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

  1. #1
    Join Date
    Jun 2017
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    Sunbury, OH
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    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
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    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
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    Sunbury, OH
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    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
    36
    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
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    Sunbury, OH
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    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
    Huntsville, AL
    Posts
    253
    $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
    7
    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
    16
    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!

  9. #9
    Join Date
    Jul 2017
    Location
    Monroe, NC, US
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    4
    I'm kind of in a similar situation as you are and have been crunching some numbers these past few weeks. The expenses on my BP are separated between variable expenses and fixed expenses. The variable expenses are then broken down into cost per barrel terms. Once I have the cost per bbl down, you can then weigh your expenses based on the amount of brew produced. From my research, 6 months of paying rent/utilities, ingredient cost, etc without being able to serve beer needs to be factored in too. I included spillage/spoilage of 20% in the plan. So if you are brewing 10bbl batches, expect to only have 8 bbl to sell. Hopefully this is an over estimation and will have some extra final product. And of those 8 bbls, I expect to sell 85% of the product. I've decided to add in a 20% misc bucket in pretty much every category (ingredients, overhead, start up, etc). I'd rather plan for it and have the funds for it than get blind sided by something.

    I'd be glad to share with you what I have and we can brainstorm on a couple of things. I'm not too experienced in the industry so I am trying to get the cost per bbl tightened down too. Here is my variable expense per month. What you don't see in the screen shot is the headings but it starts at month 1.

    Name:  Variable Expense.png
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    Here is my cost per bbl but I am still trying to make the numbers more accurate.



    Malt, Hops, Yeast 59.75
    Natural Gas 3.00
    Water 5.00
    Filter 1.00
    Waste (Grain, Hops, etc) 10.00
    Distribution 0.00
    Cleaning & Sanitizing 2.00
    CO2 0.50
    Tax (North Carolina) 19.13
    Last edited by MainstreamBrew; 07-25-2017 at 07:03 AM.

  10. #10
    Join Date
    Mar 2017
    Location
    Grand Rapids, MI
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    69
    I'm starting a brewery in 2018 - so I am also in the start-up phase. Here are some things that I noticed right away:

    1) You need to factor more loss percentage of the product. I have factored 20% loss on my product in order to be conservative
    2) Is that 200,000 loan going to cover all of your costs? Tap-room build-out, brewing equip, supplies, paying your workers, etc. Also - most important - does it give you any spare OPERATING CAPITAL to sustain yourself until you go positive on your cash flows? One thing that I found when doing my 5 year cash flow projections - and I'm sure many here will agree - when you start out you operate at a loss until you make enough beer. So, until you reach that point - you continue to drain the bank account and not replenish, until a certain magnitude of sales is reached each month. This means you need to have operating capital factored into your loan amount in order to be able to survive until you actually start making money.
    3) What about an Architect and Artist - for your support services?
    Last edited by Viridian; 08-12-2017 at 12:28 PM.
    Ryan
    Viridian Brewing Company
    [Brewery-In-Planning]

  11. #11
    Join Date
    Aug 2017
    Location
    Las Vegas, NV, USA
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    Interested in spreadsheet

    Quote Originally Posted by BeerBred View Post
    $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.
    Hey I am in the market myself for starting a brewery and am doing startup costs as well. Would you still be in the market for selling that spreadsheet? If so please let me know how much and how I can get tjis from you. Thanks.

  12. #12
    Join Date
    Sep 2014
    Location
    Austin
    Posts
    22
    Just an FYI for folks looking to get a financial projections spreadsheet set up, there is a free template (in addition to about a thousand other templates) on the SCORE website. While it is not perfect, and you will need some excel knowledge to modify the spreadsheet, it can be a good starting point.

    https://www.score.org/resource/finan...tions-template
    Brandon Besser, P.E.
    "He that breaks a thing to find out what it is has left the path of wisdom" - Gandalf

