Podcast: Play in new window | Download | Embed
Subscribe: RSS
Want to start your own craft brewery without bringing on partners? Don’t think it would be possible ever start a brewhouse for sub 6-figures?
Then take a look at this case study with Sam Corr, the founder of Drumconrath Brewing Company, who proves once and for all that you don’t need an enormous loan or a dozen investors to launch an independent brewery. In fact, Sam was able to start his own brewery for just over $50,000 thanks to his ability to identify key ways to save money on equipment and do-it-yourself mentality that allowed him to avoid hiring expensive contractor for certain jobs.
In the inaugural episode of the Food Empire Pro Podcast, you’ll get a deep dive into the how Sam Corr got started down the path to owning a brewery based in Mapleton, North Dakota. If you want to learn how to start your own craft brewery on a bootstrapped budget this is the episode for you. Click the play button below to listen to the podcast of this conversation.
The Early Days
Like the founders of so many other micro breweries, Sam was introduced to brewing about 10 years ago through home brewing with a Mr. Beer Kit. The kit leaves much to be desired from a creativity standpoint and tastes terrible, but is a simple way for beginners to brew their first batch of home brew.
While the Mr. Beer Kit, Sam had its limitations, Sam quickly returned to the home brew shop where it was purchased to ask questions about ways he could have more control over beer recipes and the equipment it would take to execute. From that point forward, Sam was hooked.
Sam returned home that day with a roaster pan and stock pots from the local home brew store and began to develop what would be his first recipe. Using a $26 computer program called BeerSmith, a tool that helps you work out the right percentages of ingredients to make beer, Sam began to experiment and learn what worked and didn’t work in terms of brewing.
Sam tested recipes for a wide variety of beer styles, including red’s, American Pale Ale’s, Porters, IPAs and continued to refine them for years as an avid home brewer. As Sam got more serious and worked to refine the recipes, most of the beer would be given away to friends and family members that were eager to sample the latest style.
Eventually, people started to compliment how good the beer had become. Sam got to the point where there was a waiting list of people that wanted to receive and try future batches that were brewed. This was the moment Sam recognized that he was onto something that could be bigger than a part-time hobby.
Sam Coor, the owner / founder of Drumconrath Brewing Co.
My wife got tired of me just giving beer away all the time. So we talked about it, looked at our finances, and took the plunge. – Sam Coor
Challenges Getting Started and a Personal Crossroads
When entrepreneurs set out to build a new business one of the first challenges encountered is raising enough money for it to get off the ground. Sam’s experience was no different. When Sam started seeking a small business loan for his concept, he faced a lot of rejection.
Sam started the search for capital by going to usual suspects by scheduling appointments with the local banks. Sam had already prepared a business plan for his craft brewery, but was quickly turned down for a business loan by the banks and credit unions he approached.
While Sam was in the process of figuring out how to pull together the money needed to start his business, a family tragedy struck. Sam’s dad was diagnosed with cancer and passed within one year. Understandably, this devastating life event postponed progress on the craft brewery and led Sam to take stock of his own path.
At the time Sam was unhappy with his day job. It got to the point where it became emotionally draining to know that he could be pursuing his true calling of running a brewery, instead of working at a place he didn’t enjoy. Sam was at a crossroads as to what path he should take. Eventually Sam told himself it was time to actually figure out how to make the business work or move on:
We need to either do this or give it up. Life’s too short to be miserable at work all the time. So either we’re going to work this out and do it or I should just quit all together because it’s emotionally draining now to go brew and think that I could have been there [owning a brewery]. – Sam Coor on being at a crossroads whether or not to move forward with the business.
Moving Forward and Raising Money
After a few discouraging meetings with banks, Sam realized that unless he was able to acquire a substantial downpayment of money there wouldn’t be a way to get a loan from a traditional bank. In most cases, banks will want some form of collateral like a house or automobile that they can take in the event you aren’t able to repay the debt. It also didn’t help with the banks that Sam had no formal business operation experience. This was his first business venture.
An alternative funding option would be to bring partners into the business that would provide the startup cash required to get started. But Sam didn’t want to go that route either. Any time you bring in partners, the operation of a business gets more complicated with more decision makers to agree on the longterm direction of the business.
So Sam sat down with his wife and they had a big talk about whether or not they should move forward with the brewery. After much discussion they decided to move forward with the plan. They would take a second mortgage out on their house to get started.
Worst case scenario, Sam and his wife determined that in the event the business failed they could support making payments on the house. Sam’s wife would stay at her current job. If needed, Sam could get another job in future.
Sam and his wife were willing to take the risk of a taking out a second mortgage to fund the business. This action is viewed as unfathomable by some, but it was a strategic bet they were willing to make in an effort to achieve a longtime goal of owning an independent micro-brewery. They are not the first or last business to be funded in this way.
