As I said we would, Kell and I have been pumping away at the business plan in hopes of having a rough draft out this weekend. Granted, I don’t think we will. But, we’re working on it pretty hard!
Everything is coming along pretty smoothly. Suppliers and other brewers alike are very generous with information. The City of Denver has been responding to questions about tax and property issues, incentives etc. All is well.
One thing that has sort of stopped us, while we get ready to gear up for the issue, is what size we want to be. Our two options are small or big. Granted, our version of “big” is still tiny in the world of brewing, but that’s besides the point. We’re looking at either a 1/2 bbl (bbl = barrel = 31 gallons = 2 kegs) system or a 3-5 bbl (either 3 or 5, that decision comes later) system.
Both systems have a lot of inherit risk. Just by opening a brewery, we are taking a massive risk. But, the beer is amazing. So, there’s that.
The 1/2 bbl system has a lot of merits. It’s inexpensive, comes pretty much ready to use in a nice little package, and doesn’t come with nearly as much initial risk. The idea with this system would be to ferment the batches in kegs or small plastic conical fermenters. All beer would be sold on premise, with maybe, just maybe an account or two. The labor to beer ratio would be ridiculously high, but the cost would be super low.
On premise sales are enormously profitable in relation to off premise sales. The revenue from a keg of pints sold in the brewery at normal costs is a few hundred percent more than selling a keg outright to an off premise account.
Of course, if the beer is as good as it is, and demand picks up like we think it will, the risk in this plan comes from the inability to grow. Growth is easy on a batch to batch premise. We buy another keg, we can brew another batch. But, for every new fermenter – aka keg – it’s another batch someone has to brew. It’s a linear growth that’s not sustainable in the long run.
The thought here is that it would be easier to get the investment for this lowered capital, prove our worth, spread the word, and then ask for more money and more equipment when we feel we need to. The downside of that is when we’re trying to save up money to grow to that next level, we won’t be able to satisfy demand. Customers get pissed. We go out of business. Or fall apart from being overworked.
The larger system, a 3 to 5 bbl system, loads a lot more of the financial risk up front. The initial investment is much more. Though, at 6-10 times the volume, the investment is not 6-10 times as much. At this level we can calm down a little on the brewing, focussing more on customer service and sales. There is more equipment required, like keg washers and fillers, for example. And we’ll need to go out and sell the beer to accounts like Falling Rock and Rackhouse Pub, rather than market to get people to come inside the brewery. So it’s just as much work, just allocated in a different way.
If we are able to secure the investment for this bigger system, the growth potential is much better. With any system, we have the ability to “double brew”, or brew more than one batch into a double-sized fermenter. This saves on yeast and time and tank resources. At the 1/2 bbl level, a double batch fills a 1 bbl tank. At the 5 bbl level, a double batch fills a 10 bbl tank. While the ratios are the same, 5 extra barrels of beer is a lot of extra beer.
Just writing this post is helping to push me toward the larger system. I think Kell said it best. It’s better to ask for a larger investment now, when we have the time, than to it is to spend an initial investment so we can ask for the same larger investment in a year or two.
So, assuming we can find a rich uncle or some other form of investor, it looks like we’re going “big”. From pico to nano!
What do you think?
The Wench says go big or go home.
Plus, the bigger you start … the faster you will grow … and then you can hire me!
Good point! I wonder what the tax incentives are for having a staff Wench…
Hey how did things work out with your brewery? Did u get it off the ground?
Go big. Being to risk averse early on is also a risk.
And as you said, you’ll be able to focus on customer service and sales, which is just as important.
Definitely good points. Thanks Dave!
Nice comparison. My team is thinking through the same logic. Our distribution area is smaller than Denver, making it easier for us to go pico.
Keeping things tiny means we can keep our day jobs, but not our social lives.
Totally forgot to mention that part of the thought process. With the pico, I would be keeping my day job, maybe moving to part time. With the nano… Well, we’ll see if I can hold on to a few hours, but all of the sudden the brewery needs to pay my living wages and health insurance. But, there’s more revenue. Still leaning toward the nano side though. Let me know what you guys come to.
I say go big… a larger system means more consistency, which is certainly important as you establish yourself. And it allows for growth as people get stoked about your suds.
Cheers!
Go big, what if you have a large run on growlers, that’s 31 growlers if your fermenters err kegs are full which they won’t be because of yeast and blowoff, so maybe you will get 13 gal out of each keg. My suggestion is pick up a couple of grundies or even some milk tanks and use them.
Todd, that’s a great point. We had actually tossed growlers aside as a negligible amount, but I hadn’t thought of a big day / week for growlers. Thanks for the ideas!
I so want to be the iconoclast and say pico. But I’m jumping on board with what others have said here. You might as well ask for as much as you can get right now. If you find no one is biting at investing in your larger set up, you can always scale back to the 1/2 bbl plan and decide to work your way up.
That’s my two pints for what it’s worth.
PJ – This sounds awesome! With you business plan, are you working business consultant to put it together? Also with you 1/2 bbl system – is this something you’re piecing together or is there a company selling “kits” of that size? Are you planning to force and naturally carbonate the beer?
