In the journey of launching your brewery business, setting sail with the right budget is akin to plotting a course on calm waters.
After all, who wants to be part of the 65% of new businesses that face failure within their first decade?
Success rarely comes without challenges, yet we don’t wear failure as a badge of honor.
One way to avoid failure is to ensure you have a budget as close as possible to reality.
Your brewery’s budget isn’t just numbers on paper; it’s a roadmap that ensures you’re well-equipped for the journey ahead.
But where do you start? What pieces make up this critical financial puzzle?
Let’s break down the essential components that typically go into a new brewery budget:
What Items Typically Go Into a Brewery Budget?
Construction or Lease of a Building
Before you think of other budget items, your brewery will need a home. You may choose to —
- get space and build from scratch
- buy or lease any building, then repurpose it into a brewery — or
- acquire an already existing brewery.
While owning your building will give you much freedom and peace of mind, it can be quite expensive, especially considering the cost of land. Then again, the cost of land will depend on the brewery’s location.
If repurposing an existing building, you’ll need to consider the cost of electricity connection, plumbing, and both interior and exterior design.
Brewery Equipment Cost
After securing a building, the next item you should consider is the equipment cost. This includes a barrel brewing system, fermentors, boiling, bottling, and packaging equipment.
Unfortunately, the cost of equipment can vary widely. This is because the amount you’ll spend on buying your brewery’s equipment will ultimately depend on the size of your brewery.
Marketing and Branding
Before you open your brewery for business, there’s a lot of behind-the-scenes heavy lifting you should do in marketing and branding.
And here’s what many people may not tell you. A successful brand launch is no stroll in the park.
To make a powerful first impression, your social media marketing game should be top-notch. Then again, you’ll need to—
- Plan your brand launch well in advance
- Identify key audiences, including your customers and the media, in the brand launch sequence, and
- Develop a brand launch communications plan.
Brewery Licenses and Permits
In Ohio, for instance, an A1c permit class obtained by businesses that produce up to 31 million gallons per year for sale on premises will set you back $1,000. This is in addition to a business license and the free-of-charge Employer Identification Number.
Other Brewery Budget Items
Other budget items to consider when starting a brewery include —
- Utilities such as rent and electricity.
- Staffing costs (You’ll need such workers as cellarmen, brewers, bouncers, and a brewmaster — among others).
- Consultancy and professional services related to accountants, lawyers, and brewery experts.
- Modern brewing tech tools, including a Point of Sale system.
How To Prepare a Brewery Budget
This may come as a complete surprise, but how you prepare your budget may determine whether your brewery business will thrive or perish.
While there are several budget preparation methods to consider when starting a business, the Profit-First budgeting method may force you to succeed.
Understanding Profit-First Budgeting
The uniqueness of a profit-first budget — as the name suggests — is the prioritization of profits.
While traditional budgets focus on revenue, which is cascaded to expenses and profits, businesses first budget for profits in a profit-first budget. In other words, profit is prioritized and, unlike expenses, is a constant.
Since profits are ringfenced, the profit-first budgeting approach often forces businesses to think out of the box to minimize expenses and achieve their unchangeable target profits.
The following are the steps to take when preparing profit-first budgets.
- Step-1: Make the most conservative estimate of your revenue
- Step-2: Set aside between 5% and 10% of the revenue as profits
- Step-3: Make estimates for various expenses, taxes, and other business obligations.
What Are the Biggest Expenses to Watch Out for in a Brewery Budget
Preparing a budget for your brewery business will need several specific details. But that said, these are some of the biggest budget items to watch out for.
- Cost of equipment: This can be up to $50,000 for a 1 to 3-barrel nano brewery, up to $200,000 for a 5 to 15-barrel microbrewery, and up to $1,000,000 for a 15 to 60-barrel regional brewery.
- Rent for the business premise: Assuming a 25,000-square-foot facility at $20 per square foot, rental expenses may set you back a staggering $500,000. If you’re constructing from scratch, this figure will go much higher.
- According to best practice, labor costs are often 30% of the total operating costs.
How Often Should You Check Back in on a Brewery Budget?
While there are no hard-and-fast rules for how frequently to check back in on a brewery budget, several businesses prefer monthly reviews. But this does not mean you should always place your budget in the cold room till the end of the month.
If there’s a compelling reason to adjust your budget, perhaps because of major dynamics in the industry, there’s really no reason to wait until the end of the month.
If you’re a beer enthusiast, you’ve probably toyed with starting your brewery. To a large extent, whether you’ll succeed or fail in your business will depend on how you prepare your brewery budget.
Here’s the truth. Including all items in your budget and adopting the profit-first method can go a long way in ensuring you succeed in your brewery business.
But still, navigating the many uncertainties of a new venture can feel like walking in a minefield.
While you can work like crazy and succeed, you can involve financial experts with over 20 years of industry experience, sleep for eight hours every day, and still give your brewery business a flying start.