Wondering how to start a brewery? It’s an excellent idea. But you’ll need to be aware of the federal and state laws involved with this business model. And other things like equipment costs. There’s a lot to think about if you want to start a small business in the craft beer industry.
Is Owning a Brewery Profitable?
Any new business is concerned with the bottom line. A new venture in the brewing industry is no exception. Here’s some numbers budding entrepreneurs can mull over.
- Small scale breweries are a great model. The profit on a keg is 75 percent.
- There’s some headwinds. The Brewers Association reported a 9% decline for craft brewers in 2020. That’s pandemic related.
Overall, the beer market in the USA was worth $94.1. billion in 2020. The craft beer market market was $22.2 billion.
How Much Does it Cost to Start a Brewery?
You need to spend money to start one of these small businesses. Many breweries will set you back $500,000 to $1 million.
Both major expenses and smaller ones need to be covered in your startup costs. These include staff salaries, ingredient prices, utilities, rental fees and of course cost for equipment to name just a few.
Don’t forget to put a market analysis focusing on the craft beer community in your business plan.
How to Open a Brewery
Starting your own business is about more than just figuring out start up costs. You might be looking to turn your home brewery into a business, so there are many options. Use the following steps as a guide and watch your craft brewery take shape.
1. Look at the Current Market (and other Brewery Owners)
Brewing beer is competitive. Get excellent stats here. But you’ll need to have an account.
Look into neighborhood features and demographics. And what other breweries are doing, as well as problems facing the beer industry.
2. Name and Brand Your Business
Brand identity will separate you from the competition. A good name gives the customer a first impression. It should be meaningful and distinctive. You need to trademark it. And you’ll get more sales when it’s visually suited to graphics and packaging.
3. Choose a Niche
Choosing the right niche is a big part of being successful when you’re selling craft beers. There are several options that appeal to specific craft beer drinkers.
- A Taproom brewery sells beer onsite. There’s no restaurant.
- A Nano Brewery is the smallest.
- A Microbrewery produces 15,000 barrels a year.
- A Brewpub adds food in a restaurant/bar setting.
- Contract Brewing Business. These hire other smbs to produce their beer.
- Regional Brewery. These are recognized worldwide.
4. Write a Brewery Business Plan
A good business plan is a financial road map. It’s also an overview detailing things like the startup capital needed. And it includes numbers like projected cash flow.
Here’s a few boxes to check.
- Executive Summary. Cover what’s to come in one page.
- Business Overview. Just the facts here–contact details, legal address, name.
- Description. Add the goals and objectives.
- Market Analysis. Fill in the stats and trends for your niche.
- Competition Analysis. Make sure to include both direct and indirect competitors.
- Marketing. What’s your strategy? Add in promotion ideas, pricing etc.
- Operations. An overview of your day to day. Don’t forget staffing and licensing requirements.
- Financials. Pitching to investors and/or looking for a loan? Include the money details here like expenses, costs, forecasted revenue.
5. Register and Form a Business Structure
The right business format is critical. The one you choose dictates your smb structure.
- Sole Proprietorship. This is top-of-list because its the simplest. But you’re responsible for all the liabilities and debts.
- General Partnership. There are two or more owners here. Partners divvy up both profits and losses.
- Limited Partnership. You’ll need to file paperwork in your state to form an LP. A limited partner is usually an investor.
- C Corporation. A business entity with shareholders and others with control over the brewery. Lots of tax deductions.
- S Corp. The profits and losses here can be filtered through the owner’s personal returns.
- Limited Liability Company. There’s big bonuses here. Less paperwork and no owner personal liability for profits and losses.
6. Create a Business Bank Account
Opening a business bank account leads to a business credit card. Buy equipment and supplies. You’ll need an Employer Identification Number and other documents like a business license.
7. Look into Small Business Loans
There’s costs involved with breweries. You’ll need funding. Here’s a few options.
- Traditional avenues like bank loans, SBA loans, business lines of credit. Here’s a bit on the process for these.
- Crowdfunding or CrowdBrewed is a relatively new way to get funding. Supporters donate cash online.
- Investors. A solid business plan helps your pitch.
8. Choose a Location
Choosing the right location is about how much space you’ll need. Craft breweries should consider the following.
- Utilities. Look to see if your gas, electric, water and sewer needs will be met.
- Your needs and wants. For example, your day to day operations might not need a loading dock. Sometimes a forklift and drive in door will do. This depends on how much beer you sell.
- You’ll need to have some restroom stalls for a tap room.
Other considerations include local zoning regulations and leasing considerations.
9. Have the Required Licences and Permits for Starting a Brewery
You need to remember a brewery is connected to alcohol production and sales. That means there’s state regulations to follow. Check with your local government or the feds for:
- A Retailer’s License. So you can sell stuff like shirts and such.
- Insurance. Get liability, casualty and property.
- An Operating Agreement. Covers the rules for an LLC.
- A Federal Brewer’s Permit. To produce beer and serve food.
- A State Liquor License. So you can sell beer to your target consumer.
- A Brewer’s Bond. Ensures you pay state and federal taxes.
10. Get Your Taxes in Order
There are both government and state taxes you’ll need to pay. Here are the main ones a brewery will have to dole out.
- Federal Excise Tax. The first 60,000 barrels will cost $3.50 per. Here’s more about those rates.
- There are state taxes too. Only 5 states don’t charge.
11. Purchase Business Insurance
Business insurance is another must. A brewery owner needs these standard types.
- Commercial Property. Covers physical damage.
- Business Income. Covers you if you need to shut down.
- General Liability. Protects against injuries and lawsuits. Important for new brewery owners.
12. Finalize Plans for the Brewing Process
Don’t forget why you opened a business. How you brew your beer makes all the difference.
Most breweries start with a milling and mashing process. Down the list are boiling and fermentation.
13. Purchase Brewing Equipment and Other Essential Items
Equipment prices are important to consider. The right brewery equipment is as critical as the suds themselves. Getting the most from brewing equipment ultimately depends on your skill level.
These items need to be on the list. Some are the same as for liquor stores.
- Refrigeration Equipment. Here’s a checklist covering compressors and pump motors.
- Canning Lines. These are cheaper than bottling lines. Look at cans per minute speed.
- Cleaning Equipment. You’re tackling things like protein and mineral scale. Look for a strong alkaline cleaner.
Other items include kettles, boilers and storage tanks. Some items are the same for companies that sell alcohol.
14. Set Your Prices
The average markup for beer is as much as 300 percent. The same price works for draft, bottles and canned beer.
15. Find Beer Distributors
A contract brewing company needs distributors, Look for clearly laid out policies.
16. Hire Employees
Good employees make everything happen.
- Like a Head Brewer. They choose ingredients and create recipes.
- A General Manager looks after the other employees. They look after inventory too.
- The Assistant Brewer is basically an apprentice.
17. Market Your Business
Beer drinkers are loyal customers. But you still need to reach out and market to them. Here’s a few proven ideas.
- Look for a Brand Ambassador. Make sure they’re willing to undergo product training.
- Be An Active Community Member. Your city should have events, festivals and the like. Get involved. Be a vendor or sponsor.
- Optimize Your Profiles. Review sites attract customers. Here’s a list to get started.
18. Expand Your Brewery
A successful brewery is a big part of the lucrative alcohol industry. This post doesn’t constitute legal advice. But it supplies a proven framework.
19. Be the Successful Business Owner of Your Own Brewery
Your new brewery is waiting. Take these ideas and get started today.
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