Brewing Up Success: 4 Steps to Starting a Craft Brewery
So you’re thinking about taking your beer brewing hobby to the next level and starting a commercial brewery. You’re not alone — there are more than 5,000 craft breweries in the U.S. And the trend shows no signs of slowing down. According to the Brewers Association, in 2017, while overall national beer volume sales were down 1%, craft brewer sales were up 5%, with microbreweries accounting for most of that growth. Craft brands now own more than 23% of the total U.S. beer market.
These numbers are a great predictor of success, but they also mean you’ll have lots of competition. Here’s how to make sure you start off on the right foot and maximize your potential for becoming the brew of choice for discerning customers.
1. Make a Workable Business Plan
This is not the place to list all your grandest dreams. You need a realistic strategy and action plan if your business is going to survive. It should include:
• How your products are unique and different from the competition
• Size of the operation and its distribution area
• Marketing strategy: who you are selling to and how you are communicating to them
• Budget: cost of ingredients, packaging, equipment, overhead, shipping
• Goals: short term steps and long term vision
• Contingency plan: How you will handle unexpected expenses such as equipment breakdown or an unusually large order
One smart move that can save you from making many mistakes is to network with other craft brewery owners. Of course, they won’t share their secret formulas, but they’re usually happy to talk about what business strategies were successful for them.
2. Figure Out the Finances
Another big reason you need a business plan is that it will be required by any financial institution that you apply to for a business loan or investment. Sit down and crunch the numbers on exactly what it will cost to set up the business and operate it for a year.
Then add a cushion for when things don’t go according to plan. There are always hitches in the early months of a start-up business, and you’ll be a lot less stressed when they happen if you know you have the money to solve the problem.
3. Learn the Legalities.
The brewing industry is fairly heavily regulated, on local, state and national levels. You’ll need to know about:
• Federal and state licenses to operate a brewery
• Laws on sending your product across state lines
• Local wastewater disposal regulations
4. Set Up Your Supply Chain
As a hobbyist, you probably focused primarily on ingredients and formulas. As a commercial brewery, you will also be buying large quantities of bottles/barrels, labels and beverage gas. It’s essential to find suppliers you can rely on to provide consistent quality and on-time delivery, because any failures will result in a setback for your business.
On the other side of your supply chain are the post-production services: sales reps or distributors, shipping, marketing. And throughout the process, you’ll need a bookkeeping system to manage inventory (both raw ingredients and finished product), cash flow, profit margins, payroll and tax prep. Many of these activities can either be handled in-house or outsourced; the choice is yours.
As small business specialists, Xendoo provides expert advice along with real-time bookkeeping. We can help steer you around the pitfalls and toward opportunities for maximizing efficiencies and profits. We handle the accounting chores while you work on brewing up your dream business.