I am going to buy me a second vacation house in Florida this summer. Doing quite good. Join the party bro.
Now that’s funny!! Honestly though…someone spends hundreds of thousands of dollars and the reality is that they have “bought themselves a job”. Unless of course there is some sort of financial reward that I am missing. It seems like unless you are a major player (Stone, Dogfish, Deschutes, etc…) the chances of are somewhat slim that any significant money will be made?
ROI’s for most small businesses are negative for something like 5 years, at least. Beer is a low-margin, capital-intensive industry, so I suspect it’s worse than that, on average.
However, I know of a few breweries that got crazy successful accidentally, so I guess it’s kind of a toss-up between spending $1m on a brewery vs $1m on lottery tickets.
I have a 10 bbl brewhouse with 30 bbl tanks and we are a production brewery unring a small profit. I can assure you, we didn’t spend anywhere near 1 million. I could certainly use 1 million for expansions though!
I don’t think you get successful by accident. If you are smart you can be successful and you don’t need a ton of money but you need to make good beer. If you don’t make it I don’t think you lose the total value of your equipment, like lottery tickets.
One other thing a would be brewery owner should ask themselves is what is my goal with this business. You have to be realistic and honest with yourself. What do you consider successful ? Don’t worry what others think. If you want to be a millionaire, yes by all means buy them tickets.
I disagree. plenty of smart people have made great beer and gone out of business. plenty of dumb people make bad beer and make a killing. I wish the world was fair, but it’s not.
I agree but they may be the exception to the rule.
Obviously there are no absolutes but there are some people whose marketing is a lot better than their beer making and others whose beer making is great but their marketing is lack luster (or worse). Those who nail both usually succeed. There are also pockets that will support bad beer when nothing else is available or where people simply don’t know any better.
Speaking of marketing, that goes back to my suggestion that money is the biggest barrier. It costs a hell of a lot of money to market yourself successfully and effectively. Too many start ups are underfunded when it comes to marketing. Most draught accounts will not serve your beer if you don’t have tap handles, tin tackers, glasses and other swag. They want your help to promote your product. Same goes with off premise sales. A lot of times it will cost you for that grocery store shelf. If you are underfunded you are going to get beat by those that have financial prowess no matter how flippin’ good your beer is. The beer needs to be good,l but the label needs to be even better.
I wish they were…
I agree with Keith. Money is the biggest barrier to entry. The biggest barrier to success is your own ignorance, followed closely by money again.
I’ve read a lot of business plans over the years. My sample size is pretty limited, since if you know what you’re doing, you wouldn’t ask me for advice. But of the plans I’ve seen, none of them followed accounting practice. (Protip: If you think you found a way to have a 75% margin on your beer, you forgot about labor and overhead. D’oh! Also, depreciation is a thing that exists, so maybe it should exist in your business plan too.)
None of them knew how to make a detailed cash budget. In the real world, your cash flows aren’t matched perfectly with your expenses, and you need to plan for that. I think that’s partly where the “take your costs and double them, that’s how much cash you need” rule of thumb came from.
I’m sure I sound like a broken record, but something like 65% of bankrupt businesses have positive annual net profits, but they can’t match their in-flows with their out-flows. So even making and selling a lot of good beer may not be enough to keep your business running.
Some of those breweries have actually gotten off the ground, and haven’t exploded yet, so maybe I’m wrong, but I doubt they’ll last more than 5 years or so.
After this past weekends beer fest, my opinion is buy the lottery tickets and even that might not be enough. WTF bottled beer cocktails? Helles and Wit in the same bottle! OK I’m getting off the soap box.
4 brothers you are talking about?