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.
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 beer facets with handles for the bar. All of these parts combined will run cost about $2,000.
Pumps: These are for pumping wert and beer from one tank to another. This will also be used for cleaning tanks. Expect to pay about $1,000 all together. This will depend on the size you need.
Shelving Units: These are utilized to stack grain, malt, hops, yeast and other ingredients. You can get shelving like this affordably at Amazon or from a home improvement store. These can be purchased between $100 – $200 per shelf. You’ll need 5 – 10 of these when you get started to keep beer brewing ingredients organized.
Keg Cooler or Cold Room: Ideally, you’ll stores kegs in a cold room that keeps that beer ice cold and run lines from there to your taps. When you’re making the floor plan for your brewery try to position it near the wall of your tap room where you plan to dispense beer. However, this might not always be possible due to the way in which your location is setup and regulations.
If you aren’t able to setup a cold room in the right location, you’ll need to invest in a keg cooler. Same was able to find a keg cooler on clearance at Menard’s (this store is a lot like a Home Depot with numerous locations in the Midwest) got a chest freezer that I converted and got on clearance for $300.
Plumbing / Electrical: As far as installing electrical and plumbing, you’ll need to hire an expert on those projects. Make sure to ask your network for referrals of good contractors and get multiple bids to understand the price range of services. The cost will vary widely depending on your location, but for initial business planning purposes you can expect to pay $2,5000 each to a professional plumber and electrician.
One final pro tip gleaned from the interview is that you should always carry a backup of spare parts so that one small piece of equipment doesn’t shut down your entire operation for days. It pays to be prepared!
How Much Does it Cost to Start a Craft Brewery?
According to reputable reports online like this one from NerdWallet, you should expect to spend between $100,000 – $1,000,000 on average to open a brewery. As you can see by getting creative in the ways described above you can save a fortune in startup costs.
As mentioned earlier, Sam was able to started a craft brewing business for just over $50,000. As highlighted in both the audio interview and equipment costs section there are the three key areas you can focus on to save money when opening a brewery:
- Equipment: Brand new, stainless steel brewing equipment will cost more than used equipment. You can buy plastic fermentation tanks for $500 a piece compared to thousands of dollars. Try to find ways to save on equipment costs so you can make it happen.
- Labor: Sam was able to get his brewery started as a one man show. Sam dedicates slow days toward brewing beer and is the head bartender on weekends. No job big or small is above him. As a result of all this, the on-going overhead is super low.
- Rent: Negotiate your lease terms in an effort reduce your monthly payment. Look for lower cost locations in the suburbs or industrial parks.
How Much Money Does a Small Brewery Make on Average?
Each brewery has different sales numbers. Some of the larger craft breweries do hundreds of millions of dollars in sales annually with dozens of tap rooms, national distribution, restaurants, and generate revenue in all sorts of ways. A good example of one of the biggest craft breweries is Stone Brewing. In 2015, Stone Brewing reported annual revenue of over $137 million and over 1,000 employees.
If you’re just starting a brewery sales figures like that can seem impossible. Lofty as that goal may seem now, when you’re evaluating any business opportunity it’s good to find examples of brands that have enjoy mass appeal. This demonstrates tremendous upside in the market to grow. But these big craft brewers are not the sort of business we’re highlighting for this piece.
At the time the podcast interview was recording, Sam was in the first year of his business. Understandably, in your first year of business you should expect the lowest sales numbers since it takes time to gain traction.
According to Sam, the first year operating a brewery they generated $70,000 – $80,000 in total sales. On the bright side, each month’s sales generally got better and better, which should continue.
The other important point to keep in mind in terms of revenue is that Drumconrath Brewing Company is only open four days per week from 4 p.m. – 10 p.m. If the brewery were to be open seven days a week it would immediately increase the monthly sales that would add up over the course of the year. But that’s the nice thing about being an independent business owner. Your the one that gets to set the hours of operation around your ideal lifestyle.
Sam is also able to keep expenses to a minimum due to being a one-man operation. Sam currently brews all the beer and works the tap room. Due to the combination of low labor costs and running the brewery out of a lower cost suburb, the monthly overhead for the business is very low.
