what do I need to do to start a nano-brewery

[Jaxmickey]

So I have a person that is willing to loan me $30k to upgrade my homebrew to a nano brewery in Florida. Do I need to have a business space and get the same alcohol licenses if I don't plan to sell my beer there? I'm hoping I can go from keg/bottle directly to beer shops/taprooms. is this even feasible with this size of a loan?

Thanks in advance!

 

[normonster]

No, it is not.

The first thing you need to do is write a business plan.

You might start with equipment costs from which you can calculate depreciation, then factor in rent, insurance, liquor license, other permitting, building modifications...basically all the expenses you will incur getting up and running.

Then workout your production schedule, which will likely lead you to the conclusion that you need more equipment and additional labor, all adding to your cost assumptions above. Calculate your cost per batch at the scale you'll be producing. It will not be cost efficient by a long shot. That might be then end. If it takes you $90 to make a keg of beer and wholesale prices are $110/keg you're out of luck. To prove it to yourself, take that margin (110-90) and extend it by the number of kegs you think you could sell, then compare that revenue with the costs above.

If you're still going, workout your distribution strategy. If you're going to sell wholesale to distributors you need to think about the value chain from the shelf back up to your FOB (what are the margins required by distribution and retail and what does that leave you with in terms of what you can change to send your product through that value chain and hit a shelf price that is reasonable). You’ll likely find that the margin you used above was way liberal and you need to assume a much lower FOB and margin.

Basically, work out fixed costs, variable costs, expected margin and expected volume and find that it is a bleak picture.
$30K doesn’t even get you a 4bbl brewery and that is just the hot side. Brite tanks, kegs, etc, are all expensive. In my estimation, you could make it all work with a $200K loan and a ton of business sense. If you have no experience in business/accounting/finance I would really think twice. Lots of people make a great pizzas but pizza shops close daily because those same people are not always necessarily business people and in the end, it is a cold hard business.
My $00.02

 

[GilaMinumBeer]

You will still need a license to sell your beer to another entity.

 

[quijiba]

No, it is not.

The first thing you need to do is write a business plan.

You might start with equipment costs from which you can calculate depreciation, then factor in rent, insurance, liquor license, other permitting, building modifications...basically all the expenses you will incur getting up and running.

Then workout your production schedule, which will likely lead you to the conclusion that you need more equipment and additional labor, all adding to your cost assumptions above. Calculate your cost per batch at the scale you'll be producing. It will not be cost efficient by a long shot. That might be then end. If it takes you $90 to make a keg of beer and wholesale prices are $110/keg you're out of luck. To prove it to yourself, take that margin (110-90) and extend it by the number of kegs you think you could sell, then compare that revenue with the costs above.

If you're still going, workout your distribution strategy. If you're going to sell wholesale to distributors you need to think about the value chain from the shelf back up to your FOB (what are the margins required by distribution and retail and what does that leave you with in terms of what you can change to send your product through that value chain and hit a shelf price that is reasonable). You’ll likely find that the margin you used above was way liberal and you need to assume a much lower FOB and margin.

Basically, work out fixed costs, variable costs, expected margin and expected volume and find that it is a bleak picture.
$30K doesn’t even get you a 4bbl brewery and that is just the hot side. Brite tanks, kegs, etc, are all expensive. In my estimation, you could make it all work with a $200K loan and a ton of business sense. If you have no experience in business/accounting/finance I would really think twice. Lots of people make a great pizzas but pizza shops close daily because those same people are not always necessarily business people and in the end, it is a cold hard business.
My $00.02

What he is saying is pretty spot on.

I just started a nano for 50ish k and I own the property/building and even then the margins are pretty tight even just selling out of a bottle shop (again that I own) using a 1BBL system. No employees or anything (we are moving to a 15BBL within the next 12-16 months though, this is our pilot and we just wanted to quick beer out the door here).

