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Thread: Average Startup Capital For NanoBrewery (2-3bbl system)

  1. #1
    Join Date
    Jun 2011
    Location
    Cornelius, NC
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    87

    Average Startup Capital For NanoBrewery (2-3bbl system)

    Looking for advice on starting our nanobrewery. How much startup capital did you set aside for your startup?

    Here's our situation. By years end, we'll have around $10k. From there, incoming capital goes way up because my wife finishes PA school, and has already been offered numerous jobs after graduating. So we go from school expenses to bringing in around $170k a year in income because I don't plan on quitting my day job until the brewery really hits its stride. We're considering a nano loan from the SBA for 10-15k, which would mean we would have $25k to start the company.

    I plan on brewing at least 4-6 times per week on a 2-3bbl system, and running a tap room on friday and saturday (and maybe sunday) afternoons. There's already significant interest in the brewery, with local bar managers and owners asking when we will be rolling out our first brew, so we have very high hopes. I'm not sure if I've been more excited about anything in my entire life. I love brewing, love it when people like my beers, and would love running a small tap room & brewery.

    ~Jeff
    Hob Knob Brewery
    Huntersville, NC

  2. #2
    kyle.carbaugh Guest

    Nano Capital

    We started down the nano path in January 2010, planning on using a 1 BBL brew system with plans to upgrade substantially once off the ground. Currently, we've invested nearly $25k in equipment alone and are likely 12 months away from launching.

    In speaking with some of the other nano's that have sprung up, expect upwards of $50k minimum with permitting, construction, rent (it takes at least 90-105+ days for TTB and local licensure), and operating capital. I'm sure the "I've done it for less" stories will come in, but I think you'll be hard pressed to find it do-able for much less.

    Check out the old "Frankenbrew" video - they mention piecing a 7 BBL system together less than $20k -- but that was back in the 90's with substantially less expensive stainless. Good luck!

  3. #3
    Join Date
    Sep 2006
    Location
    pembine, wi USA
    Posts
    140
    We've been fully licensed for about a year now and we have sunk quite a bit of money into this. Most of it went into the building which is on our property so the investment into the building stays with us personally rather than with the brewery. Equipment investment has been minimal. Part of that is our belief that the ratio of nano equipment to potential profit needs to be as low as possible and spending tens of thousands of dollars on a system that will only net thousands of dollars in profit is not a good business move. The other factor is that we view nano as a means to an end which is a micro brewery so any equipment purchased will be in use for a short period of time as demand hopefully will outpace equipment capacity. I suppose the nano equipment can be re-sold but that sounds like a pain in the ass. So our first system which was home made with stainless 1/2 barrels lasted about 9 months. The new system which is made from recycled stainless vessels cost me about $600 to put together and has teh capacity of 1.75 bbls. Looks like shit but it does the job. We are already at our limit brewing 2-3 times per week so have already looked at junked dairy equipment to take us to 5bbls by next year. So that kinda lays ot our situation. One thing I have learned is that there s more to having a brewery than brewing beer. We also have our jobs and the brewery and soemtimes it is overwhelming. planning to brew multiple times pe rweek can be done but I don't know ho wlong it can be sustained for. I know I can't do that.

    We can't realistically do a tap room which is a big loss so if you have that option it makes success much more likely.

    Anyways good luck and I hope this helps.

    Tim. I can't spell worth shit
    Tim Eichinger
    Visit our website blackhuskybrewing.com

  4. #4
    Join Date
    Feb 2011
    Location
    Indianapolis, IN
    Posts
    23

    100k+

    We have a small taproom (< 50 seats) and a small food menu as well, but we will end up spending over 100k after all the construction and permitting is complete. We have a 3 BBL system from stouts and it was a small portion of our budget. Make sure you consider all the costs around construction, zoning, and front of house items (assuming you are having a taproom as well).