With the cash finally in hand start the brewery, it was game on and time to begin evaluating locations and completing the regulatory steps needed to legally start this type of business.
Finding a Brewery Location
Selecting the right location of your brewery is one of the most important factors that can determine the success of failure. Not only do you to find an environment that is safe, inviting, and has a big enough customer base nearby. But you also need to locate a spot that’s large enough to store your brewing equipment, have a tasting room with sufficient seating and fit your budget all at the same time. For many breweries renting space at a quality location is the largest on-going monthly expense. (Note: The biggest monthly expense could also be labor depending on the size of the operation.)
Finding the right place that checks the box on all of these categories can be a lot like finding a unicorn… seemingly impossible.
Sam originally looked at a Fargo location for his brewery, which is the largest city in North Dakota. The location being considered was near the center of the city and accessible by a lot of major roads. In Sam’s situation, most of the startup cash would go toward funding the rent for the location and getting it outfitted / transformed into a brewery.
When it’s time to start looking for a location, one of the first things you’ll need to do is get touch with a commercial realtor that understands your market. Talk about where you want to be, how much space you’ll need, and the type of areas you envision.
Don’t forget to solicit commercial realtors opinions about the best neighborhood, prices, and up-and-coming areas you may not be aware of. It’s wise to take into consideration other people’s perspectives on a location when making this important business decision.
Sam selected a location in an industrial area that’s 2160 square feet. It’s not uncommon to find breweries across the United States located in what would be considered a traditionally industrial area. Due to the space requirements needed to brew beer this is often the only affordable area available.
Assuming you plan to open a smaller brewery and tap room, you could probably get by with 1,500 square foot space if you’re looking for a minimum size requirement. But having a little extra room to grow for the future doesn’t hurt either.
What Are The Regulatory Requirements for Breweries?
Craft brewing is a federally regulated industry through the Alcohol and Tobacco Tax and Trade Bureau (TBB). But you’ll also need to understand the requirements from your state. Generally speaking, states are easy to work with. States will happily take your money and with the additional tax revenue and licensing fees. At least in the North Dakota, you can send them a check and get a license in the mail.
At the federal level, however, it can take 6 – 7 months for them to get back to you after submitting paperwork needed to get started. The city you decide to start and operate business can also present challenges. For example, the owners of more established bars, restaurants, or craft breweries can make getting started more difficult if they happen to be friends with high-ranking city officials.
Alcohol and Tobacco Tax and Trade Bureau (TBB)
The federal requirements and forms for going through the brewery qualification process are available online. These can be challenging to fill out so if you can get guidance from a mentor on this piece that will make the process infinitely easier.
This not the type of form you can just sit down and complete in an afternoon like a driver’s liscense. Many brewers express that it took them a few days or a couple weeks to complete the first time. Many entrepreneurs need to amend their filings based on the request of the government later as well.
Highlights of Federal Filing Requirements for a Brewery:
- You must give a typed description of the brewery.
- Describe plot of land your brewery is on.
- Describe building brewery is in.
- Describe the brewery overall.
- Get a letter of recommendation from bank.
- Acquire and Send Registered tradename
- Submit floor plan of your brewery.
- Secretary of State or Attorney for State information.
What Equipment Costs Are There for a Brewery?
Equipment not as expensive as you might think. Sam was able to order all the metal equipment from China and handled his own importing. The fermenters purchased are plastic, which is a lot less glamorous and a little harder to work with, but saves a lot of money when starting out. You need to be more careful with plastic fermenters because if the plastic gets too hot it will wreck the beer. Sam also built a cold room himself. All this work added up to massive savings in startup costs that similar businesses should expect to incur.
All that being said below is the list of equipment costs Sam incurred while starting the brewery business:
Brewhouse & Filtering (or Brite Tanks) Tanks: $11,000
The brewhouse is where you make the beer and the filtering tank are what you’ll use to pump liquid into the fermentation vessel.
Fermentation Tanks: These were $500 a piece used from another brewery. Fermentation in these tanks will take about two weeks for the wort and yeast to transform into real beer.
Kegs: These are the most expensive pieces you will invest in due to the quantity you need to purchase. You can find used kegs for around $60 a piece used and you need a lot of them. You might be able to get lucky and find them through another brewery or someone that’s going out of business. Sam invested approximately $12,000 total in full size kegs.
Sinks: You’re required to have a 3 compartment sink ($300 roughly). A seperate hand washing sink is also required and will cost between $50 – $200 on eBay or Amazon depending on the size and brand name you purchase.
Draft Parts: This is only a requirement if you have tap room on-site. You’ll need draft facets, which are the lines that go to kegs, regulators, bulk C02 and nitrogen tanks. You’ll also need