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How to Start a Brewery
Beer is more than a beverage – it’s a craft. If you love to drink it, why not make it yourself?
Local breweries have popped up across the country in recent years aiming to ride the craft beer boom. Globally, craft beer has been exploding and the market is expected to double again by 2027. You could join the ranks of brewers, grab your share of the booming market and build a beer empire. … Continue reading
Of course, starting a brewery will have its challenges, but with diligence and passion, you can be successful. The key to launching your brewery is having the right information, and this step-by-step guide provides all you need to start brewing some business.
$162,950 - $1,141,800
Time to build
3 - 6 Months
$400,000 - $2,000,000 p.a.
$100,000 - $500,000 p.a.
Step 1: Decide if the Business Is Right for You
Pros and Cons
Starting a brewery, like any business, has its pros and cons. You need to carefully weigh these to decide if the business is right for you.
- Enjoy Beer – Make and drink the brews you choose!
- Control – Decide when to work, how to work, etc
- Scalable – Demand is constant and you can easily add new brews
- Profitability – Brewery margins tend to be relatively high
- Crowded Space – Competition is fierce as new brands appear nearly every day
- Learning Curve – You’ll need to experiment, and fail, before you brew well
- Unique Brew – Creating a novel beer, amid so many options, will be tough
Market analyst IBISWorld values the US brewery industry at over $30 billion and foresees 4% growth in 2021.https://www.ibisworld.com/industry-statistics/market-size/breweries-united-states/ Craft beer, in particular, has been booming for years. In 2019, the global craft beer market was valued at almost $90 billion, but it’s expected to more than double to $190 billion by 2027, according to research firm Fortune Business Insights.https://www.fortunebusinessinsights.com/industry-reports/craft-beer-market-100736
Trends in the brewery industry include growing consumer demand for cans and bottles over draft beer due to a spike in pandemic-driven at-home consumption. For breweries, having an in-house taproom is now seen as essential, along with outdoor spaces and food menus. Innovative beers containing added ingredients, such as CBD oil or medicinal mushrooms, are gaining strength. IPAs are perpetually popular, accounting for as much as 40% of the craft beer market, with the cloudy New England IPA suddenly ubiquitous of late.
How much does it cost to start a brewery?
The startup costs for a brewery range from around $160,000 to over $1,000,000. Brewing equipment and other equipment are the largest expenses. The high-end includes having a kitchen in the brewery so that you can have a taproom with a food menu. If you’re willing to start out small with a microbrewery, you might be able to launch for $80,000, but that’s with bargain-basement prices for all your key equipment.
|Start-up Costs||Ballpark Range||Average|
|Setting up a business name and corportation||$150 - $200||$175|
|Licenses and permits||$1,500 - $3,000||$2,250|
|Insurance||$100 - $300||$200|
|Business cards and brochures||$200 - $300||$250|
|Website setup||$1,000 - $3,000||$2,000|
|Location security deposit||$5,000 - $10,000||$7,500|
|Site preparation||$20,000 - $50,000||$35,000|
|Brewery equipment||$100,000 - $1,000,000||$550,000|
|Other equipment such as canning equipment and kitchen equipment||$25,000 - $50,000||$37,500|
|Initial inventory||$10,000 - $25,000||$17,500|
|Total||$162,950 - $1,141,800||$652,375|
How much can you earn from a brewery?
Breweries generally use the half barrel, which represents 100 $4 beers, or $400, as the primary sales metric. The profit margin for a brewery is often around 25%, which means if you’re able to sell 1000 half barrels per year, you’d have $400,000 in revenue and $100,000 in profit. As your brand gains recognition, you might do 5000 half barrels in a year, resulting in annual revenue of $2,000,000 and a nifty half a million dollars in profit.
What barriers to entry are there?
There are several barriers to entry for starting a brewery. Your biggest challenges will be:
- Startup costs – Brewing large batches requires major equipment
- Space – Once sales tick up, you’ll need a warehouse or open space
- Competition – Craft beer is a crowded marketplace
Step 2: Hone Your Idea
Now that you know what’s involved in starting a brewery, it’s a good idea to hone your idea in preparation to enter a competitive market.
Why? Identify an opportunity
Research other breweries in your area and see what kinds of beers they produce, their prices, and which products do best. Based on this info, consider how your brewery might stand out. You need a unique concept that will fill a gap in the market.
What? Determine your products or services
First, determine which beers you plan to produce. This should be based on what’s trending, what you’re good at, which flavor profiles you prefer, and what you come up with through experimentation. Will you have a taproom? Will you serve food as well? If so, research dishes and meals that pair well with your brews.
How much should you charge for beer?
The average price of a craft beer in a bar or taproom is $6-$8, while the average price of a packaged beer is $1-$2. Including all costs, you should aim for a profit margin of about 30%, but this will be dependent largely on the rental cost of your location. Good locations with a lot of space are going to be expensive, so your margin will be lower.
Once you know your costs, use the Step By Step profit margin calculator to determine your price points.
