Homebrew to Nano question

[MAX1MVS]

My friend and I are planning on opening a nano in the near future. One big hurdle is the financial jump from our day jobs to full time brewers. We plan on starting either a 2bbl or 3bbl with a tasting room. I've done the calculations and on paper it looks golden, but as we both are the sole bread winners in our respective families, this is a HUGE leap of faith. When making the leap from home brewing to professional brewing, how soon should we expect to see profits? Months, years? Any insight on this will be of great help.

Cheers and thanks in advance!

[ziggy]

You're not gonna want to hear this but it's gonna save your asses. You can't make any money off a nano. You can make enough to pay for your ingredients and that's about it. You said it looks golden on paper but I bet you are missing something major. You might be able to make money off a nano if you are making super premium beers that you can sell for $15 per 750ml bottle but at regular $4 pint prices you can't make enough to draw a salary unless you are brewing around the clock and you are selling all of your beer out of your tasting room which means selling 62 pints per hour if you are open 8 hours per day at $4 each.

[Adam]

Nanos generally are to break even or just make a slight profit to show financial history, brand itself, and obtain investment or loan for expansion. Would be nice if Moscow would book the guys from the nano show a couple years ago for an update, I know one of them is growing quite nicely.

As a general rule in business (and I've started a few), the first year is a loss, second year is gaining some traction, and the third shows good profit. You might hit profitability in your second year. One business I started was profitable during the first year. That's pretty rare in the business world.

The key to profitability is cost control. Economies of scale come into fruition. Charge market value but reduce your costs and you will increase your profit. $4 or $5 pints between two companies, and the one that produces those pints cheaper is making more profit. Everything looks good on paper. Trust me.

[12stones]

The problem is that at the nano level, keeping your costs down is difficult. Economies of scale are an issue at the supply and production levels as well as the retail levels. Finding a way to maintain a profitable margin is difficult at a nano production level. You'll pay more for supplies and produce less beer for your effort which makes your price per gallon go up. Not saying it's impossible, but...

[ziggy]

You also have to think about maximum production and lost opportunity costs. Every hour you spend brewing which is going to be a lot on a 2 barrel system is an hour you can't spend selling pints in the tasting room, promoting at bars, marketing, driving the delivery truck. We have a local 2 bbl brewery here that was started by 6 guys and they brew around the clock and they have a bunch friends that work for them part time and volunteer.

[peas_and_corn]

You'll need a 10 barrel brewery at the very least- 15 would be preferable. The overheads per barrel will be lower and as mentioned above, you'll spend less time to brew the same amount of beer. It will still be very difficult to turn a profit- talk to the head brewers at your closest micro and I'm sure they'll tell you about how hard it is.

[12stones]

Checking with a local microbrewery here, the minimums he gave me for a production brewery were 15bbl brew house and 120bbl fermentation space. This is what's taught at Seibel. Industry accepted break even (not profitable) was 3500-4000bbl a year. At 10bbl and brewing once a day you couldn't even make that if you brewed every day of the year.

Looking at the economics of a nano-brewery, I just can't see it working. Higher material costs, higher overhead and labor costs = more cost per oz of beer. If higher volume production breweries are working on 1 - 2 cents of profit per oz of beer for draught distribution, the smaller, less efficient breweries will make even less per oz. Paying more and making less isn't a good business plan IMO.

Take it for what it is, but if the numbers are looking good on this, then you probably don't have the right numbers.

[ziggy]

I recommend you take a business class at your local community college. That's what I did and I gain HUGE amounts of knowledge about starting a business in general. And having researched it a lot there is only so much advice you can get from people online in forums. You really have to get down into the details like how much water, electricity, and gas it takes to make a barrel of beer and what the rates are in your area, what your local laws are, local real estate prices, etc. There are a lot of sweeping generalizations that you read about on the internet but you really have to end up finding your own way. There are some commonalities to a California brewpub restaurant in a downtown metropolitan area and a production brewery in the middle of nowhere midwest but those 2 business plans are going to look nothing alike at all.