Business Issues To Consider Before Opening A Brewery

With the rise of the craft beer industry, aspiring brewers are preparing to open craft breweries, but there are still some realities to face before opening a craft brewery to make this dream come true. Brewing craft beer is fun, and opening a craft brewery is even more fun. Generally speaking, craft breweries are smaller in scale, so there are many business issues you need to consider before opening a craft brewery.

1. Funding

Do you have the money to start a craft brewery? This is the first step in planning to start a brewery. We have seen many craft breweries that are underfunded and eventually face a situation where the capital chain is broken. If you do not have sufficient financial support, we do not recommend that you start a craft brewery because it is like using paper instead of steel plates to make beer equipment.

You need to determine whether you have enough funds to start a brewery. Generally, you need to prepare more than 30% of the brewery startup costs (equipment, rent, decoration, etc.) as working capital for the brewery. This is a relatively safe starting amount. If the expansion and equipment investment is $1 million, then you need to prepare more than $300,000 in working capital to help you get through the first few months. Although this amount of working capital seems to be a large amount, marketing and raw materials alone will consume most of the funds in a short period of time.

Your funding sources can be friends, family, banks, investors, or even crowdfunding. In addition, you must work with the right legal and financial team to establish a structure that can receive funds from anyone. Any wrong decision may cause big trouble in the future.

2. Planning

Do you have a plan for your brewery? I’m not talking about traditional commercial brewery planning, but planning for brewers. When I say planning, I mean the layout of the brewery, the strategic plan for the next five years, parking space, and expansion plans. Of course, marketing and staff benchmarks also need planning. Although we can’t predict the future, we can plan for it. Now you can feel your ambition!

Goal planning can start with simple plans, such as production goals, number of tasting rooms, and wholesale revenue goals. While these seem simple, they will become the basis for more complex indicators in the future. Over time, your goal planning should gradually transform into a deep understanding of production, marketing, and financial processes, which will have a very big impact on you.

3. Sales Model

You need to consider how you will sell your craft beer. What is the distribution situation in your state? Can you produce and sell your own beer? For states where you can distribute your own beer, do you have complete logistics and liability insurance? Producing and selling your own beer is a very good option in the early stage, but as you scale up, you may sell your beer to professional craft beer distributors. When the distributor signs the contract, you need to carefully review the nuances in the contract. Although it may make you crazy, it will affect the future profits of the brewery.

You have to hand over the transportation and sales of a product you are proud of to a complete stranger. This process needs to be slowed down as much as possible. During this process, you need to carefully review every detail of the contract signed with the distributor. In addition, don't be shy to hire a beverage lawyer to come in and review the contract, who will better help you understand all the terms in the contract.

4. Audit

I believe you know how to operate all the valves and tanks in your brewing equipment, but you may not be able to calculate your expenses and profits. An accountant can provide you with the ability to handle the expenses and profits of your brewery. You need to hire professionals who understand this industry. No one knows the financial situation of your craft brewery better than a professional accountant or bookkeeper.

Another reason why an audit should be in order is that TTB requires it. If you conduct an on-site review of the selected project, you need to provide data support for the information you provide. Of course, you can also find a TTB agent, who is very professional. However, you need to provide them with relevant information and follow their requirements so that they can serve you better.

Finally, you also need to know if your craft brewery is profitable. Most of the craft breweries we contacted have cash in the bank. While bank balances can indicate profitability, it is not authoritative. A professional accountant will calculate your brewery's costs and profits and properly record and save every transaction of your craft brewery. Properly recording and saving bills can make audits orderly and instill confidence. This is very important because proper record keeping can keep the TTB out of trouble. You can also see if your craft brewery is profitable.

5. Culture

You need to build a good corporate culture for your craft brewery. Do you want to know what kind of person you will serve? I know everyone loves a bar and has money, but what exactly is that person like? Every good culture is carefully crafted by the business owner, and it has a greater impact on the success of the brewery than most people think.

If a culture is clearly defined, it will attract more followers. As the saying goes: birds of a feather flock together. A confident culture will only bring more loyal followers to the brewery, which will increase sales. While increased sales are good, having a clear culture is better - team members will treat the brewery as a second home. They will also be the most effective advertisement for you, bringing more customers and family.

A clear culture also helps to develop employees. Culture can help you filter out those who don't belong here. How to tell if you have a good culture? Then start with the leaders. Do you want your team and sponsors to show what you stand for and believe in? If not, then try. It's never too late to build a beer culture.