Opening a (brewing) business

[blinkau]

Hi guys I thought I would post this on these forums as everyone here is very well informed on the business world.

I am looking at getting into a business myself and we have settled on a microbrewery. We have done a significant amount of research into it and will be assisted by an already well established player. The question is we would be operating a business which wouldn't be under a franchise model and requires a large capital out lay 350-500k and staffing costs etc. The product itself is a relatively high mark up product at 80% which is soon eaten away at with costs and government excises.

The question I am posing to everyone here is if they where looking into operating a business like this what questions would they ask and where would they go for additional info. I feel I have an acceptable amount of research on the topic but I feel discussing this in an open forum could allow me to see a much larger picture from a well educated audience.

Any of your advice tips on positives/negatives would be very appreciated

 

[Nyden]

Hi guys I thought I would post this on these forums as everyone here is very well informed on the business world.

I am looking at getting into a business myself and we have settled on a microbrewery. We have done a significant amount of research into it and will be assisted by an already well established player. The question is we would be operating a business which wouldn't be under a franchise model and requires a large capital out lay 350-500k and staffing costs etc. The product itself is a relatively high mark up product at 80% which is soon eaten away at with costs and government excises.

The question I am posing to everyone here is if they where looking into operating a business like this what questions would they ask and where would they go for additional info. I feel I have an acceptable amount of research on the topic but I feel discussing this in an open forum could allow me to see a much larger picture from a well educated audience.

Any of your advice tips on positives/negatives would be very appreciated

Can I first ask, why aren't you considering a franchise model? Surely in brewing there are franchises out there? A proven name, help throughout the entire process - there are many advantages there. Obviously though, this can have different costs associated with it.

Can you give more details on this brewing enterprise of yours? A factory set up, or?

Well, who would you pose the questions to? You mentioned it would be your own business, not a franchise? I guess if you were asking someone with past experience, you would ask about marketing, long-term costs, problems you can expect, well, not really sure what else! Liability? Safety, insurance?.

You could probably get more information from a qualified Business Advisor.

You should certainly try to narrow down the outlay costs though, your current estimate has a 150k of uncertainty!

 

[cuttlefish]

Just curious - have you (or your partners) run a business before and do you have any experience in brewing or in the liquor industry?

If going into partnership with others I'd recommend you work through a shareholders agreement at commencement while you're all still cool headed.(I'm in business with others and this has served us well).

You've probably covered all this in your research, but I've put a few of the sorts of questions that would come to my mind below in case its any use.

Is the larger player contractually committed to provide support for the business and in what form is that support taking (sales/distribution channels? technical expertise?).

Sounds challenging starting a business from scratch - wouldn't it be easier to buy an existing micro brewery and then adapt it to your purposes?

How do you manage supply/demand in a micro brewery - if you have a succesful sales/marketing campaign how do you ramp up supply to ensure you have enough product - is it fairly easy to adjust production upwards/downwards to cater for differing levels of demand - can you scale your delivery mechanisms to meet with increased demand etc.?

What is the distribution channel (who are your customers, how does your product get to them?).

What differentiates your product, and how will you make the market aware of this differentiator. What sort of competition will you face and what form will it take. Are there other players that have established relationships with customers/distributors who you will have to dislodge in order to get your product positioned?

What is the thing that is going to give you the competitive advantage - superior quality product? Innovative branding ideas? Efficient/innovative production technology? Efficient end-to-end processes/systems? Innovative distribution model? Innovative sales and marketing plan? etc.

What is the contingency plan/exit strategy if things don't work out.

Sounds like a challenging sort of industry to operate in but could be fun as well.

I couldn't do it I'd be sampling the product too much! :bier:

 

[prawn_86]

If you are starting from scratch, marketing will be of enormous importance.

If buying an existing microbrewer then this will not be as much as a problem.

 

[blinkau]

Ill try and answer the questions below in individual posts (but let me know if you think my responses are way off or if you think I am on the wrong track)

Can I first ask, why aren't you considering a franchise model? Surely in brewing there are franchises out there? A proven name, help throughout the entire process - there are many advantages there. Obviously though, this can have different costs associated with it.

The name is out there so there are already 8 setup under the name so we wouldn't be running from scratch rather using their existing model and adapting it to a new location. We would already have the awareness of their brand. Franchising can be offered its something we havent considered as we thought it would be unfavorable, but thanks for the tip and its defiantly another side I will look into.

Can you give more details on this brewing enterprise of yours? A factory set up, or?

Its a model which has been done before so you pay the capital outlay for all the setup equipment you need.

Well, who would you pose the questions to? You mentioned it would be your own business, not a franchise? I guess if you were asking someone with past experience, you would ask about marketing, long-term costs, problems you can expect, well, not really sure what else! Liability? Safety, insurance?.

Those are a few questions we asked but safety/liability is something I am very unsure on and need to research into.

You could probably get more information from a qualified Business Advisor.

Thanks ill have a look tomorrow and see what I can find as I am sure it would pay for itself.

You should certainly try to narrow down the outlay costs though, your current estimate has a 150k of uncertainty!

We are working 500k on the high and 350k on the low we plan to sort out this huge cost difference soon and work down to what we can reasonably expect.

 

[blinkau]

Just curious - have you (or your partners) run a business before and do you have any experience in brewing or in the liquor industry?

Havent run one before or had any experience in the industry which is a big risk in itself

If going into partnership with others I'd recommend you work through a shareholders agreement at commencement while you're all still cool headed.(I'm in business with others and this has served us well).

Thanks for the tip I was unsure of what structure is the best to work, I will definitely have a look into the above.

You've probably covered all this in your research, but I've put a few of the sorts of questions that would come to my mind below in case its any use.

Thanks for the list of questions these are something I will write down and go over very carefully.


Its a new learning experience and I am sure having not done it before there are several things we could miss, I mean the only way we will learn is to make those mistakes like everyone else has I guess! A research into the internet on others owning microbrewries in other states shows that some struggle to break even while some are successful and purchased out by larger players. Running a a business with a huge capital outlay to break even year on year would not be worthwhile.

I think a few months of research (so far we are in the early stages hence the general figures) we could determine which action to take. One thing iv found is the more we look into a business the harder it gets. Thanks for all your tips and keep them coming the more tough questions the better as it will really keep me on the ball

 

[Trembling Hand]

In a former life I have started, owned, ran, successfuly sold and/or blown up about 10 hospitality business from small cafes, large ones, small bakeries, large wholesale bakeries and even a fish and chip shop. As well as helping a few friends to do the same along the way.

One thing that I would recommend is if you cannot see the business realistically achieving a large turn over stay away. For two reasons

1. People that have not had experience running a business do not realize how hard you work for your income. And how little of you business income ends up in your pocket.

2. And most importantly few new owners reach the level of turnover that they were hoping for. If they are already aiming low and only get 1/2 way there you have a recipe for trouble. For example if your projections/biz plan realistically aims for 5000 per week my bet is most new biz owners will only get to $2500. That can be a disaster.