Brewing a Profitable Business: 8 Financial Tips for Starting Your Own Brewery

Microbreweries have become increasingly popular over the years, providing beer lovers with unique, high-quality craft brews. Starting a microbrewery can be a challenging but rewarding endeavor, and it’s clear to see why people want in on this growing industry.

Many microbrewery owners start out as hobbyists. They begin homebrewing for friends and neighbors and realize that they have what it takes to start brewing in a more serious manner. Brewing good beer is a labor of love, and something many people feel connects them to their senses. It’s a process of tasting, carrying equipment, becoming familiar with ingredients and noticing small signs that your beer brewing is on track. But turning it into a business requires more than good brewing sense. You also need to be financially savvy and to ensure that your venue is going to profit.

If you’re planning on starting your own brewery, these tips will help.

Research Your Profit Potential

Before you start your microbrewery, you need to do your research. This includes studying the market, researching your competition and understanding the legal requirements. Find out what types of beer are popular in your area, and what your target audience is looking for in a craft beer.

A lot of people say the craft beer industry is already oversaturated. But this is true for many industries, and yet newcomers can still thrive. While many brewing companies try to appeal to as many different niches as possible, most beer drinkers look for a good-quality, standardized product that competes with the competition in price and ease of access. Speak to your beer-drinking friends and conduct surveys to determine what’s needed in the industry and what’s going to be profitable.

Create a Business Plan

A solid business plan is essential for any business, and a microbrewery is no exception. Your business plan should include a detailed financial projection, market analysis, and marketing strategy. It should also outline your business structure, mission statement and long-term goals.

Use the research you’ve done prior to your business plan to construct a business model that makes sense. Do you want to sell from a taproom, from local liquor stores or via an online delivery service? What type of license do you need to make this work? Don’t overlook the importance of accounting for startups — having a clear understanding of your startup’s finances from the beginning can help you avoid costly mistakes and prepare for future growth.

Choose a Strategic Location

Location is critical for any business, and a microbrewery is no exception. You need to choose a location that’s easily accessible, has ample parking and is in a high-traffic area. Additionally, you need to consider the zoning regulations, utility costs and potential competition. But above all, you need to ensure that your location is within your budget. If you over capitalize on your location, you’ll pour your profits down the drain.

If you’re not looking to buy a taproom, where can you brew from that can generate maximum yield at minimal transport costs? Is it a smaller warehouse closer to the local bars, or a larger facility on the edge of the city close to transport routes? Your location is determined by your business – and your capital.

Secure Financing

Speaking of capital, starting a microbrewery is a capital-intensive venture, and you’ll need financing to cover your startup costs. You can apply for a business loan, seek out investors or use personal funds.

If you’re looking for investment right off the bat, you need a watertight business model. In the saturated brewing industry, you’ll need to convince possible financiers why they should have faith in your business model. You’ll also have to convince them that you’re aware of their concerns and the risks and have solutions ready.

Understand Your Costs

To run a profitable microbrewery, you need to understand your costs. This includes the cost of ingredients, brewing equipment, rent, utilities, salaries and marketing expenses. Make sure you factor in all of your costs when pricing your beer to ensure you’re making a profit.

One of the main startup costs for a brewery is equipment. More expensive equipment can be of a higher quality (i.e. less time before repairs) or generate a high quantity of beer (more turnover in a shorter time frame). It’s up to your business model to decide what kind of start-out costs will be necessary.

Focus on Quality

Affordable options don’t mean skimping on quality. In the craft beer industry, quality is essential. If your beer is not up to par, customers won’t return. Make sure you invest in high-quality ingredients and equipment and that you brew consistently good beer.

This is also why it’s best to start out with simple crowd pleasers with a bit of a twist. If you’re making a pale ale, why not take inspiration from an older recipe? A good story goes a long way in ensuring people remain interested in your craft. Whether you’re chasing firsts or spending time discovering lost recipes, make sure your beer lives up to the legends you’re spinning, otherwise customers will spend their money elsewhere.

Get to Know Your Regulars

If your business is customer-facing, make sure you engage with your customers frequently. The beer industry is known for being friendly and welcoming, so you want to make sure that people see your business the same way.

Offer tasters of new products, keep in conversation with your friends, family and locals that support you. This gives you a constant source of external information and a perspective on your business that could be invaluable. It also ensures that you have regular customers that you can maintain a baseline of profit from.

Keep Your Accounting in Order

Working in the brewing industry can be tiring, and admin and accounting may take a back seat in the beginning. This is a huge mistake and one you need to ensure doesn’t happen to you.

Keeping accurate financial records, sticking to your budget and implementing proper accounting procedures such as invoice processing and pay runs is crucial. The more on top of your accounting you are, the easier it will be to ensure you maintain a consistent cash flow. Plus, you’ll know exactly what financial position your new venture is in at all times.

Starting a new brewery is daunting and exciting, but if you follow these eight financial tips, you’ll find that the money management side of it is far more manageable.