I've done some more thinking on this. A coworker has been talking to be about starting a nanobrewery.
pfooti wrote:At first, I figured that there was absolutely no way I could go pro without going Huge.
Beer is a volume industry. It's like a gas station. They make 3 cents per gallon, but don't make money on the one customer filling their tank. They make their money on 100,000+ customers a week. Basic economies of scale come into play. You will have to figure out whether you will sell volume and make little profit per sale making money over time or sell a lower volume at a higher price, make more per sale but less sales. In my experience (I've started and operated 5 businesses) it's easier to lower your price than raise it. One of the things I hate the most about being in business is setting prices.
I did some math on the situation and preliminary numbers indicate that a 1-10 hL system would yield enough income to keep me in business and making enough money to live on, given certain preconditions- one being actually selling the beer and two being the still-murky regulatory world of brewing. I could probably run such a system by myself indefinitely, possibly hiring help to run the tasting room if business picks up.
One of the best formulas is (revenue-COGS)/profit margin = overhead to break even. Goods are sold far less efficiently than they are made. You make money on COGS, not price. You and your competitor charge $3/pint and sell the same volume. Your competition's cost per pint is $0.75. Your company's cost is $0.60 per pint. Who's making more money? Anytime you can get a discount, take it. Bill accurately, get paid on time, pay your bills on time to get the discounts. Get your suppliers to sign you on 2/10N30 terms. Get that discount every time.
I would start off without employees, personally. No WC, no headaches with employees. You have enough to worry about as a startup, you don't need employees complicating the situation. That's another level of management that can be avoided.
I'd done some investigation into this already as part of my first commercial business plan (a subscription model). Living in California makes things somewhat easier, you can self-distribute.
I wish we could self-distribute here.
I'm a pretty smart person and good at learning from books and online resources; I'm not going to jump into this blind. I really can't as the startup costs (while relatively low for a small business) are large enough to require financing, and banks like business plans.
Every business should have a business plan, not just those seeking financing from external sources. Writing a plan can guide you along the way and allow you to find things that you didn't address. The business will cost only as much as you make it cost.
1) Business planning. I'll need to figure out predictions for the actual cost of brewing (right now, I externalize things like water and garbage as they're not really noticeable on the 5 gal scale and they're also part of my regular residential rent) and the likely price points for the products. If I largely self-distribute through a combined storefront / subscription system, I can make more per liter of beer, at the price of actually having to deal with transactions.
That's the largest part of your business plan. You want to make beer and sell it for profit. How are you going to do that? Wholesale only, tap room, retail for off premises consumption only, etc.
2) Regulatory planning. I've talked to some people at the ABC here in CA about this and have a handle on how to start, but I'm still dealing with zoning and health regulations. In particular, I think a tasting room that doubles as a pub (but only serves my beer, which I believe makes it easier to get a permit for) could be a decent anchor for the brewery. No food service planned (don't want to deal with that)- just beer on tap, cases to purchase, and probably a returnable growler filling service. That would be the anchor for the outreach and sales- the rest of sales would be subscriptions, but operating a bar is tricky.
Generally for simplicity wholesale only is the way to go. For a brewery with retail up front, you walk into health codes with restrooms, customer access, etc. Quite possibly you might be able to qualify as a brewpub if you allow food from outside vendors, but not offer food service yourself. In addition to growler filling, perhaps a corny filling service too.
3) Location planning. I'm in the SF Bay (currently living in SF), and cannot move too far. But I could go to Oakland or somewhere else nearby to save on rent. On the other hand, I'm looking to market my product to yuppies (or whatever they're called now), since they're the ones with the money. Anyone know any good resources for finding commercial rental properties in that region? Craigslist isn't all that helpful.
Demographics definitely play a role in marketing and are very tricky. My experience has led me to find out just because there is money in the area, doesn't mean they like to spend it. Even the wealthy people are cheapskates.
For commercial property, I'd look at your local online realtor websites. Here they list everything online that's available. For great deals, go directly to the banks and ask for the REO listings (real estate owned). These are foreclosed properties owned by the banks on defaulted mortgages. Usually only available to real estate investors, but if they are sitting on something for a few years they will deal buyer direct (use their financing as leverage). All REOs are assets of the bank that want it off the book, since it's a liability.
