How hard is it to start a brewery?

[BeerMouth]

Dear Brewnosers,

It seems everyone and their dog (and it's fleas) thinks they can start a brewery these days so I figured I'd toss the question out there to y'all for debate: How hard is it to start a brewery? I mean beer is just water, yeast, hops, and malt. Boil 'em together and let it sit around for weeks until it's beer. Bottle it, come up with some silly/cool name for it, put it on a truck and get it to market. Oh! And if you run a brewery from Quebec, don't forget to include some anti-religious sentiments when naming your beer (i.e. Genou de la face de Dieu Saison Epique)! Do I have the formula right yet?

Many of you likely find the above statement a huge pile of oversimplified ignorance from a forum (and brewing) noob. Good. It is!

Really I want to get us talking about the true talent of fusing brewing art and business. What considerations should be made before starting a brewery? What are the biggest hurdles to overcome in startup? Beyond startup? What are the legal considerations (i.e. do you need an inspected facility? Permits? Licenses? etc.?). Is NS close to market saturation for craft beer? Is Canada? Is there any money in it? Does success/failure strongly correlate with product quality or can any beer sell if it's well marketed?

Looking forward to having an interesting debate around this! Thanks in advance for your contributions!
Cheers,
Clint

[bluenose]

I think it's a lot harder than making a batch of beer and coming up with a clever name

I believe there are a few professional/semi-professional brewers who are members of this board who can chime in as well

zoning, permits, licenses, etc, are all considerations, not to mention the headaches that come with running a business of any type

I would also think that gearing up for a commercial system would be a big upfront cost as well

[Jimmy]

I'd say any beer can sell. We already have proof of this right here in NS. There are numerous sub-par breweries around here, but they are still successful because of the local market and the "support local" trend. I think eventually these breweries will either a) step up their game and start making decent beer, or b) fail a miserable death as more quality breweries launch and push them out of the market.

[Broob]

I read an interesting book a while back called "The E Myth". The E myth is the "entrepreneurial" myth - that people often feel that if they are good at something then that means that they would be good a running a business in that field. A good business-person could probably make and sell bad beer easier and more successfully than a shitty business-person could make and sell good beer. Best case scenario - good brewer partners with someone who's business savvy.

[bluenose]

I'm good at drinking beer, if I could get paid to do it then I think I would be successful

[BeerMouth]

I would also think that gearing up for a commercial system would be a big upfront cost as well

To brewers, I feel cost is one of the areas a brewery owner has a lot of control over. Look at Scared Men Brewing in NB who are just starting up with some small carboys and plastic fermenters and are planning a local fundraiser (and auction I think) to raise $ for startup. Then Hammond River with it's "small scale sophistication". I think the worst case scenario is your start small with a high-demand product and end up missing out on a ton of sales opportunities. So really, it's about choosing the right size to start with. And how is that done? Are there consultants who do this? Interesting...

I'd say any beer can sell. We already have proof of this right here in NS. There are numerous sub-par breweries around here, but they are still successful because of the local market and the "support local" trend. I think eventually these breweries will either a) step up their game and start making decent beer, or b) fail a miserable death as more quality breweries launch and push them out of the market.

Big fish eat the little ones. My taste buds have stack-ranked the NS craft brewers and there are a few that certainly have areas in which they need to improve. That being said, I find the worst craft breweries are still much better than the best commercial breweries (generally speaking).

I read an interesting book a while back called "The E Myth". The E myth is the "entrepreneurial" myth - that people often feel that if they are good at something then that means that they would be good a running a business in that field. A good business-person could probably make and sell bad beer easier and more successfully than a shitty business-person could make and sell good beer. Best case scenario - good brewer partners with someone who's business savvy.

That is a fantastic point. I'm a banker by day and I meet with many small business owners who are fantastic at their businesses core activity (i.e. cutting hair) but are poor at managing all of the facets that come with owning a business (i.e. cash management, asset acquisition, accounting & recordkeeping etc.).

I'm good at drinking beer, if I could get paid to do it then I think I would be successful

http://cicerone.org/canada

[bluenose]

I'm good at drinking beer, if I could get paid to do it then I think I would be successful

http://cicerone.org/canada

Sadly I'm better at drinking beer than tasting beer

[HPhunter]

I can say this much.
Starting a brewery is a lot of work. Running a business is even more work. Putting out poor quality beer and selling every bit of it is easy to do. Everything boils down to cost.
Always has always will. People don't like to admit they need help (there are some options out there) especially when people are buying their beer and telling them its fantastic.
Permits and rules for starting are pretty straight forward. Turning down customers nearly everyday gets frustrating. Borrowing money without experience for a start up business isn't easy. That's why most people start out small and keep expanding.