I really want you to succeed (mostly because I plan on picking your brain) but I think you need to consider your break even point (BEP) in your plan. How sustainable is brewery at 1/2 bbl? Larger? Will you be able to keep the lights on at that rate?
As far as money goes, I agree that you should get ALL the money/investment/support you can now; enough to get you to BEP. Truthfully, most business are profitable in the first few years, but with enough capital and planning, you can definitely sustain it long enough to start making $$$.
I know I’m ranting a little but these things I’m asking are the same things I’m trying to hammer into my own head as go on this journey. At the end of the day, it comes down to the beer you make and I’m confident that anyone crazy enough to start a brewery is making fantastic beer! Can’t wait to try some someday soon!
-M
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As far as money goes, I agree that you should get ALL the money/investment/support you can now; enough to get you to BEP. Truthfully, most business are NOT profitable in the first few years, but with enough capital and planning, you can definitely sustain it long enough to start making $$$.
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I think you knew what I meant – ha!
Cheers, boss!
-M
Mike,
thanks for the comment! I really want us to success as well
We’re definitely going bigger. I think we’re going to go 7-10 or so. Please feel free to ask me anything / give me any advice you have. You can always reach me at pj [dot] hoberman [at] gmail [dot] com
I have to join the “Go Big” crowd. Lots of good arguments there.
I vote Go Big! Brewing 2 times a week as opposed to 10 opens up time to focus on the countless other tasks that will need your attention. You can always scale down and brew less often on a big system, but there are only so many hours in the day if you need scale up on a small system. According to my own research it seems conventional wisdom says to go as big as possible as early as possible.
Although, according to Sam’s book, his initial tiny 10 gallon sabco system that had him brewing multiple batches each day is what enabled him to experiment and develop his recipes.
So, I guess there are advantages both ways, the most important decision is the one you’ve already made to actually move forward with your dream. Much respect…
I think that you would be nuts to go with something the size of a 1/2 bbl. While small systems have worked in the past (aka Dogfish Head) they usually had a food source to go along with them.
If you are going straight production, you need to go with the bigger system IMO. I mean even some brewpubs have a larger system than 3-5 bbl. Have you guys thought about the idea of contract brewing. You have almost zero equipment costs and while you beer will be more expensive to make, you have far less costs. It also gives you time to save up some money and gain a follows so that when you can afford your own brewhouse, you have a better chance of success.
Another thing to consider with the full time vs. part time idea is that the time differences in making either sized batch can’t be that drastically different. I would assume that you will have a brew day of 6-8 hours in either case, so why not go big?
Nate, some great points. We’re definitely looking at the 5 bbl stuff now. I should write a new post so people know that
Contract isn’t a bad idea… It could be an ego thing, but I want to have a brewery. Maybe if the numbers don’t line up, that’ll be the next step… But ya.
And also, good poing about the part time thing too. Brewing 1/2 bbl or 5 bbl takes about the same time… Little longer to get the water heated, wort chilled, cleanup, etc., but overall, it’s the same. Great point there.
Thanks for reading! I’d love to hear any other thoughts you might have as we share more on here.
Definitely go big. 5BBLS of beer is about 1200 pints, every other week (I’m guessing you’re doing ales). Sounds like a lot until you start sitting down to actually drink it. I’m pretty sure my friends and I went thru 40 servings just at happy hour yesterday.
How big is your taproom? Will you offer growlers? Take that stuff into account.
1/2 bbl will drive you crazy
I vote Go Big! Brewing 2 times a week as opposed to 10 opens up time to focus on the countless other tasks that will need your attention. You can always scale down and brew less often on a big system, but there are only so many hours in the day if you need scale up on a small system. According to my own research it seems conventional wisdom says to go as big as possible as early as possible.
Although, according to Sam’s book, his initial tiny 10 gallon sabco system that had him brewing multiple batches each day is what enabled him to experiment and develop his recipes.
So, I guess there are advantages both ways, the most important decision is the one you’ve already made to actually move forward with your dream. Much respect…
Hello,
My husband and I own and liquor store and are considering starting a brewery and pub. We don’t have a clue where to start. We know liquor, beer and retail but have no experience with brewing. We have 18 years in food/liquor service. We have owned our own business for 20 years. We have lots of experience with running a business and customer service. We no nothing about brewing. Where did you start and where do you get information? We are in a situation where we can’t practice in our garage for a couple years. It’s either now or the opportunity will be gone. Can you give us some direction since it sounds like you have been where we are.
thanks,
Laurie Ott
Hi Laurie,
The best place to start learning is at home. Go to your local homebrew shop, ask them for help with equipment and learning, and they’ll put you on the right path. I can explain it all here, but it’s much better to be able to ask questions as you go.
Why can’t you practice in your garage? Brewing, and opening a brewery, is not a rush operation. What is it about right now that presents an opportunity that goes away tomorrow?