30k simply is not going to get you far enough if you have any intention of renting anything. Take some time and write a good hard and fast business plan. If somehow you still aren't disenfranchised there, look into the regulations you'll need to get approved in your area (which typically also jacks the price up because some locations won't work and other things will be required you may not have thought of yet). Then rejig your business plan again to match all that, consider the time everything it is going to take. I assure you 30k will look like peanuts after you've done all that.

 

[Weezy]

$30k will work if you already own commercial property suitable for a brewery, as per local zoning officials and county or state inspectors. You need to worry about recurring costs like rent, taxes, insurance, utilities, materials, etc. Pricing and buying brewing equipment is the easy part.

As was said, work on a business plan; Google examples. Work out what your real cost might be and add 25% to account for unknowns.

I've been down that road. I own outright 3200 sq.ft. of suitable commercial space and have the verbal blessing of the township. It's still going to cost me $25 just to get the side up to code for the job. But the beauty of a true nano is that it's part time and I wouldn't quite my day job. If you were planning on writing your day job, you need to be much bigger then nano and you need to add a least a zero to that $30k. Maybe some day.

But look into it! Just take your time and check with your local SBA for help well, before you commit. Go really to some local brewers too. Hopefully they'll be willing to talk some.

 

[GJOCONNELL]

So I have a person that is willing to loan me $30k to upgrade my homebrew to a nano brewery in Florida. Do I need to have a business space and get the same alcohol licenses if I don't plan to sell my beer there? I'm hoping I can go from keg/bottle directly to beer shops/taprooms. is this even feasible with this size of a loan?

Thanks in advance!

Don't want to crush your dreams but $30k isn't even close to cutting it without a lot of free help and I mean a lot of it.

Based on my most business cases I have seen you will need a bare bones minimum of $300k but the average tends to be closer to $500k to give buffer for things that will go wrong....they always do. You have hiccups that cost a lot more than you would expect.

I have had people approach me about opening a brewery and if $250k was enough and I said not even close...double it and it might work....I know a guy who was effectively the head brewer and he left to find more stable and better paying work.

I still to this day think about opening a brewery at some point...I get nudged by lots of people but resist.

 

[Murphys_Law]

You need more friends.

 

[bobeer]

if it were me I'd want about 250k so I could do it right. I dig the nano size so you can experiment and always have new and different beers on tap. That comes with a cost though of always having to brew around the clock. With that comes more wear and tear on your gear, you'll be constantly cleaning, constantly ordering inventory, and, basically, constantly working just to stay afloat; money wise.
30k is chump change in the big scheme of things. Depending on your retail space situation you may need to put in floor drains which can cost up to 20k right there... Fermentors aren't cheap either, and keeping them at the temps you want isn't cheap. Even a walk-in freezer you build yourself still costs around 8k. Then you have the application fees, you have to make the dept of health happy which could cost some money to do, and you have the costs of building a bar for folks to sit at, the tap system to serve out of, glasses/dishware, swag to hand out to promote your brand, etc etc. State and local governments will also want to charge you money to comply to local and state laws. The list just keeps going on and on.

It's a lot to take on, for sure, but if it's your dream you just have to take it one step at a time and not think about how much more you have to do. Just work on the one thing that's in front of you. I think getting educated in business and accounting is a must as well unless you have someone willing to do that stuff for free. I'd def write up a business plan, do some market research, benchmark your potential industry, and learn how to run a business. If all you're going to do is brew and someone else will take care of all this stuff then more power to you.

But all in all just brew brew brew. Get your beer into people's mouths and get as much feedback as you can. Good luck!

 

[brandonnys]

Why do you want to own a nanobrewery? If you can answer that question, continue with your business plan. If you can't, or the answer is "to make money making beer", you need to think about it more.

 

[brandonnys]

Speaking from experience, you can make a nanobrewery work on a shoestring.

There are so many factors to think about when you start small. It all becomes an exercise in time management, not money management. The resourceful entrepreneur can always find money.