[CPR]

No market is too saturated if you have a mission, but so few breweries, it seems, really have a mission. Is your mission to create jobs for those involved (not a terrible goal), or is it to advance the culture, to bring something new to your drinking public, or to surprise people's tastebuds? I think if you have something to say with your beer, then you should open a brewery. If not, there's probably another job out there for you. At least that's my perspective as a beer bar person. I want more in NS, but I also want it to be better.

[BeerMouth]

I can say this much.
Starting a brewery is a lot of work. Running a business is even more work. Putting out poor quality beer and selling every bit of it is easy to do. Everything boils down to cost.
Always has always will. People don't like to admit they need help (there are some options out there) especially when people are buying their beer and telling them its fantastic.
Permits and rules for starting are pretty straight forward. Turning down customers nearly everyday gets frustrating. Borrowing money without experience for a start up business isn't easy. That's why most people start out small and keep expanding.

I agree. Starting any business isn't easy. There are so many factors to consider just in the marketing arena alone. And financially, costs can get out of control quickly and unless the owner has a keen business sense, poor cash management can be fatal. However, by pacing yourself in any business plan and making small, high impact tactical decisions along the way, one can make sure their foundation is set before plopping their mansion on it. Excess demand is super frustrating but some NS Breweries seem to have turned this weakness into a strength, promoting their beers exclusivity and making their drinkers feel special just for being able to get some. And yeah, borrowing money for startup can be a challenge. I know, I do lending to small businesses. At my bank, we typically do not consider any lending until a business has been established for at least 2 years AND the owner is rock solid financially (lots of liquidity, low debt, large asset base etc.). Probably one of the more promising programs for breweries is the Governments "Canada Small Business Financing Loan" (CSBFL) intended solely for startups seeking financing for equipment and leasehold improvements. It's a loan issued by the government via chartered banks. Could be a good starting point. More info here:

https://www.ic.gc.ca/eic/site/csbfp-pfp ... 02855.html

No market is too saturated if you have a mission, but so few breweries, it seems, really have a mission. Is your mission to create jobs for those involved (not a terrible goal), or is it to advance the culture, to bring something new to your drinking public, or to surprise people's tastebuds? I think if you have something to say with your beer, then you should open a brewery. If not, there's probably another job out there for you. At least that's my perspective as a beer bar person. I want more in NS, but I also want it to be better.

I love this comment because it focuses on a breweries Raison d'être. My favourite breweries in NS are the ones who are putting out new an interesting beers with a focus on the drinking experience. I also really appreciate the breweries that are attempting to go beyond the brewing. Companies like North Brewing who are striving for "zero emissions" or Bad Apple/BoxingRock/Garrison recently releasing beers with a charitable component and finally Schoolhouse's "Southfield Project". I have no doubt we are going to see more beer flowing in NS. I too hope it is more of the good and not more of the meh.

[Comforteagle]

Very interested in this subject. I'm a entrepreneur, but IANABO*

I suspect starting a brewery currently has at least one step up from a lot of new businesses.... there is actually some demand. There also seems to be several ways to de-risk starting up before going whole hog.... there are only so many points of distribution (liquor commish & outlets, bars). If you can truly validate that you can get in those ahead of time you're really far ahead.

That being said markets like that attract competition... like you!

Thinking out loud I'd say the biggest risks are:
Would people repeatedly pay for it? Find out. Compliments don't pay the bills. Try getting someone to pay for it - twice. It might cool your jets enough to put off capital investments until you have a really good product people would notice, give a shit about enough to buy repeatedly & recommend to others!.... 'cause that is your minimum goal with or without tons of marketing money.

People paid for something you're selling? Wow, pat yourself on the back because that is really quite amazing whether beer or not. Now, what volumes can you sell at? Do the math (people hate math). I suspect the professionals on here would share some numbers with someone serious about taking a plunge.

Money. always money. Do you really 'get' cash flow? Can you manage it? There are profitable businesses that go under because of cash-flow.

Oh, and gov't regulations & agencies. ughghhh

Other concerns:
Are you a good brewer? To stay in business you'll prob spend less time doing that... can you find a co-founder who can be the brains while you do the fun stuff or vice-versa?

Do you -have- to quit your job? Too many people quit their jobs when they could test a lot of these things on the side. Instant cash flow!

Is SWMBO supportive and cool with risk? If not you're asking for trouble.

Time & Cost. Time is a motha. Everything takes twice as long as you think & costs twice as much.

FWIW, I think running a business is only for people who can't do anything else & if not you're out of your mind.