    For example, we are using an all electric system and it cost us a little under 10k to upgrade the service at our location to the 400 amp 3 phase power. If you go the direct fire route, the hood systems/firewall requirements can sometimes be just as pricey. We found that we priced out the brewing side very accurately but undershot how much the build-out would cost. Luckily we had built in a large enough buffer of funds that we were able to cover everything. Like Tim mentioned, we wanted to give ourselves the ability to expand our system as we grow, so we focused more money into the taproom and the "bones" of the brewery than the system itself. The nano model makes it difficult to be profitable if you want to pay yourself anything in the long run. The cliche that you should research every possible expense and then double that amount seemed to be true with our experience and other start ups we have been in contact with.

    If you need more funding, you may want to consider equity financing. We wanted to keep our overhead as low as possible, so we raised all of our money through selling small shares to friends and family with set buy back amounts that we will purchase back over time. If you have a good lineup of sample beers and a solid business plan, this can be done fairly quickly. We were able to raise our funds within a month and it gave us the freedom of not being beholden to a bank.

    Goodluck!

    Justin
    Last edited by Black Acre; 06-22-2011 at 03:17 PM.

  5. #5
    Join Date
    Jun 2011
    Location
    Cornelius, NC
    Posts
    87
    So far...19 people are telling me I'm screwed

    Anyone care to guess who voted for 10-15k

    The only bit of good news is that we could apply for an SBA loan as I hear they only require 20% down. At the end of this year, we'll have a squeaky clean business plan, no debt (except a house & student loan for the wife), and household income between 150k-185k. So at 20% down with the SBA, we could qualify for up to $85k for the nano.

    That's looking more and more like it's our only realistic option. I don't want to give away ownership shares, so private investors are pretty much out of the equation.

  6. #6
    Join Date
    Dec 2009
    Posts
    171
    If you have such a baller household income, why in the world would you not just save cash for a while until you have the funds you need?

    An SBA loan isn't practical for brewery equipment. A buy/build real estate oan has a tollerable term (>15 year). If you borrow for equipment, they will likely require a shorter term (6-7 years), in which case the monthly payment will be enormous and tough to pay. You should go talk to a bank. They will tell you straight up what they can do for you - and I dont think it will be what you expect.

    I own and run a nano. It took over $50k in equipment and working capital before I was breaking even and I built everything myself and saved cash at every opportunity.

    Andrew

  7. #7
    Join Date
    Oct 2008
    Posts
    81
    Quote Originally Posted by ParishBrewingCo
    If you have such a baller household income, why in the world would you not just save cash for a while until you have the funds you need?
    Yep. And talk to your accountant because the more you're able to spend accumulating equipment, the more you'll be able to claim as deductions.. so some of what you're paying in taxes now can be used to accumulate equipment. Just patiently acquire and keep the dream alive.

    That's what I'm doing anyway, but my income fluctuates and I'm able to do more sometimes and less othertimes... frustrating but if I'm ever gonna get there at all, that's the only way I want to get there.
    John Little | Auburn, Alabama
    General Counsel, Southern Farmhouse

  8. #8
    Join Date
    Jan 2004
    Location
    Redmond (Seattle), Wa
    Posts
    362
    If you have not yet, check this website for info on nanos.

    http://www.soundbrew.com/

    Maybe not what you want to hear but he tells it how it is. I don't see how anyone could start a brewery for under 25k, even if you found free equipment. If you are adding a tasting room, well there goes all the 25k plus more, it adds up so fast your head will spin.

    Your 10k will be gone before you even start moving in your equipment. In fact, it is already gone in fees, permits, licenses, legal documents, brewers bond, pre-payments (nobody will give you terms yet), lease deposit, etc. Start looking for the next 10k for taphandles, coasters, starting inventory. Now start finding some real money for building your taproom, draft system, POS, cold room, kegs, electrical work, plumbing work, HVAC work, mechanical work, walls, floors, drains, furniture, computers, lights, decor, signage, advertising, graphic design, business cards, bookkeeper, accountant, taproom supplies, brewery supplies, office supplies, van, gas, vehicle insurance, business insurance, glassware, chemicals, labor, state and federal excise tax, state and federal business taxes, software, trade association fees, lease plus NNN/CAM fees, repairs, pest control...you get the idea.

