to never take a vacation and be married to the brewery? Can you afford on a infinitely small (nano) scale to leave the fate of your business in the hands of another person? You can? Ok, have a relaxing vacation and don't worry about what is going on at the brewery in your non-temperature controlled fermentation tanks.
Still think you have what it will take for the next 5 to 10 years? Congrats! That is the entrepreneurial spirit and you probably have always felt it.
The first question that usually comes up is either: what are the legal requirements or how much will it cost. Professional brewing systems are expensive, not because breweries like spending $300k+ on shiny tanks, it is because that is the ONLY proper way to operate a brewery.
Has it been done for less? Of course, but it probably wasn't much fun.
The answer to both of these "It depends" on your location and desired size of your brewery in planning. (Answers to both may be found below).
So without further delay, some numbers to help crunch some numbers for your business plan
(all numbers approximate and are based on small quantity orders):
Ingredients and consumables:
Equipment is probably the biggest expense next to real estate or working capital, figures are from a Fall 2012 quote from the Pacific Northwest:
Those are some general numbers that I used in the spread sheets that helped create my business plan. After the first full draft, I reviewed and researched for better numbers from suppliers to create pro forma balance sheet, income statement and cash flow statements.
In figuring loss of product to trub, yeast and spillage: 85% of the batch size will probably be salable. So desired batch size X 0.85 to get racking size. Divide that number by ingredient cost, utilities used, labor and another inputs to reach the cost of the pint/can/bottle/etc. Add up overhead expenses (labor for service, loan service, monthly expenses) and divide by number of units sold per month. Add that on to the unit price.
If after all the numbers are crunched, it still looks good; take it to your local SBA office or SCORE office (SBA.gov is also a great resource). They may not know anything about making beer, but they can review numbers and help polish that business plan. They can also help you with the local market demographics and help you evaluate your competition. Running your business plan through one bank can also show where the holes are before moving on to a bank you ACTUALLY want to work with.
For industry information; the Brewer's Association is a good start. A limited amount of information is available on their website to the general public. You should probably order a back issue of the latest industry review copy of the "The New Brewer" published in May/June every year for $15 plus shipping. A membership to the BA may also be helpful as it gives access to a members-only forum and other information.
Your state or local professional brewer's guild may also be of help, but I would contact them after becoming familiar with your plans and market.
For laws pertaining to production of beer (should be one of your first stops):
Federal: (Click "Browse Next" to read the next section of Title 27, there are at least 6 sections you should completely read. Do this before reading your state's laws)
States and local jurisdictions: A web search should find state laws and local ordinances. Also be aware of any local zoning requirements in addition to local laws on service, manufacturing and licenses.
For more in depth articles and forum: Probrewer.com is a great resource. There is a lot of knowledge over there and those guys have seen the "How much?" threads probably once a month for the past decade. I would suggest reading through the articles over there and then start asking questions.
I hope this forced you to seriously consider your dream of owning a brewery and hopefully INSPIRED you to continue with your dreams.
If you don't try, you have failed before giving yourself a chance. I personally would rather make a good run at something and fail than work a job I hate everyday.
Disclaimer: Your mileage will vary, I am not responsible for any financial problems incurred because of this article. I am not an attorney and no part of this article is to be used or meant as legal advice, please consult an attorney licensed in your jurisdiction. This information is provided for informational purposes only.
No guarantees are made to the accuracy of the information contained, I am just a guy on the internet. I am not responsible for crops failing to germinate or pestilence across the land or locusts. All figures are based on a brewery forecasting 900 barrels first year, 75% in-house sales with an annual growth rate of 5%.
Thank you and have a great day!
The tone of this article is not meant to be rude, condescending or anything other than matter of fact. It is meant to provoke some serious thought into the minds of hopeful entrepreneurs. Consider this a primer to finding more detailed information elsewhere, such as Probrewer.com.
I started home brewing about the time a childhood friend went off to brewing school. It was his dream of bringing a brewery to our hometown that got me thinking about opening and running a brewery. I have always felt a calling to the business world and pursued that through high school and into college. I have been planning a brewery for three years and am about half way there, I keep hitting roadblocks. Will I succeed? Hopefully, but only time will tell. Hopefully this article will help others with their dreams or kick start new ones.
Am I the absolute expert in running breweries and businesses? NO, but I have spent a considerable amount of time researching, writing business plans and consulting with industry members and experts. Will you agree with everything I say? Probably not.