Do you plan to sell your beer to local taphouses and bottleshops? If so, how much time do you have to go to these places to pitch the product? If you don't have the time, will you onboard a distributor? (This assumes you're in a state that allows self-distribution, such as Oregon) What is the cost associated with onboarding a distributor? Will they buy bottles from you if you don't also offer kegs? Will you be selling 1/2BBL kegs, or just 1/6BBL kegs?

Once you have clients and beer is moving out the door, can you keep up with demand with your current system? What's the plan if your demand exceeds capacity? If you need to expand, what's the likelihood of you having the capital to do it? What happens if it's the other way, and you have too much product and not enough demand? Can you stay afloat if that happens? Does staying afloat mean keeping a day job?

I mean, I could go on and on with the questions I asked myself when I started the process. There are probably a thousand more that I can think of right off the top of my head, but I don't want to discourage you. Every question needs an answer, but not every question is the most important one to ask at any given point in time.

One thing I cannot stress enough is once you decide that owning a brewery is really what you want to do, find yourself a bookkeeper, a CPA, and a lawyer. You will need this network of skilled people to do the legwork that takes the most time and requires a certain amount of expertise. You need to know that these people come at a cost, but the cost is well worth it. Not having them will extend your timelines immensely.

 

[bucketnative]

Also, what's the payback schedule on the "loan", or is it an "investment" where the investor assumes the risk of loss?

 

[GPP33]

This guy does a good job with the nano business model. Not sure how much he has invested, how many hours a day he spends brewing or how much he makes doing it. I'd reach out to guys like this with your business plan and see if you can get them to review it and poke holes in it.

http://jwellsbrewery.com

I'd also suggest focusing on selling on location. $5 for a pint will net you a much higher profit than $5 per 6 pack (remember the bottle shop is going to want to make a profit too). Plus you don't have to spend time fighting for shelf space, paying for packaging or trying to pursuade customers to buy your beer that they have never heard of when there's one they like right next to it.

 

[markstache]

What about gypsy/contract brewing or finding an alternating proprietorship? This would get you around some of the high capital costs, while allowing you to build a brand and gain experience. Luck up Notch Brewing for a good example of someone who used this strategy really well (and now has a physical location, I think).

 

[Weezy]

Maybe this isn't common thinking but "nano" to me means small scale and small budget.

When I hear someone say "nano" brewery, I take that to mean a hobby, side business or you plan on living the starving artist lifestyle, with a cobbled together 1-2 bbl system, maintaining a couple taps at a local bar or two.

To make a decent living, i see two options...you need to be in the 3 barrel range and do the majority of your sales over the counter in pints from a full on tap room. I don't consider this nano because of the investment in cash and manpower to open and run a tap room (small scale but not small budget). And the second option is large scale production and distribution. If you want to be a production brewery, living off distribution, you need to be in the 7+ range and the bigger better. If it's the later, you should consider getting a job at a brewery or volunteer there, to learn how large scale production work goes.

 

[kingmatt]

So I have a person that is willing to loan me $30k to upgrade my homebrew to a nano brewery in Florida. Do I need to have a business space and get the same alcohol licenses if I don't plan to sell my beer there? I'm hoping I can go from keg/bottle directly to beer shops/taprooms. is this even feasible with this size of a loan?

Thanks in advance!

I agree with most everything that has been posted in this thread so far.

My first thought when reading your OP was that even if you were able to cobble together a workable system and space to brew with $30k, there is no way you would be able to survive solely on distributing for outside sale.

Small breweries make miniscule amounts on the kegs they sell to bars, to they point where it is basically nothing more than a marketing tool for your brewery. Not to mention how difficult it has become to even get adequate distribution with the enormous amount of competition out there. The Macro and even established micros can offer retailers a cheaper price (because they brew on a much larger scale, so their price per batch is much less than yours) and a proven name that will sell. You on the other hand are an unknown asking more for your product that may or may not tie up one of their valuable tap spaces for an extended period of time. Tough sell.

