How to Start a Craft Brewery

Understand the cost, location and your business goals before opening your own brewery.
Steve NicastroMar 11, 2016
Tips to opening a craft brewery

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

You’re with friends at your favorite craft brewery enjoying some tasty ales when it hits you: Why not turn your love of great beer into a profession and start your own brewery?

If you’re serious — and not just buzzed — understand that it takes a lot of planning, money and patience to make this dream a reality. Starting a small business is already difficult, and breweries are highly capital-intensive businesses that come with additional legal and permitting requirements.

But with sober planning, creative financing and tenacity, you could create your own neighborhood watering hole. Here’s some advice to get you started:

How much you’ll pay for brewing equipment ultimately depends on the size of your brewery and whether you buy new or used. You can purchase brewing equipment with the smallest capacity (1 barrel, which is 31 gallons of beer, equal to 320 12-ounce beers) for $100,000 or less if you buy it used, or pay up to $1 million or more for a brand-new, 30-barrel system (equal to 9,600 12-ounce beers), says Leonard Kolada, founder of Smokehouse Brewing Co. in Columbus, Ohio.

Your brewery needs essential equipment: kettles, kegs, boilers, bottling and canning lines, conveyors, cooling systems, storage tanks, fermentation tanks, filters and beer-labeling machines, piping and tubing, refrigeration equipment, cleaning equipment, waste treatment systems and tap handles.

Although you can get the cheapest equipment for reasonable prices, if you purchase equipment with less capacity and your brewery turns out to be a big success, you can run into problems because the system will be difficult and costly to modify, says Kolada, who recommends taking a more conservative approach when crafting your budget.

“If you’ve done your homework and details, and you think your project will cost extra, I would highly recommend that you up that by about 50%, just for the unforeseen, and see if your business plan would still work under that scenario,” Kolada says. Check out Nerdwallet’s .

Of course, your brewery also needs a home. The monthly cost of rent depends heavily on your location and the size of the building. You may need to come up with the first month’s rent plus a security deposit for the landlord when you sign a lease. And you’ll also probably need to do construction on the building to get it fit for the brewery.

“You have to consider plumbing, electric needs, if the ceilings are high enough — you may have to tear out existing concrete slabs and re-pour them so the water drains properly — there’s a whole laundry list of things that goes into it,” says Kolada, who added that as a general rule of thumb, you should take your equipment costs and, double them, and that’s what you’re going to spend on construction for your building.

Rob Sama opened a 25,000-square-foot brewery in Chicago in spring 2016 called Baderbrau. He said the tricky part in starting a brewery is determining the right size and capacity.

“On the one hand, you have to plan for growth or you’ll get stuck,” Sama says, “but if you overbuild, you can end up with a monthly debt payment your sales don’t support.”

Although Sama is starting out with a 25,000-square-foot facility, he says the building will have 5,000 square feet of empty space for future fermentation tanks. “When you calculate costs, you need to calculate the costs of nonproductive floor space as well,” he says.

The cost of flooring is often overlooked, Sama says. A good composite floor that will withstand impact shock, temperature shock and acid from beer will cost upward of $10 per square foot, according to Sama.

“You will spill beer on the brewery floor when you’re brewing,” Sama says, “so if you have, say, a 100-barrel tank sitting there, you don’t want the cement underneath to erode away and have your tank topple over.”

Then there are the necessary permits and legal requirements. You’ll need to apply for a federal brewing permit with the Alcohol and Tobacco Tax and Trade Bureau. Although the application doesn’t cost anything, it’s usually takes four months to process, according to Matthew Cordell and Derek Allen, who have advised several startup breweries in North Carolina for legal firm Ward and Smith, P.A.

“The cost can range from several hundred dollars to several thousand,” Cordell says, “depending on how much work we have to do on our end.”

You can also turn to  for advice and to save money.

Also, the government won’t approve your federal brewing permit until all of your equipment is installed and operational. That means you’ll have monthly expenses to pay before you even make and sell a drop of beer, Kolada says. So plan to have working capital to manage these ongoing expenses.

Local licensing is required if you want to serve beer at your brewery, including a state liquor license, which can take about 45 to 60 days to secure depending on the availability of state inspectors, says Matthew Pore, a senior manager with Baker Newman Noyes’s tax division.

Brewers may also want to file for a retailer license if they want to sell other products like clothing or supplies at their brewery, Pore says.

You’ll also need to choose a . Will your business be a limited liability company or a corporation? Cordell recommends filing as an LLC as it’s “slightly quicker, cheaper and easier than a corporation.” He also recommends having an operating agreement as part of the LLC.

“An operating agreement says how the business is going to be run, who’s going to control it, how new investors will be brought in and how to resolve disputes,” Cordell says.

What about insurance? Any manufacturer of beer should have property, casualty and liability insurance, and a bank won’t lend to you unless you have all three, according to Allen. To get your federal brewer’s permit, you’ll also be required to get a, which ensures you pay your federal taxes.

So where can you get the money?

“It’s very cliché to say go follow your passions,” Sama says. “You have to make sure your passions are something that meet a demand in the marketplace.”

New brewery owners should be prepared to put a lot of money back into their business, even after reaching profitability, according to Kolada.

“It’s not a get-rich-quick scheme,” he says. “It’s very capital-intensive and could go on for years where you’re putting more money into it, not because you’re unprofitable but because as demand increases you have to buy more equipment.”

Even though the process takes patience, money and focus, Kolada says it could be worth all the blood, sweat and tears in the end.

“If your beer is great, ultimately it will work out,” he says, “but it’s a lot of work. Having said that, it’s still really cool.”

On a similar note...
Dive even deeper in Small Business