Who? Identify your target market
Your target market will depend on the concept you choose, but the market for locally brewed and craft beers generally tends to be younger, around college age. You can reach a younger audience on a site like Instagram or TikTok.
You could also target older professionals looking for a high-end beer, use local and organic ingredients to create a more adult flavor profile, and reach out to potential customers on Facebook and LinkedIn.
Where? Choose your business premises
If you plan to have a taproom, a good location will have high foot and road traffic and be close to restaurants, clubs and cinemas. Trendy areas that attract young craft beer drinkers would be ideal, though expensive. If you’re not planning to have a taproom, it might be wise to find a warehouse outside the city, where rents are much cheaper and spaces larger. The more square footage you have, the more revenue you can bring in. And you can always add a taproom down the line.
- Central location accessible via public transport
- Ventilated and spacious, with good natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- The name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for suggestions
- Including keywords, such as “beer” or “brewing”, boosts SEO
- Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
- Avoid location-based names that might hinder future expansion
- Use online tools like the Step by Step business name generator
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names at a web cataloging site such as NameChk. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. And if you’ve exhausted all your creative juices but still don’t have a business name, don’t stress! Instead, check out our business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Step 4: Create a Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your brews in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer on Fiverr to create a professional business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states offer real advantages when it comes to breweries.https://www.zippia.com/advice/most-breweries-states/
If you’re willing to move, you could really maximize your business!
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your brewery will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the four main options:
- Sole proprietorship – The most common structure for small businesses makes no legal distinction between company and owner: you get to keep all the profits, but you’re personally liable for all debts.
- Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses.
- Corporation – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
We recommend that most new business owners form an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can quickly and cheaply form an LLC using ZenBusiness’s online LLC formation service (it can take as little as 5 minutes). They will check that your business name is available before filing, submit your Articles of Organization and be on hand to answer any questions you have about the company formation process.
Step 6: Register for Taxes
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online. It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund an entrepreneur’s vision.
- Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.
Step 8: Apply for Licenses/Permits
Starting a brewery requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
As a brewery, you’ll need to register with the Alcohol and Tobacco Tax and Trade Bureau and submit a Brewer’s Notice, as well as obtain a liquor license from your state.
You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. You could also check this SBA guide for your state’s requirements.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.
Step 9: Open a Business Bank Account
Before you start making money you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your brewery as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress, Webflow, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
Some of your business will come from the casual passerby or online visitors, but still, you should invest in marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, make sure you link to your social media accounts and vice versa. Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales.
- Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
- If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
You’ll need a handful of items to successfully launch your brewery business. Here’s a list to help you get started:
- Kettles and kegs
- Boilers and cooling equipment
- Canning equipment
- Storage tanks and refrigeration equipment
- Kitchen equipment
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a brewery would include:
- Master Brewer
- Marketing Lead
- General Manager
- Bartenders and Waitstaff (if you have a taproom)
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn or Facebook. You can also use free classified sites like Jobs and AngelList. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Start Making Money!
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your brewery meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Some signature USPs for your brewery could be:
- Barrel-aged for premium taste
- Eco-friendly brews made with local & organic ingredients
- The coziest and most welcoming taproom
Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
- Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as 25% off during happy hour.
- Optimize calls to action – Experiment with text, color, size, and position of calls to action such as “Reserve Now”.This can sharply increase purchases.
- Signage – Put up eye-catching signage at your store and website
- Flyering – Distribute flyers in your neighborhood and at industry events
- In-Person Sales – Offer your products/services at local markets, trade shows
Consider a Niche
You should consider creating a niche for yourself by specializing in a certain aspect of your industry. This could jumpstart your word-of-mouth marketing within your niche market.
Build Affiliate Relationships
Affiliate marketing is advertising in which you compensate third parties (i.e. your affiliates) in order to generate traffic to your website. You can develop long-term relationships with these affiliates and generate traffic for each other on an ongoing basis.
Beer is always in demand, and the craft beer craze shows no sign of slowing. Almost every bar carries local craft brews for good reason — people like to try them. Starting your own brewery can make for an exciting and fun lifestyle, and you might share a beer with all kinds of people in your own little pub! There’s no reason you can’t tap into this booming market. The right knowledge will be crucial to your success, so you might want to bookmark this page, and check out Step By Step’s business tips for additional insight and guidance. Happy brewing!
Brewery Business FAQs
Starting a brewery is expensive and you’ll need at least $100,000 to get started. You can find financing from banks or investors, or you might try crowdfunding. Your return on investment could be well worth the startup costs since your profit potential is good, with relatively high margins.
State and local license requirements will vary, so check with your local government offices for requirements. You’ll need to register with the Alcohol and Tobacco Tax and Trade Bureau, submit a Brewer’s Notice, and obtain a liquor license from your state.
It’s illegal to make beer for sale from your home in the United States. You need a brewery that has all the proper licensing at federal, state, and local levels.
There are many online guides to brewing your own beer, but your best bet would be to contact a local brewer for advice. You’ll just need to convince them to help you even though you may become a competitor!