  13. #13
    Join Date
    Jun 2017
    Location
    Sunbury, OH
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    Quote Originally Posted by MainstreamBrew View Post
    I'm kind of in a similar situation as you are and have been crunching some numbers these past few weeks. The expenses on my BP are separated between variable expenses and fixed expenses. The variable expenses are then broken down into cost per barrel terms. Once I have the cost per bbl down, you can then weigh your expenses based on the amount of brew produced. From my research, 6 months of paying rent/utilities, ingredient cost, etc without being able to serve beer needs to be factored in too. I included spillage/spoilage of 20% in the plan. So if you are brewing 10bbl batches, expect to only have 8 bbl to sell. Hopefully this is an over estimation and will have some extra final product. And of those 8 bbls, I expect to sell 85% of the product. I've decided to add in a 20% misc bucket in pretty much every category (ingredients, overhead, start up, etc). I'd rather plan for it and have the funds for it than get blind sided by something.

    I'd be glad to share with you what I have and we can brainstorm on a couple of things. I'm not too experienced in the industry so I am trying to get the cost per bbl tightened down too. Here is my variable expense per month. What you don't see in the screen shot is the headings but it starts at month 1.

    ...
    Thanks for the insight, I will factor that stuff in. I am currently stuck on my business plan and may be enlisting some professional help. I am pretty good with numbers and spread sheets, but market studies, feasibility studies, etc, are not my thing. Also, all the business plans i look at want to factor in competition, but I have no idea who to consider competition. From my experience so far, craft breweries are not really in competition with each other, but rather tend to help each other when they can and sometimes join forces with collaborations and events.

    Thanks!

    Ken

  14. #14
    Join Date
    Mar 2017
    Location
    Grand Rapids, MI
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    Quote Originally Posted by kenfitz View Post
    Thanks for the insight, I will factor that stuff in. I am currently stuck on my business plan and may be enlisting some professional help. I am pretty good with numbers and spread sheets, but market studies, feasibility studies, etc, are not my thing. Also, all the business plans i look at want to factor in competition, but I have no idea who to consider competition. From my experience so far, craft breweries are not really in competition with each other, but rather tend to help each other when they can and sometimes join forces with collaborations and events.

    Thanks!

    Ken
    Performing a market study is most certainly something that you should be doing, if you are starting the brewery. It's not necessarily a formal study - it is a matter of knowing the area, the beer market, the customers and the products / breweries - and getting it on paper. Then you want to describe how you're going to infiltrate that market and be successful. You want to do this in order to convince yourself that its possible, along with other potential business partners along the way. Your entire business plan is a feasibility study. Don't worry about having a section for that particular "task" - I didn't include it in mine. If your market study and response (your brewery) is good enough, you don't need one.

    Competition plays into this as well. You are going to start a business - and the only way that you keep the doors open is by having operating capital. You only have operating capital by having profit every month/quarter (eventually), and you only get profit if you're competitive in the marketplace. Yes, breweries and craft beer have a team oriented camaraderie. However, if you think that you don't need to consider how YOU can make a better product or experience compared to the OTHER breweries - you will likely fail. You need to ensure that you have a well thought out product, customer experience, branding, marketing strategy, company virtues (that you follow) and go-to-market strategy. You are in competition with other breweries that (hopefully) already have these things secured, and have a secured customer base. How are you going to ensure that they come to your brewery for a few pints, at all? What makes yours more attractive than their already favorite craft beer tap-house or brewery? Keep in mind that this is not 1990, and average "its good because its simply craft beer" is behind us, and the average customer knows the difference between average and quality these days.

    Don't get me wrong - the camaraderie in craft beer is great and I love supporting my fellow brewers - but at the end of the day this is still a business and you still have to attract customers. My advice would be for you to spend a month or two and really nail down an extensive Business & Marketing Plan. Best of luck!
    Ryan
    Viridian Brewing Company
    [Brewery-In-Planning]

  15. #15
    Join Date
    May 2013
    Location
    North florida
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    5
    your pint and 64 oz growler price seems low but depends on your market. 500 bbls's in yr one isnt easy unless you have great marketing, distributor support, great beer.. you probably wont go straight into distribution until you get the handle on things unless you have pro brewing experience. taproom size and location will dictate how many people you could expect to come through your doors per day, week, month. Also taproom hours and days open. Any questions just shoot me an email Jon@oldcoastales.com and i'll give you a rundown on our 7 bbl brewery, now open for 7 months.

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