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?
May 1, 2010.
Starting a Brewery 