I don’t know where you’re located, but if it’s in the United States, you’re going to have an issue opening a brewery if you own a liquor store. Check out http://legalbrewing.com/ for more information, but due to the three tiered system, it’s illegal to have any involvement in both a liquor store and brewery.
Let me know if you have any more questions!
Hey-
I’m trying to do the same thing as you right now. I decided to go pico right now at the cost of around $8k (fermenters incl., kegging, etc.). I have an amazing fully automated, fully electric brewery that makes both the work load and variable consistency much less of an issue to fret when doing pico. I personally would never dream of doing a propane based 1/2 bbl brewery as a business, not that there aren’t nice ones. Complete automation is the only reason I’d consider going pico rather than nano. After there is cash flow, really at whatever rate, then there is the capital justification for spending on a 7 bbl system. Unless I plan on doing it with a lot of investors (and then with less personal control and reward) I couldn’t afford it until then. Reason is is that I want to do it on a piece of property I also live at (future tense) so the rent for my business and my personal mortgage is combined and that makes it easier to ramp up the size of my business at my own pace. And, if I get real big before I can install a big rig, I would just contract brew my best sellers.
So, I’d keep the job I have now while I build the brewery and apply for permits, and then there’d come a point where I’d jump ship when the business is ready to go.
I know I’m bucking the trend, but I’m also going for a ~4 hr brew day that I can “monitor” instead of “babysit”, too. That’s not the trend either. I can see doing double batches every day 4 days a week if I have to (and not go completely crazy). That’s about 200 bbl a year. And if I supplement with contract brewing, I have a nice easy (easy on the wallet) ramp up to a full production brewing scale.
I’d rather you send me a communication if you want more info on my rig for fear I’d sound like a sales rep for the company (1 man company). The fellow makes 3 bbl systems too. Automation is key for my plans to be able to do other things in the business and just carry a timer on hand.
Dr. Spanks,
I’d be interested in who your guy is too. Not necessarily in the immediate future, but a couple years down the road. A friend and I are in the infancy of putting our plans together but it is something I fully intend to pursue. I’d love to make the contact now and have an understanding of the potential investment as we press forward. If you wouldn’t mind reaching out to me via email I would appreciate it.
PJ,
This blog was a great find. I’ve enjoyed reading about the adventure. With each batch we brew our quality improves and we are further inspired to pursue our dream. I’ll continue to follow your story and hopefully have one of my own to begin sharing here soon.
-Mike
Dr. Spanks,
thanks for the comment. That’s great that you know what you want, and have a way to get there. I’d love to hear who your guy is, and see what he offers. I’m pretty sure we’re going bigger, like 7-10bbl, but I’m still all ears for anything. Shoot me an email at pj [dot] hoberman [at] gmail [dot] com. Thanks!
PJ
Dr. Spanks,
I’d be interested on more information on your rig as well. I think you and I are thinking on the same levels of a business plan (i.e., living in the space as the brewery, etc.) I’d be interested to learn more about your brewhouse, as I’ve been attempting to piece things together, but would love an automated approach. Please email me if possible.
Hi Dr Spanks,
I am also starting a pico/nano brewery and would be very interested in hearing about the automated system you are looking at. Please contact me at dfalken2000@yahoo.com.
thanks,
David
Dr. Spanks – If you were able to share your brew system contact I would appreciate it. I am planning on opening a nano – and would be interested to learn more about his 3 bbl system.
cheers,
dan
Dr. Spanks,
I agree with “a lot less personal control and reward.”
My husband and I went down the road of a BP for a larger brewery and decided that due to our need to raise most of the capital, we would be taking on a huge amount of risk for very little ownership. . . I’d rather keep my day job and keep brewing a fun hobby. . .
I am now considering an approach similar to what you posted. I would also be interested in the contact for the brew system you mentioned.
Dr. Spanks,
I would appreciate info about your equipment contact as well. If possible, email me directly. thanks Laurie
Seriously spend your money on building your brand and get it contract brewed. Then when you do your brewery you will know exactly what size you need. Read book on Brooklyn brewery founders to see how they did it this way. Brands like them in their early days and Epic beer still work the recipe and are there on brew days but don’t waste capital at startup on plant.
I was curious if you have considered the idea of a brew on premises? You could start with a three kettle system of 1/2 bbl each and rent out the equipment for use by the public. During a couple off days each week you could brew your own batches to sell on premise to customers and growler fill ups. I am in the biz development stages of making this type of business happen in my area. Nothing like it around.
That’s definitely been a thought before. Also considered doing a full out co-op.
Did anyone every find out who Dr. Spanks’s brewery builder was? I’d love to know because it’s hard to find good, small systems out there. I know its been almost 2 years since that post, but if anybody found any information about that, I’d love to hear it. You can email me at pgillis08 [at] gmail [dot] com. Thanks, guys! How’s the brewery looking PJ?
Go both big and small… get a pre-fab 1/2 bbl. system to get up and running in 6 months. Getting your 5 bbl system online will take a year. Once your 5 bbl system is up and running, sell off the 1/2 bbl system (which hold their value well), or keep it for experimental purposes or for the occasional corked and aged batch.