    The reality is you will pay to work at your brewery and you will work harder than you ever have seven days a week, 52 weeks a year. Say goodbye to your life...

    Brewing 4-6 times per week and running a tasting room? Serious? Every week?
    Save your money and plan for success (larger brewery). Why kill yourself to make no money?

    Good luck,
    Beaux Bowman
    Black Raven Brewing

  9. #9
    Join Date
    Jun 2011
    Location
    Cornelius, NC
    Posts
    87
    Quote Originally Posted by ParishBrewingCo
    If you have such a baller household income, why in the world would you not just save cash for a while until you have the funds you need?

    Andrew
    I'm a do stuff at 100mph kinda guy...no patience (ok..i'm working on becoming more patient). I've been obsessing about this thing since I finally decided to make the jump a few months back. My imagination has been running wild with all the awesome things that go along with running my own brewery.

    So the short answer is it's the dream job and I don't wanna wait If I could...I'd be in the brewery all day and havin people enjoy some great beers in the tap room in the evenings. I got a buddy who's already volunteered to do the deliveries.
    Last edited by HobKnobBrewery; 06-23-2011 at 11:02 AM.

  10. #10
    Join Date
    Apr 2009
    Posts
    56
    Quote Originally Posted by HobKnobBrewery
    I got a buddy who's already volunteered to do the deliveries.
    I would be very careful about how much volunteering you allow. At some point people get tired of running kegs, pouring at festivals, helping with events, helping with the build out, (all the other things people will 'volunteer' for) only to see the compensation for their effort go to you and your brewery. People say they will work for beer or just to be a part of it, but that ends real fast.

  11. #11
    Join Date
    May 2011
    Posts
    15
    I was going to same the same thing about the volunteering. It is easy for people to volunteer but when it comes down to it you are running a business and trying to make some money from the business. People will get pretty tired of volunteering if you are relying on them to carry out regular activities. And if they are volunteering what are you going to do when they can't help out one day, can't actually fire him for not showing up to work. Make sure your business plan does not count on any volunteers but when you do get a bit of help all the better.

    Mark

  12. #12
    Join Date
    Jun 2009
    Location
    Cortland, NY
    Posts
    182

    listen to beauxman

    He speaks the truth. Ditto looking at the SoundBrew site.

    We are in our first year of production (20bbl system), and I have never seen cash disappear so quickly, nor have I worked as hard.

    Buy yourself a Sabco to play on and develop some recipes, labels, and a solid business plan, and go volunteer at another brewery in your spare time while you save a couple hundred thousand to invest. I suspect that there will probably be plenty of brewery equipment on the market in the next two years - especially nano systems.

    BTW, we spent $15k just installing a used boiler.

    Also, volunteers still need to be on a workers compensation plan in my state and I suspect it may be the same in your state as well.

  13. #13
    Join Date
    Sep 2010
    Posts
    80
    I think there are great points on both sides of the line. Hereís my general take on things:

    Going the nano route is going to mean busting your ass working on a small system, not making a whole lot of beer, not making a whole lot of money (if any), and probably hating your life because you canít keep up with. But, if you have a good paying job, a family to support, you canít afford to quit that job, and you donít have the professional experience to make yourself feel comfortable with a lot of debt, then the nano route is the way to go. Itís definitely going to take you much longer before you can quit the day job and realize your dream of being your own boss and a brewery owner, but you can sleep at night knowing that your family isnít in jeopardy if things turn south. In the best case scenario, you have built a business with lots of demand and your odds of getting money from banks/investors is probably going to be better than if they just see a business idea on paper.

