Overhead Cost: How much does it cost to run the still?

The question about what is the overhead cost of running a still can actually be a surprisingly complex one to answer. There are a lot of moving parts with any business start-up and any time you have a moving part in a system you have a potential point of failure.

The unexpected happens very often and it’s almost impossible to be ready for every potential scenario. As you go through your planning process you’ve probably gone over the following items a time or ten but it never hurts to go over things one more time.

It’s easy enough to calculate your equipment costs and figure out how much capital you’ll need to purchase it and install it in your facility (assuming there are no surprises and everything goes according to plan).

The cost of feeding the still can be relatively straightforward as well, whether you’re making the mash yourself or buying the beer from a local brewery you can calculate the input cost, labor handling costs, and add in a loss factor to get the total cost of your fermentables. The loss factor can be a little tricky and this is where plans and reality can diverge pretty quickly. Any time you’re handling material, transferring it between vessels, or processing it you’re adding in more potential for loss.

Variability in materials also has a role in the overhead cost of running a still and if not managed properly can increase your distillation expenses fairly quickly. Thankfully with distilling even if a beer doesn’t come out quite where you want it you may be able to distill it into something that will blend well or be the base for your next seasonal release.

This is a great way to recycle material rather than throw it away but there can be some associated costs here as well. Storage costs add up pretty quickly and depending on how many barrels you’re planning to put aside for aging things can get crowded pretty quickly.

Buy a Perfect Distillation Equipment

This likely won’t be a problem if all you’re doing is producing vodka from neutral but if you’re trying to store your grain, bottles, barrels, and have a tasting room with limited space it can be a challenge.

Utility costs vary by area. Check your local rates to see what the payback period is on your infrastructure. Are you planning on using electricity to heat your kettle or do you want to invest in a boiler? Some of the math changes depending on how long you’re planning on being in the same building.

It may be necessary to spend a good bit of money to build out a space to make it suit your needs but if you outgrow the space in a few short years the ROI may not be worth the expense. This applies to tasting rooms as well as your production facility. Tables and chairs may be easy enough to transport but built-in fixtures are a little tougher to move.

If you’re planning on having a tasting room that adds other costs as well, fixed costs for the facility, decor, added variable costs for supplies, labor, and added utilities. As a general rule, labor costs will end up accruing faster than equipment costs. It can be tempting to get smaller equipment to start with and assume you’ll buy more later but human nature doesn’t always work that way.

Opportunity costs are probably the hardest to account for. If you decide to get a very simple setup and only run a pot still you’ll miss out on the flexibility to make gin and vodka and if you can’t sell a white spirit you’ll have to wait on the cash flow from your aged spirits.

It can be a tough balancing act keeping your distillation expenses in balance with all of the other costs of running a business and sometimes you can end up “saving” money to the point that it puts you into a poor house. We’re not financial advisors by any stretch of the imagination but we’ve seen a lot of different setups and business models and we’d be happy to help.

If you have any questions, please email kate@degonget.com and we'll be happy to help!