Assuming of course that you can brew good beer, the only really feasible way to make it as a nano is to have a tap room where you can sell directly to your customer in the form of pints. Let's say it costs you $80 to produce a keg that you can sell to a bar for $100, a whopping $20 profit for all your HARD work. That same keg will yield around 124 pints that you can sell for $5 each out of your tap room, leaving you a $540 profit.

A taproom gives you a way to make enough to sustain your nano, build a customer base and eventually prove to a bank that your business plan is profitable so they will lend you the additional money you will need to step up to the minimum 7-10bbl system you will need to make brewing your day job.

That said, people have proven it can be done...just know what you are getting into! Good luck!

 

[kh54s10]

I think the key for starting that small is owing property. If you have to rent that will suck away most if not all profit.

 

[ericbw]

No one asked what he meant by nano. Ya'll got a lot of answers for people that don't even know what the question is.

 

[kingmatt]

No one asked what he meant by nano. Ya'll got a lot of answers for people that don't even know what the question is.

The term 'nano brewery' is pretty well defined at this point:

http://www.probrewer.com/library/nano-breweries/nano-brewery-basics/

 

[xCSx]

i gave up on the idea, i'll keep my software engineering job and keep homebrewing as a hobby

 

[kh54s10]

I suppose that you can start on a shoestring... Your results will depend on many things.

There was a thread a while ago for someone starting a brew pub. Starting was 6 months and less than $300K. It ended up taking 1 1/2 years and over $450K. I don't know the current status.

But figure at least twice as much and at least twice as long.

You will need licenses, permits, health inspections....... etc.

 

[madscientist451]

My first thought was: "if this guy us asking that question on here, he doesn't have a clue and is doomed". Sorry if that's negative, but if you haven't hunted around for all the available information that's out there, you really don't have a clue and there's no way you can run a business and be an entrepreneur.
A local brewer near me started a nano in a garage type space. He had a 1/2 bbl keggle type system and the laws in this state at the time only allowed him to sell growlers; he charged like $10- $12 for 64 oz and sold about 10-12bb; a month, and had a couple of accounts he sold kegs to. No seating, couldn't sell by the glass, but somehow he survived for a few years. Now a few years later, he got financing and has a brew pub/restaurant.
If you can rent a space for $1,000 a month, how much beer do you have to sell to pay all the expenses and make a profit? How much rent money is going to be spent while you are waiting for licence approval? Is your beer really any good anyway? There's a lot of mediocre micro brewery beer out there, are you going to be way above average? Selling kegs wholesale isn't going to make enough profit on the nano brewery level. Can you get enough people in the door to keep things going? These are the things you need to ask yourself.

If you haven't listened to all the available podcasts and read all the available books, should get started on that ASAP. If you can't find those things on your own without asking, you are not going to be a success in the brewing business.

 

[ericbw]

You don't have to make above average beer to be successful. See other threads here about brewpubs AND think about how nasty many beers are. You just have to find your customers. For some, drinking beer in a rustic, poorly heated garage might be the selling point.

 

[Jaxmickey]

Thank you all for your answers. This is really not even close to the first steps of my research. Just thought that I could get some additional input from fellow brewers across the country.

Thanks again!

Cheers

 

[MaryB]

If you could partner with a local bar to offer on site brewed beer you might stand a chance... MN has a Brew Pub license that is dirt cheap because the licensing is already paid by the bar. Next step up to microbrewery is $1k a year license and limited to 2,000 barrels a year production... which is quite a bit!

Start with your local laws and go from that point to see what you can do cheapest!