At the time of recording this interview, Sam was generating sales exclusivley through his tap room. Here’s what the high-level costs and profits looks like for a batch of beer (17 kegs of beer). You can use this formula to help project the profit for your own beer.
What’s the profit margin on a batch of beer?
It will cost about $300 to make a batch of beer (ingredients only, not factoring labor costs). A batch of beer is a approximately 17 kegs of beer. We are assuming you plan to utilize standard 5-gallon keg sizes for this estimate.
You can expect to get approximately 40 (16 oz) beers from each 5-gallon keg.
So the math behind behind estimating your profit potential from a batch of beer looks like this:
40 beers X 17 kegs = 680 beers
680 beers X $5 average sales price per 16 oz. beer = $3,400 sales value per batch.
For our profit margin estimate above we’re assuming you plan to make a beer with slightly more expensive ingredients such as an IPA. As you might expect, the costs of ingredients required to make different styles of beer will vary in cost.
You can increase profitability further by making and selling an American style light beer, which could cost under $200 for ingredients per batch. Naturally, you’ll want to run this simple formula using your own proprietary ingredients when starting out to make the estimate more accurate.
You could also increase the average profit margin of your beer by raising prices. In the example above, we assumed that you are charging only $5 per 16 oz. draft beer. That’s pretty darn cheap for a glass of beer in much of the United States. In many markets you’ll be able to charge $6 or $7 per glass.
By increasing the price of the beer by just $1 per sale (from $5 – $6), you can increase sales value of a batch of beer to $4,080! Be sure to test price points to determine the best pricing model in your area. If you do some quick research by viewing the prices of beer at other breweries you’ll get a clear understanding of what prices your market will bear.
On the flip side, you’ll need to factor the labor cost to make the beer. As you already know, the ingredients needed to make the beer are low. But the time and labor required to make an enjoyable craft beer is high. Sam has a passion for brewing and loves the craft so doing it himself this is part of the reason he got into this business. But if you don’t share that same passion for brewing you will need to plan for the expense of hiring an employee into your business plan.
Finally, keep in mind the other basic expenses and overhead that go along with operating any type of business. There will be a certain amount of product waste per keg, you’ll need to pay taxes, and rent.
Note: Sam is in talks to distribute his beer locally through restaurants and bars, which would add an additional sales channel and revenue to for the business in the coming months.
What Are the Steps Needed To Start a Brewery?
Follow these steps to start a craft brewery or brewpub:
- Pre-Planning and Research Phase – Determine the costs to start the business, what’s your brand is going to be, you ideal customer, the styles of beer you want to specialize in, the ingredients and formulas for you beer. Determine your strategy for generating sales (sell food, tap room, distribution). This is the stage you write business plan for your micro-brewery.
- Financing: Have an investor? Great credit? A large retirement account? After figuring out how much money you’ll need to start the brewery, it’s time to go out and raise the capital needed to make it happen. This is the point where you must decide if you’re willing to take the financial risk to start this business.
- Finding a Location and Negotiating the Lease: Find a location that would be suitable for starting a local brewery. Try to negotiate the lease terms and price of lease. Never accept the first lease offer without countering. Tour multiple locations and note the pros and cons of each. The less you spend on monthly rent the more profit will be left over for the business.
- Regulatory and Licenses: You will need to acquire the appropriate licenses at the federal, state, and city level to operate. Details on this in the podcast.
- Equipment and Build Out of Your Unit: Get the list of equipment you’ll need to start and also create a layout how everything will fit into your desired space.
- Make First Orders – What do you need to order? All the tiny little things. List of it. Soap, soap dispensers, napkins, brewing chemicals, malt, hops, grain. These should be outlined in your business plan that you compiled in the pre-planning / research phase.
- Make First Batches – Making the jump from home brewing to pro brewing is a challenge for many first time brewery owners. When you were a home brewer you would likely doing 15 gallon batches… now you might be do 100 gallon batches or more. When you brew 10 times bigger quantities there’s less room for error with beer recipes. For example, you can’t pitch yeast at the same rate in large batches as you could at home.