    Scenario 2 you say screw it and you find investors or somebody willing to help you start out for a few hundred thousand dollars (estimate) creating a 15bbl production brewery. The costs are going to be higher for everythingÖbigger system, bigger fermenters, bigger brite tanks, the 30 kegs you will need per batch you brew, steam boilers, bigger chiller, bigger heat exchangerÖ.the list goes on and on. I heard of a brewery in Chicago that spent close to 100k just on kegs for their production brewery when they started. The upside is that at the end of the day, you actually can make big dollars to pay the big bills and you also get to go to your dream job every day of the year. The downside is that if thingís turn south, youíre up shit creek and not only could you lose the brewery, you could also lose things youíve put up as collateral on a loan (such as your home).

    Itís real easy to see why people on both sides choose their path. Like they always say, high risk = high reward. In our brewery in the works, we decided to go the nano route just for the reasons I listed which I think are the reason that most people go the nano route. My partner and I both have good paying jobs and he has his first child on the way. We donít have 15 years of working in a production facility like a lot of people do so spending a few hundred thousand when weíre fresh to the game just doesnít sit right. We know we went too small right off the bat when we ordered a 1bbl system so weíre now getting ready to order a 3bbl system. Itís still way undersized according to everybody who has ever started a brewery, but itís what we feel comfortable with. We are going to be distributing in a town of 3500 to a few local bars and have a small tasting room and we are perfectly ok with that until we are comfortable enough to grow. Best case scenario, we are able to do some fun beer experiments on the 1bbl system and brew the ďyear roundĒ beers on the 3bbl system to distribute locally to the bars. Since we will have no debt, my biggest worry will be keeping up with demand and if youíre going to run a business, thatís the best worry you can dream of.

    I guess I should stop rambling on but I guess my general advice is to do what you feel comfortable with. As much as I have been rushing to get things open since I had the dream a few years ago, itís been almost a full year since I ordered my first piece of equipment and I am still another 6-8 months out from opening. Looking back, Iím glad it took longer than I thought because it allowed me to fund all the expenses I didnít see coming and itís been a great learning experience. We are easily going to spend 50-75k on getting up and going so definitely save up. If you can find a solid partner to help support the load, then your burden gets cut in half. Good Luck on your adventure.

    Beauxman, as a side note I was in Seattle a few weeks ago and Black Raven was one of my favorite breweries I went to. The beers were awesome.

    Cheers,
    Jared Kueker
    Kaskaskia Brewing Company

  14. #14
    Join Date
    Dec 2010
    Posts
    41

    any 3bbl's NOT too small?

    Can I get a shout out from any Nano reading this where it is appropriately sized? And I assume that this can eliminate production / wholesale breweries.

    Nano size <> Production . Got it. Check.

    I read the soundbrew.com advice long ago but still am going forward with a 3BBL for our brewpub for several reasons,

    Small town, limited space (only about 35 seats), expected turns and research on other local town ďpubĒ environs show that I am not likely to move more than about 60-70 pints/day. Couple that with some modest 1/2bbl sales to a few local bars, a handful of daily growlers, and Iím at about 200bbl/yr with a once/week brew day with two 3bbl fvís and a doubled up 6bbl fv all on a 21 day cycle.

    For our business plan, roughly 80 % of the revenue comes from the restaurant side and only 20% from the brewery. Even though it is small, and Iíll be brewing weekly, Iíll still be working like a fiend Ė itís a restaurant. But it does (so far) give the projection of being a sustainable business even that small.

    As for the OT Ė cost Ė the 3bbl brewery cost estimates are up to about 85k Ė which does NOT include construction within the proposed facility. I feel pretty confident about the brewhouse estimates. Decidedly less so about the construction.

  15. #15
    Join Date
    Oct 2008
    Posts
    81
    How about a shout out from all the folks who went into big debt for a 15 or 20 bbl system from soundbrew and never managed to get far beyond 1000 bbls a year before declaring bankruptcy? Anyone? Well, I guess they wouldn't be reading this board anymore. Darn. All the nanos here would probably benefit from their wisdom.

    As I read this board, nanos are doomed to failure, regardless of what they hope to achieve or how they achieve it. Gotta crank out that pale ale, amber ale and brown ale in massive quantities to survive in this industry, right? There's no room for anything else.
    John Little | Auburn, Alabama
    General Counsel, Southern Farmhouse

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