Will it force you to examine your views of brewing as a hobby vs. a career, some of the facets of running a brewery and perhaps more importantly a small business? Absolutely.
I would like to make this a crowd sourced article, so if I left something out or if I am plain wrong, please point it out and it will be adjusted to serve the greater good. Please include a reference for your information.
With that out of the way, the meat and stout of the article:
Making great beer is a small part of running a brewery; a lot of business knowledge is required to be successful for any length of time. A model built around brewing all day, everyday is not sustainable. As we sometimes forget (some long than others) we are only human and NEED to sleep, relax and spend time away from work, no matter how awesome it may be.
Brewing is not a glamorous job, it is hot, wet, hard work. From cleaning big mash tuns to moving full 1/2 barrel kegs, it is fun as a hobby but would you want to do it everyday? Still thinking yes? Well, the not so fun parts of a business: taxes, accounting, marketing, legal paperwork, handling unhappy customers, dealing with suppliers, shipping companies, retailers and wholesalers is almost a full time job in itself. Don't forget maintaining and fixing anything and everything around the brewery. Want to hire all that out? Can you afford to do so only brewing 1/2 barrel batches and justify doing so?
You are going to self distribute? Who is going to clean those tap lines and ensure your product is fresh, properly rotated and stays on tap when the local wholesaler comes knocking with free concert tickets (or other swag) for the manager? Most retailers won't clean their own lines, they rely on someone else (usually a wholesaler) to clean, maintain and fix their draft system: the kicker: they aren't going to pay for it.
Still sound good? Working 16 hour days brewing, serving and business administration functions? Are you ready to never take a vacation and be married to the brewery? Can you afford on a infinitely small (nano) scale to leave the fate of your business in the hands of another person? You can? Ok, have a relaxing vacation and don't worry about what is going on at the brewery in your non-temperature controlled fermentation tanks.
Still think you have what it will take for the next 5 to 10 years? Congrats! That is the entrepreneurial spirit and you probably have always felt it.
The first question that usually comes up is either: what are the legal requirements or how much will it cost. Professional brewing systems are expensive, not because breweries like spending $300k+ on shiny tanks, it is because that is the ONLY proper way to operate a brewery.
Has it been done for less? Of course, but it probably wasn't much fun.
The answer to both of these "It depends" on your location and desired size of your brewery in planning. (Answers to both may be found below).
So without further delay, some numbers to help crunch some numbers for your business plan
(all numbers approximate and are based on small quantity orders):
Ingredients and consumables:
- Grain malts, adjuncts: $0.60/lb. plus freight (about $100 per 2,000lb pallet)
- Hops (spot market): $6.50 to $14/lb plus freight (usually UPS or Fedex)
- Yeast: Varies, but 7bbl pitchable is around $300 to 500 with next day shipping. Can be used for several generations, but new breweries are warned to use new pitches for each batch so they have one less thing to worry about during commissioning.
- Water, gas, electricity, labor, taxes, CO2, additives (fining agents, water salts, etc), cleaning chemicals and other consumables add up quick.
Equipment is probably the biggest expense next to real estate or working capital, figures are from a Fall 2012 quote from the Pacific Northwest:
- 7bbl brewhouse (skid mounted - steam fired, USA built): $72.2k total
- Rake/Mixer for MT/LT: $8.5k
- 7bbl Fermenters/Uni-tanks (USA): $12.2k each
- 7bbl Single wall serving tanks (USA): $6.5 each
- Steam boiler: $12k plus install.
- Glycol chiller system for jacketed tanks: $10 to 20k plus install
- Cold room: Starts at $10k for a decent size.
- Hoses, fittings, temp. controllers, carbonation stones and portable pumps: approx $10k.
- Grain crushing/handling: $3k to 10k
- New kegs run from $93 (China import) to $120 (German import) for 1/6 bbl, $128 (China) to $150 (German) for 1/2 bbl.
- Keg maintenance: $500 to $1k for spare parts and tools
- Freight: Varies, a budget of $25k would be a good start (based on my limited experience.
- Installs: Varies, some are included with purchase of equipment, some is extra $$.
- Build-out: Varies on location, zoning and design.
- Water treatment: $3k to 15k, depends on capacity.
- Lab equipment: $500 to $1k for the basics.
- Safety equipment and signs: $3k to 5k for wash station, signs, CO2 warning system, etc.
- Automatic (5 head) canning line: $110k plus install and 135k minimum can order at ~$0.10/can.