 

[RevKev]

I know a liquor license in NYS costs about mmmm... 30K so. In short have fun! But you need more and figure out if it actually will gross money! All these guys are much more helpful than I

 

[Cape Brewing]

if it were me I'd want about 250k so I could do it right. I dig the nano size so you can experiment and always have new and different beers on tap. That comes with a cost though of always having to brew around the clock. With that comes more wear and tear on your gear, you'll be constantly cleaning, constantly ordering inventory, and, basically, constantly working just to stay afloat; money wise.
30k is chump change in the big scheme of things. Depending on your retail space situation you may need to put in floor drains which can cost up to 20k right there... Fermentors aren't cheap either, and keeping them at the temps you want isn't cheap. Even a walk-in freezer you build yourself still costs around 8k. Then you have the application fees, you have to make the dept of health happy which could cost some money to do, and you have the costs of building a bar for folks to sit at, the tap system to serve out of, glasses/dishware, swag to hand out to promote your brand, etc etc. State and local governments will also want to charge you money to comply to local and state laws. The list just keeps going on and on.

It's a lot to take on, for sure, but if it's your dream you just have to take it one step at a time and not think about how much more you have to do. Just work on the one thing that's in front of you. I think getting educated in business and accounting is a must as well unless you have someone willing to do that stuff for free. I'd def write up a business plan, do some market research, benchmark your potential industry, and learn how to run a business. If all you're going to do is brew and someone else will take care of all this stuff then more power to you.

But all in all just brew brew brew. Get your beer into people's mouths and get as much feedback as you can. Good luck!

This is some of the worst advice I've ever heard

Sorry... no offense.

 

[JDXX1971]

I am a little late to the party but here you go.

https://www.homebrewtalk.com/new-bill-homebrew-sales-cottage-licenses.html

 

[yeahfairly]

OP.... Your getting a lot of advice thrown at you and seeing start up expenses in the $250,000 to $400,000 range..... I say Bollocks! Go to Colorado Boy's site http://www.coloradoboy.com/ridgway and order his book. He has helped several folks start at the Nano level on a shoestring budget (less than $30,000). There are ways of making your dream of owning a Nano a reality without having to be a Bazillionaire! The biggest downside I see to your plan is you don't want a Tap Room. You can't make money selling Kegs off a Nano system. The Tap room is where the money is. You make a buck a beer selling a half barrel Keg but you can make $4.50 a pint selling it through the Tap Room.... Serving food is another topic that needs to be considered. It gives you an additional revenue stream and gets more folks in your door! Good Luck!

 

[Brownalemikie]

Serving food is another topic that needs to be considered. It gives you an additional revenue stream and gets more folks in your door! Good Luck!

Or partner up with an existing food truck. Our local brewery has an arrangement with "Suzy's BBQ" and it works out great with the truck right outside in the parking lot. I always eat a pulled pork sammich while tipping a cold one.

 

[Cape Brewing]

We started our nano for just under $30k in 399 sq ft and are now in 8,500 sq ft with a 3 bbl system and ten fermenters and then a 15 bbl with four 15s and two 20s

If you are starting a nano for any more than about $50k... you have a massive uphill battle ahead if you and, I believe, are setting yourself up to fail.

The most important data point I can give you is "about a $1,000 of revenue per barrel". That's not profit. That's revenue. If you do whatever calculations you're going to do and you are thinking you're going to produce significantly more revenue than that, you're being way too aggressive. If you think you will produce significantly less than that... you're doing something wrong.

So take that $1,000 of revenue and cut it in half to cover cost-of-goods-sold.

That's $500 before paying yourself, or anyone else, a penny. AND that is before putting a penny into expansion.

Now do a back of the envelope of how many barrels you would have to produce on a nano system to hit your payback period on "$250k" or worse, "$400k".... or the most ridiculous I have ever heard (from a beer blogger).... "you can't start a brewery for less than a million dollars".

For every day you haven't paid off your initial investment, all you're really doing is playing with a REALLY expensive hobby. Yes, you own assets and are building equity in a business but those are only valuable if you're going to sell the business or close down... which... given haven't opened yet... i doubt those are your goals.