How to start a brewery

You don’t need experience in the beer-producing industry to start your own craft brewery. Running a successful brewing business involves much more than making a tasty cold one. 

1. Do your research and write a brewery business plan.

Before you commit money to your project, you should conduct essential research. As said above, the craft beer market is crowded. You’ll need great beer, a welcoming audience and a solid marketing plan to carve your niche This is the kind of information you need to know upfront:

• Where will you base your business and where will you sell your beer? 

Most craft breweries start out very small, with only one or two products and a taproom (bar) where they sell their beer. Do the math. Is the area where you want to open big enough to support a new brewery? Can you attract enough people to your taproom to sample your products? Are there already too many craft brewers selling in the same territory? If your chosen location is either too competitive or the local population is too small to support your business, look elsewhere.

• Who are your target customers?

Craft brewers tend to shape their products to suit a small segment of the market – for instance, they may aim at beer connoisseurs who like rare and unusual brews, beer-lovers who like European-style beers, or trend-driven markets like sports bars and beer fests. In the early days, you won’t be able to compete with everyone, so you need to pick your targets carefully. Who is your ideal buyer, where are they, and what kind of beer do they drink? Shape your products, branding and marketing accordingly.

Once you’ve got a handle on your market and who your customers are, you’ll need to create a business plan that lays out your vision. This will be especially important if you’re seeking external investment or a commercial business loan to open your brewery. Investors and lenders will expect a detailed plan that covers every aspect of your potential business, including financial forecasts. Keep in mind that business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. 

Even if you don’t need investment or a loan, a business plan can still be an extremely useful tool. Use it as your business manual, referring to the contents to guide your strategy and manage your financials.

Find out more about creating your business plan here.

2. Hire a consultant

If you can afford it, it may be worth hiring a brewery consultant to help you get started. Consultants will be able to guide you on finding a commercial space, securing permits and licenses, producing a pitch to investors, hiring key staff such as a head brewer, and creating a distinctive brand. 

Your consultant should be someone who has extensive experience in the industry, ideally as a brewmaster, as well as formal education, such as a degree in brewing science or fermentation science. You also need to see that the consultant has a successful track record with other breweries.

3. Get funding

If you don’t have enough cash on hand to launch your brewery on your own, you’ll need funds from investors or lenders. Many new business get started using financial support from friends and family, but if that’s not an option, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need to get your brewery started but be aware that investors will usually want a piece of the action in exchange for their money. This means you will need to give up a share of your ownership and you may lose overall control of the business. 

With a business loan you don’t have to surrender a share of your business to get the funds. Although it’s never easy for new businesses to borrow money, some lenders have special products and programs for startups and entrepreneurs. These types of financing include:

• Term loan – this is a lump sum that you pay back over time. Borrow up to $5million over as long as 25 years. Collateral may be required.
• Business line of credit – a loan that functions like a high-value credit card. Withdraw cash anytime up to the maximum of your credit limit. You only pay interest on the sum you withdraw, not the whole line. This can significantly reduce your borrowing costs. Collateral may be required.
• Merchant cash advance – borrow against the value of your credit/debit card sales. As your card sales increase, your credit limit goes up. Pay the loan back with a small percentage of your weekly or daily card sales. No added collateral is required.
• Equipment loans use the asset you’re financing as security, similar to a car loan or a residential mortgage, so no added collateral is required.  Buy machinery, furniture, technology, etc. Use the equipment as you pay for it. 

To get these types of loan you can approach banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of startup loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a startup loan before. 

4. Register your business and apply for permits.

You’ll need to register your brewery with local, state and federal authorities. But before you do that, you’ll need a name for the business. You’ll want a name that is not taken by another organization, as infringing on someone else’s brand name and copyright could end up in a costly lawsuit. 

You will also want a website and branded email addresses for your brewery. Check to see if your preferred company name is also available as a domain name. If your domain name is available, you should be able to buy it via any of the advertised web hosting services. 

Once you’ve settled on a name, you must decide if you want to run the business as a sole proprietorship, an LLC or a corporation. Although it involves more paperwork, operating as a corporation can protect you if the brewery does not succeed, as you are not personally responsible for the company’s debts. If you choose this route, you must submit your articles of incorporation to the secretary of state’s office in the state where you register. You can do this in-person, online, or by mail. You will have to pay a registration fee at the time of filing – typically $100.

Breweries are governed by a host of laws, and you will need to get the necessary licenses and permits. If you’re running a taproom alongside the brewery you may need to apply for multiple permits as you will be selling via retail outlets and on-premises.

5. Buy commercial brewing equipment.

You’re going to need a lot of equipment to make award-winning beer:

• Mash/lauter tun – this is a tank that infuses grains and water, creating wort, which is a bittersweet liquid that becomes beer after fermentation.
• Brew kettle – a pot that boils wort.
• Heat exchangers – quickly cools wort to speed the brewing process.
• Fermentation tank – holds wort as it ferments into beer.
• Brite tank –  clarifies and carbonates beer.
• Kegs, cans or bottles – the containers in which you store and distribute your beer.

Brewing equipment can be expensive, especially if made to order. You should also factor in long-lead times for bespoke equipment and machinery. Alternatively, some equipment may be available second hand. This will be cheaper, but you should have an expert inspect the goods before buying, as brewing equipment is subject to high heat and rapid temperature changes than can affect efficiency and structural integrity. 

6. Get insurance protection.

Protecting your investment is crucial, so you’ll need insurance to cover every eventuality:

• Business insurance – this covers you for errors and omissions, lawsuits, natural disasters and accidental property damage.
• Liability insurance – covers your employees and customers for personal injury or loss while on your business premises.
• Business interruption insurance – pays out if your business is unable to function due to events beyond your control – such as a power blackout.
• Commercial building insurance – covers your physical work space.

7. Build a taproom.

Many craft breweries operate a taproom alongside their brewing facility, usually on the same site. Taprooms sell your products straight from the production line and it’s where your first customers can sample your beer and a place where you can bring potential distributors and retailers to discuss the distribution of your products. Your taproom is your initial window on the world, so it’s worth extra investment.