- You’re Up and Running: You’re finally open for business. Now is when the work begins! From now one you’ll be in charge of many different functions in your business, including marketing, brewing beer, keeping customers happy, accounting / bookkeeping, cleaning, and trying to come up with creative ways to get people to visit your business.
From a time frame perspective you should be able to complete these steps within 4 months if everything goes smoothly and as planned. It took Sam about 9 months to go through the opening process due to delays with the city and paper work at the federal level. If you want to build in a buffer of time to resolve unanticipated issues or delays getting started a 6 month time frame from start to grand opening is reasonable.
Frequently Asked Questions For Aspiring Pro Brewers:
Read This If You’re Married or In a Serious Relationship.
If you’re married, make sure you’ve got a super supportive spouse. Over communicate why you want to open a brewery. If you don’t have it together, it may not be the right time. If you need to manage a tap room, you won’t be home in the evening a lot on weekends. It is very hard sometimes for both the entrepreneur and spouse. You’ve got to be willing to take the jump together. When you start a brewery, you’re basically having another child.
What’s the Biggest Tips for Someone Just Starting Out?
Sam recommends finding a business mentor that can help you get started. Preferably this would be someone that owned a brewery in the past.
However, if you’re not able to find someone with that specific of a skillset, anyone with experience operating a small business will do. Someone that has owned a bar or restaurant will have a lot of transferable experiences that you can learn from. Why make an already difficult journey more complex by not asking someone for help?
One specific way to start looking for a mentor or peers in the industry is to find the Brewer’s Guild for the state that you are in. This is a great way to meet other brewers and find out what strategies that are working. See if you can get hooked up with local owners.
Second, find out how much money you have can get access to. This shouldn’t take more than a week or two to figure out. Access how much personal savings you have in a checking account, stocks, savings, 401K or other retirement fund, and even figure out what you would be able and wiling to convert into cash like an unneeded car. Then figure out how big of a loan you can get either through a second mortgage or business loan. The goal is to get a clear understanding on paper of the different funds you have readily available. Starting a brewery as a business is not a low-cost endeavor. If someone claims to have a “no money” way of starting a brewery… Run the other direction!
As a general rule of thumb, stay away from investors if you are able as it will complicate your business operations in the future. Don’t take money without thinking about the longterm implications of that decision first.
Finally, keep your mind open to ways to save money when you’re getting started. Don’t take the first offer you get on a lease. Try to negotiate better terms for yourself and shop around for different locations.
When you start outfitting the brewery, look for tasks that can be completed by you or a friend. If you can buy second hand furniture and install it yourself in the tasting room go for it. Look for second-hand kegs and other equipment if you can find it. As a business owner must get into the habit of always asking for a better deal and looking for lower cost alternatives to getting things done. Each dollar you save reduces the debt burden and will helps expedite the profitability of the business.
Is the craft brewing market too saturated?
This will depend on the market you’re in. If you’re in Denver, maybe the market is flooded. Smaller towns and suburbs are often an untapped gem, however.
Believe it or not, before prohibition every town had a brewery. Part of the reasoning for this occurrence is that distribution wasn’t as advanced as it is now.
Still, buying all things local when you can is a mega trend. People like to see local things succeed and enjoy regional beers. If you travel somewhere new for pleasure or work, many visitors will want to sample the regional brews they can’t get at home.
How did you decide your production capacity?
Three barrel system is the most versatile size for the money. If you put in one long day of work, you can produce two batches of beer. You could make about 4,000 barrels annually with a three-barrel system if you had some reliable part-time help. Input cost would still remain very low even with hiring employees.
Investing in a 10 barrel system would be as high as you would want to go initially and you could hit the 10,000 barrel mark which is kind of the benchmark for breweries that have “made it.”
How time consuming is it to operate a brewery?
It is time consuming. If you want to start a business it’s going to take time. I’ve got a wife and four kids so I understand the importance of being home, enjoying time with your kids, and making sure everything is good on the home front. I actually decided to close Sunday and Monday to be able to spend time with the family.