*IANABO = I Am Not A Brewery Owner

[BeerMouth]

Great comments Comforteagle (and others) and many interesting perspectives! Thanks for participating!

there are only so many points of distribution (liquor commish & outlets, bars).

Indeed, the regulations and controls are certainly barriers to large scale success and are important considerations. Maybe someday, beer may be made available in the grocery stores and/or other marketplaces. Although still overtly in control, the recent changes by the OLCB are hopeful that this may one day be true.

Thinking out loud I'd say the biggest risks are:
Would people repeatedly pay for it? Find out. Compliments don't pay the bills. Try getting someone to pay for it - twice. It might cool your jets enough to put off capital investments until you have a really good product people would notice, give a shit about enough to buy repeatedly & recommend to others!.... 'cause that is your minimum goal with or without tons of marketing money.

A sound financial plan that is prepared in advance and ADHERED to is critical. That plan should most certainly accommodate for an increasing financial commitment to marketing efforts. Marketing is the fuel that ignites sales. Marketing can actually force people to do things they wouldn't otherwise choose to do on their own. Like mix Jager and Red Bull or Listen to Britney Spears or do both at the same time.

Do the math (people hate math)

I love math and I'd love to know both the individual and average gross margins for all NS craft beer companies.

Money. always money. Do you really 'get' cash flow? Can you manage it?

As I mentioned earlier, this is key. Expanding too fast or veering significantly from your financial plan can be very dangerous. BUT! The opposite can also be true. One really needs to pay attention to what their numbers are telling them. Identify market cycles both short and long term so you can execute strategically.

Oh, and gov't regulations & agencies. ughghhh

Yup.

Are you a good brewer? To stay in business you'll prob spend less time doing that... can you find a co-founder who can be the brains while you do the fun stuff or vice-versa? Do you -have- to quit your job? Too many people quit their jobs when they could test a lot of these things on the side. Instant cash flow!

This is a very smart comment and another thing that folks wanting to start a company seem to ignore. Yeah, that thing you love to do? Guess what you won't be doing if you're really good at that thing you love to do? Yeah, that thing you love to do.

The job piece is also important. While it's great "to do what you love", it's also great to "have your prescriptions covered" and "be able to fix your kids teeth if they break". There's more than just salary at a job....And when you quit "to do what you love" make sure you can still "take care of WHO you love"; including YOU!

[HPhunter]

I forgot to mention my biggest hurdle. Getting paid! Those swanky drinking places that go through a lot of beer on a regular bases are some of the worst people when it comes to getting paid. Just got a cheque from one place that owed it from October last year. Cash flow problems get bigger when a few places owe you 1/3 of your current year sales. ( of which is low for me it was over 1/2 so I started hounding places)
I have a good job, that's why I only produce small amounts. Does that make it exclusive, well I guess it does in a way. I brew beers that I want to brew, give my money to whoever I want, and offend people with my abrasive personality on a regular bases. A bank would laugh me out of the office with a business plan like that. I'd really like to get more training, and build up a line of rock solid beers that I'm proud of and enjoy making. Along the way I want to brew some extreme beers that push some limits ( but also be great beer in their own right )
As for market growth, forecasts and projections? I guess for me I've built a baseball field, hopefully "they will come"!

[BeerMouth]

I forgot to mention my biggest hurdle. Getting paid! Those swanky drinking places that go through a lot of beer on a regular bases are some of the worst people when it comes to getting paid. Just got a cheque from one place that owed it from October last year. Cash flow problems get bigger when a few places owe you 1/3 of your current year sales. ( of which is low for me it was over 1/2 so I started hounding places)
I have a good job, that's why I only produce small amounts. Does that make it exclusive, well I guess it does in a way. I brew beers that I want to brew, give my money to whoever I want, and offend people with my abrasive personality on a regular bases. A bank would laugh me out of the office with a business plan like that. I'd really like to get more training, and build up a line of rock solid beers that I'm proud of and enjoy making. Along the way I want to brew some extreme beers that push some limits ( but also be great beer in their own right )
As for market growth, forecasts and projections? I guess for me I've built a baseball field, hopefully "they will come"!

Where's da money?

[Comforteagle]

I forgot to mention my biggest hurdle. Getting paid! Those swanky drinking places that go through a lot of beer on a regular bases are some of the worst people when it comes to getting paid. Just got a cheque from one place that owed it from October last year. Cash flow problems get bigger when a few places owe you 1/3 of your current year sales. ( of which is low for me it was over 1/2 so I started hounding places)

That gives me heartburn just reading it.