- Bottling line: Varies, but $20k to $60k is a good starting number.
- Office equipment: $1k to $10k
- Insurance: Varies, but usually doubles if you serve on premise. A good estimate is $24k/year.
- Engineer/architect: Varies. usually a percentage of project bid price. Budgeting at least $10k is a good start.
- Operating capital: Usually 3 months worth of expenses.
- Security system: $1k to $10k, alarm, video camera, etc.
- POS system: $0 to $15k, depending on seating capacity and desired features.
- Sales taxes: Varies. Yes, you GET to pay another type of tax!
- Permits/licenses: Federal: free (sort of, they require a 28% bond of forecast production in barrels [[$7xN]/0.28] State: Varies
- Manufacture taxes: Federal: $7/bbl State: Varies
- Business fillings: Varies, your secretary of state's office does registrations and you may be subject to local registration as well.
- Legal documents: Varies, operating agreements are usually simple. Private placement memorandums get expensive very quickly (+$10k) to protect your rear from investors.
- Investment filings: Depending on your business structure and potential investors, you may have to register with the SEC and also any state regulatory agency for securities.
- Three part sink: $800
- Dishwasher: $3-4k, may be available for reduced rate through a chemical supplier
- Glassware: $1k to 10k, depends on style and number of seats. Cool glasses like to walk away or "break".
- Coasters/napkins/other stuff: Varies. Budget $2k to get started.
- Food/snack stock: $500 to $1k to get started.
- Food/snack service: $1k to 2K, microwave/pizza oven, trays, napkins, etc.
- Kitchen: Varies, I am not going this route but adds at least $20k to the plan.
- Merchandise: $2k to get started, use profits from sale to order more merchandise.
- TV/Sound system: Varies
- Uniforms: Varies, if you are going to go this route.
- Staff training: Varies, from you teaching to hiring a consultant.
Those are some general numbers that I used in the spread sheets that helped create my business plan. After the first full draft, I reviewed and researched for better numbers from suppliers to create pro forma balance sheet, income statement and cash flow statements.
In figuring loss of product to trub, yeast and spillage: 85% of the batch size will probably be salable. So desired batch size X 0.85 to get racking size. Divide that number by ingredient cost, utilities used, labor and another inputs to reach the cost of the pint/can/bottle/etc. Add up overhead expenses (labor for service, loan service, monthly expenses) and divide by number of units sold per month. Add that on to the unit price.
If after all the numbers are crunched, it still looks good; take it to your local SBA office or SCORE office (SBA.gov is also a great resource). They may not know anything about making beer, but they can review numbers and help polish that business plan. They can also help you with the local market demographics and help you evaluate your competition. Running your business plan through one bank can also show where the holes are before moving on to a bank you ACTUALLY want to work with.
For industry information; the Brewer's Association is a good start. A limited amount of information is available on their website to the general public. You should probably order a back issue of the latest industry review copy of the "The New Brewer" published in May/June every year for $15 plus shipping. A membership to the BA may also be helpful as it gives access to a members-only forum and other information.
Your state or local professional brewer's guild may also be of help, but I would contact them after becoming familiar with your plans and market.
For laws pertaining to production of beer (should be one of your first stops):
Federal: (Click "Browse Next" to read the next section of Title 27, there are at least 6 sections you should completely read. Do this before reading your state's laws)
States and local jurisdictions: A web search should find state laws and local ordinances. Also be aware of any local zoning requirements in addition to local laws on service, manufacturing and licenses.
For more in depth articles and forum: Probrewer.com is a great resource. There is a lot of knowledge over there and those guys have seen the "How much?" threads probably once a month for the past decade. I would suggest reading through the articles over there and then start asking questions.
I hope this forced you to seriously consider your dream of owning a brewery and hopefully INSPIRED you to continue with your dreams.
If you don't try, you have failed before giving yourself a chance. I personally would rather make a good run at something and fail than work a job I hate everyday.
Disclaimer: Your mileage will vary, I am not responsible for any financial problems incurred because of this article. I am not an attorney and no part of this article is to be used or meant as legal advice, please consult an attorney licensed in your jurisdiction. This information is provided for informational purposes only.
No guarantees are made to the accuracy of the information contained, I am just a guy on the internet. I am not responsible for crops failing to germinate or pestilence across the land or locusts. All figures are based on a brewery forecasting 900 barrels first year, 75% in-house sales with an annual growth rate of 5%.
Thank you and have a great day!
Also, your message near the end:
