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Thread: Brewery Startup - Advice on my Cost, Expense, and Profit Projections

  1. #1
    Join Date
    Jun 2017
    Location
    Sunbury, OH
    Posts
    3

    Brewery Startup - Advice on my Cost, Expense, and Profit Projections

    Hello,

    I was wondering if some folks could look at my first attempt at operating financials for my business plan and tell me what I may be missing, if any of my numbers are way off, or if something doesn't make sense?
    I tend to over estimate costs to be safe, but I don't want to go overboard. I am still researching the costs and expenses, so this is a ballpark. Unexpectedly, I was introduced to someone who is very interested in building a shopping complex in my town and he and his partners want to get a brewery in there and my name came up. Since I just got started with this, I want to get some sort of draft done on my business plan this weekend to them when I meet with them next week.

    In a nutshell, I am planning on starting off with 10 bbl batches done once a week and go from there (~500 bbl per year). Most sales in the tap room, with some sixtels and kegs going to some local bars and restaurants.

    Here is a summary of how I have the document broken down:
    1. Costs to making a batch of beer.
    a. I broke it down between the amounts for my lower gravity beers (low) and higher gravity beers (high).
    2. Calculate the Average cost (between high and low numbers) per batch, bbl, gal, and oz.
    3. Price I plan to ask for various vessel sizes and net profit based on the cost.
    4. My expected sales.
    5. Yearly and Monthly profit based on the number of barrels I plan on producing.
    6. Expected Monthly and Yearly expenses. (This is were I may need some better numbers).
    7. My expected net profit.

    Thanks in advance for any advice or tips.

    Ken
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  2. #2
    Join Date
    Mar 2016
    Location
    Richland, WA, USA
    Posts
    5
    We're about to finalize our loan so we've been through a few of these things. Your legal is probably high. We spent $1600 on starting the business and probably around that for the rest of expenses. It will drop in year 2 and you won't have a retainer fee. Insurance will be based on revenue. We were quoted 6-10k a year for 350k in revenue. Not sure how you calculated sales tax but in Washington the bar you sell to pays the sales tax on any kegs you sell them rather than you. You're also going to have to do month by month revenue projections. Try to figure out what time of year you'll be selling more beer. Our loan is 10 years at 2% over prime rate.

  3. #3
    Join Date
    Jun 2017
    Location
    Sunbury, OH
    Posts
    3
    Quote Originally Posted by datomcat13 View Post
    We're about to finalize our loan so we've been through a few of these things. Your legal is probably high. We spent $1600 on starting the business and probably around that for the rest of expenses. It will drop in year 2 and you won't have a retainer fee. Insurance will be based on revenue. We were quoted 6-10k a year for 350k in revenue. Not sure how you calculated sales tax but in Washington the bar you sell to pays the sales tax on any kegs you sell them rather than you. You're also going to have to do month by month revenue projections. Try to figure out what time of year you'll be selling more beer. Our loan is 10 years at 2% over prime rate.
    Thanks! I'll do that!

  4. #4
    Join Date
    Sep 2005
    Location
    Anaheim, CA
    Posts
    33
    Congrats on getting started. You're farther along than many folks, and of course, there's a lot ahead of you. We opened in 2011 with an SBA-backed 10-year loan (last payment in just 3 more years!). These loans typically have the first few month's repayment built in, so you get a little breathing room.

    I don't know the going rate for beer in Ohio, and I don't want to collude on prices. So I'll just say your keg prices are on the high side, and pint price on the Happy Hour side.

    Property taxes may be your responsibility even though you are a tenant; ours shocked us when we got the first bill. It's about 8K/year, due all at once.

    Annual licenses from the state and city add about 1100/year.

    If you have live music, you'll have to pay the three licensing companies (or use a service like Pandora for Business which costs about 30/month).

    You'll need a point of sale system; they all have different initial costs and monthly fees.

    Pest control - best to start with it so it never becomes a problem. Plan about 100/month.

    Best of luck,
    Barbara

    Barbara Gerovac
    Anaheim Brewery

  5. #5
    Join Date
    Jun 2017
    Location
    Sunbury, OH
    Posts
    3
    Quote Originally Posted by B Gerovac View Post
    Congrats on getting started. You're farther along than many folks, and of course, there's a lot ahead of you. We opened in 2011 with an SBA-backed 10-year loan (last payment in just 3 more years!). These loans typically have the first few month's repayment built in, so you get a little breathing room.

    I don't know the going rate for beer in Ohio, and I don't want to collude on prices. So I'll just say your keg prices are on the high side, and pint price on the Happy Hour side.

    Property taxes may be your responsibility even though you are a tenant; ours shocked us when we got the first bill. It's about 8K/year, due all at once.

    Annual licenses from the state and city add about 1100/year.

    If you have live music, you'll have to pay the three licensing companies (or use a service like Pandora for Business which costs about 30/month).

    You'll need a point of sale system; they all have different initial costs and monthly fees.

    Pest control - best to start with it so it never becomes a problem. Plan about 100/month.

    Best of luck,
    Barbara

    Barbara Gerovac
    Anaheim Brewery

    Awesome, thanks!

  6. #6
    Join Date
    May 2009
    Location
    Scottsdale, AZ
    Posts
    239
    $8000 in rent, yikes! The keg prices are definitely high. You might figure $109 for a half keg if you use a distributor. This would put you around $149 PTR. I have a spreadsheet model with 8 different pages, startup costs, use of funds, personnel page where you input salaries for various jobs, P&L, cash flow, balance sheet, costing/volume by package page and I forget what the last one is... You can change certain cells such as volume, cost, expenses and it spits out adjusted numbers for the results. Calculates pre and post EBIDTA numbers. I would sell it to you.

  7. #7
    Join Date
    May 2017
    Location
    Jacksonville FL
    Posts
    3
    I just went through all these projections etc as I am in the process of a startup. The thing that sticks out to me is your breakdown of sales. I honestly think that you will move a lot more beer through your taproom than that, and that is going to lead to making your first year substantially more successful.
    From all the stats I have seen and read about, you should expect to do 75% of your sales in your taproom. According to the most recent Nielsen study on pint prices, people pay less than they would! Nielsen sets the proper price for a pint around $6.22. So we projected ours at $5.50 here in Jacksonville (low cost of living etc).
    Your keg price will be $110 (people here are getting $118).

    Also, why do you assume you will only do 500+ BBL's? If you spend your time during the planning phase to ensure an awesome taproom build out to create a great experience, no reason you cant get to 700+.

    just my thoughts
    DM me if you want some of my projection sheets etc. I wont post them here, but I would be happy to share with you what we are looking at.

  8. #8
    Join Date
    Oct 2015
    Location
    Mason City, IA
    Posts
    7
    IMO you're right to charge the low low price of $4 a pint for standard beers, unless you're in an area where they typically go for $6+.
    Obviously the profit margin even at $4 is incredibly high compared to the profit per pint when distributed, and building a community of supporters through your taproom is invaluable as your business grows.

    If you're going to have a taproom, pushing as much beer through there is top priority for a new, small brewery. Whether it's flights, pints, crowlers, or growlers, compare those margins to kegs.

    That being said, the end goal of each brewery is different and you might be more focused on growing distribution to become a regional brewery, you might have a different strategy.

    Just my opinion, good luck!

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