[BeerMouth]

I forgot to mention my biggest hurdle. Getting paid! Those swanky drinking places that go through a lot of beer on a regular bases are some of the worst people when it comes to getting paid. Just got a cheque from one place that owed it from October last year. Cash flow problems get bigger when a few places owe you 1/3 of your current year sales. ( of which is low for me it was over 1/2 so I started hounding places)

That gives me heartburn just reading it.

Get those swanky bars to put their orders on a swanky credit card so they can collect swanky points and go on swanky trips to swanktown.

Also, some banks offer specialized "payment" modules that allow your company to directly debit bank accounts for payments due. Super SWANKY!

[Comforteagle]

[canuck]

Like hphunter has already stated, starting a brewery is a LOT of hard work. Running it on a daily basis is even HARDER work. For a small guy like myself, I have to wear every hat imaginable........from the brewer, the cleaner, the kegger, the delivery person, the financial person, etc. I'm literally in my brewery seven days a week doing something that needs to be done. We all know that the craft beer industry is booming right now, but if there are folks that want to climb on the bandwagon simply to make money, I think they'll have a shock to their system on how much work is involved. IMHO, anyone starting a brewery with only $$$ in mind is going about it the wrong way and will fail.

My brewery in my basement ended up costing me $58k. Certainly more than I was anticipating, but I don't like half assing anything. It was money well spent and it's been a helluva great 15 months in business so far!

[canuck]

I forgot to mention my biggest hurdle. Getting paid! Those swanky drinking places that go through a lot of beer on a regular bases are some of the worst people when it comes to getting paid. Just got a cheque from one place that owed it from October last year. Cash flow problems get bigger when a few places owe you 1/3 of your current year sales. ( of which is low for me it was over 1/2 so I started hounding places)

Wow, that's crazy Jeff! Here in NB, no kegs get delivered until the licensee places the order to ANBL. Once I get the order from ANBL, the keg(s) get delivered and I invoice ANBL to get paid. Must be different in NS eh?

[Keith]

That's shit Jeff.

[toddthebeerdude]

That is sad Jeff. I worked in property management in Nova Scotia and New Brunswick, NS is archaic and NB is streamlined and efficient, looks like that extends to ANBL as well

I forgot to mention my biggest hurdle. Getting paid! Those swanky drinking places that go through a lot of beer on a regular bases are some of the worst people when it comes to getting paid. Just got a cheque from one place that owed it from October last year. Cash flow problems get bigger when a few places owe you 1/3 of your current year sales. ( of which is low for me it was over 1/2 so I started hounding places)

Wow, that's crazy Jeff! Here in NB, no kegs get delivered until the licensee places the order to ANBL. Once I get the order from ANBL, the keg(s) get delivered and I invoice ANBL to get paid. Must be different in NS eh?

[HPhunter]

Here we self deliver, so its up to us to get paid. In saying that, I'm not trying to throw anyone under the bus. I don't take CC payments, so that options out. The people that write the cheques are not the people usually accepting the beer or invoices. All in all I have always been paid to date, just not always in what would be considered a timely manner. I only brought it up because at my level its really important since I give a large majority of money away. As for the ones doing it for money, they won't fail easily, they are the ones with the most business experience and have "marketing" ( Gimmicks) skills that will keep the beer selling even if it's not top notch. The number of Sheepeople that drink beer far outweigh the discriminate drinker.

[canuck]

Here we self deliver, so its up to us to get paid. In saying that, I'm not trying to throw anyone under the bus. I don't take CC payments, so that options out. The people that write the cheques are not the people usually accepting the beer or invoices. All in all I have always been paid to date, just not always in what would be considered a timely manner. I only brought it up because at my level its really important since I give a large majority of money away. As for the ones doing it for money, they won't fail easily, they are the ones with the most business experience and have "marketing" ( Gimmicks) skills that will keep the beer selling even if it's not top notch. The number of Sheepeople that drink beer far outweigh the discriminate drinker.

I self deliver as well but it definitely sounds like your system in NS is different. For us in NB, my accounts place the order with ANBL, ANBL forwards the order off to me, I deliver the keg(s) myself, and then invoice ANBL to get paid......which we get paid weekly from them. So my accounts don't pay me directly, they pay ANBL first.....and if they don't pay ANBL they don't get beer. I can see how that would be a shit show for you.

[Comforteagle]

There's a great quote of Walt Disney along the lines of Disney not making movies to make money, but making money so they can make more movies. make money so you can make more beer for me to buy.

[bluenose]

There's a great quote of Walt Disney along the lines of Disney not making movies to make money, but making money so they can make more movies. make money so you can make more beer for me to buy.

well said