You can do this a couple days a week if you want to keep your full-time job for financial stability. You’re not going to get rich off of it as long as you’re operating part-time, but it is a good way to get started.
There is brewery in Bismarck that’s only open on Friday and Saturday. As you might expect these are the two most profitable days of the week. The business does leave money on the table by not being open every day, but this is actually the type of business you could realistically start part-time with a job and run only weekends if you wanted.
What’s a typical day like operating a craft brewery?
This is what a typical work week will look like for a small, independent brewer. As the operation grows you’ll naturally be less involved in the day-to-day operations below and more focused on increasingly sales and awareness for the business.
Brew days: 1 – 2 days per week.
Come in and open up my brew software. Turn the water on and start filling the tank. Weigh out my grain. By then I’ll know if I need to add any salt to the water or PH adjustments. Start dumping grain and mixing it up. Do inventory, figure out what I need, order materials. Come in at 6 a.m. or 7 a.m on these days. Brewing time per day is between 6 – 8 hours.
Cleaning and Administrative Work days: 1 per week.
Clean tanks and fermenter cleaning day. Might also clean tap room or other parts of the facility. Bookkeeping and other administrative type work could also be completed on this day.
Tap Room Days: 4 days per week
Come in during the afternoon. Count down till. Clean everything including bathrooms, pull pins on taps. Open the overhead door. Put the flags outside the building. Open for business! Often, there will be people waiting outside for the doors to open.
Should you hire a brewmaster?
This totally depends on you and what you want to spend you time on in the business. Adding an experienced brewmaster will increase your overhead significantly, which can be tough in the early days. If you got into this because you love trying, testing, and creating beers then by all means do it yourself.
A brewmaster is someone that has been to school for brewing. They have professional brewing experience and have worked in a brewery. You don’t need to be a brewmaster to start and their are plenty of smaller places that don’t have anyone with this credential on the payroll.
Do I need a business plan to start a brewery?
You will be required to have a business plan if you plan to bring on investors or want to work with a bank. This is a must have and these individuals will need insight into how you plan to operate the business. I mean, if you can’t get a business plan completed, how serious are you really about starting this business?
You should be excited at the opportunity to write a business plan. Before you open the business is when you’ll have the most time to stop and think about your vision, determine where you want to source ingredients, and develop a style of beer and brand that’s all your own.
Instead of thinking about a business plan in the same way you would think about homework at school… Think about it instead as an opportunity to get super clear on the direction of your business and how it will operate.
As mentioned during the interview there are all sorts of resources available locally, many of them free, that are setup to help new businesses and entrepreneurs develop a business plan. One way to get started is to take advantage of the free resources available from the U.S. Small Business Administration for help drafting a business plan.
What if people don’t like my beer?
No many how many accolades your lineup of beers receive, someone will inevitably not like your beer. This feedback could come in the form of someone posting a negative comment on social media or telling it straight to your face.
While criticism can be tough to swallow it’s important to remember that most of your customers aren’t beer aficionados. What’s good beer? To the layman, they may have tried an Imperial Stout for the first time and not like the taste because it wasn’t anything like Bud Light.
One piece of advice that Sam offers is to understand your customers, target market and the region you plan to operate a brewery. In the upper Midwest, most folks still drink mass produced light beer. As a result, Sam makes sure to have a light blonde on tap at all times. It’s a continual strong seller and makes his beer assessable and desirable to a wider range of people that visit his brewery.
Keep in mind that when someone says they don’t like your beer, not to take it personally. A customer may simply not like the taste of Double IPAs so from a business perspective it’s smart to have a few different options on tap.
What Type of Person Should NOT Start a Brewery?
If you’re not a people person this is not the job for you. If you don’t like getting to know your customers or building connections with other local businesses this isn’t going to be something you’ll enjoy. Making great beer is only one ingredient of operating a successful brewery.
What is a BBL?
When you dive into the topic of brewing beer at a deeper level you will begin to see references to BBL. BBL refers to barrels of beer. A barrel of beer is 31 gallons. The size of a brewery is often described by the annual production of barrels within the industry.
You can learn more about the classification of the size of breweries in this article from Kalispell Brewing Co.