03 Jun 2010 @ 10:30 AM 

If you’ve never started up a brewery before, as I haven’t, you may be interested to learn of what I think is the most interesting challenge up front. I’ve been thinking of it as the “Order of Operations” problem. Allow me to explain:

In order to sell make/beer, you need to be licensed by your state to do so. This process can take months, depending on your state.

In order to be licensed by your state to make/sell beer, you need to be licensed by the TTB to do so. This process can take months (they quote 95 days).

In order to be licensed by the TTB to make/sell beer, you need to have a place of business outside of your home.

In order to have a place of business outside of your home you need money to pay a lease.

Okay, now go!

This, all of the “construction” or “buy equipment” or “make good beer” crap aside, might be the single most prohibitive process I can think of in new brewery startup. Why? Because it means that you can’t make your product, aka make money, aka pay your expenses from cash flow, until months after you’ve begun paying rent and, quite possibly, paying people.

Can you begin building out your brewery while waiting for licensing to come through? Certainly, as long as you have a floor plan design in place that you can submit to the TTB, but new startup brewers beware: You need capital up front to be able to pay for MONTHS of operations before you have the slightest possibility of being able to make any money back to put into your bank account and start to pay off your debts.

The thing that I hear most in brewery startup is that the #1 reason for failure is under capitalization. Now, I can be snarky and say that that should apply for any business, but it seems to me that in many other businesses you probably don’t have to pay for months worth of space and utilities while simply waiting for a piece of paper to come in that says you’re allowed to actually make/sell your product. Maybe I’m wrong. I feel like yarn stores don’t have this kind of long startup period.

To be fair, I don’t know how this works if you’re starting a nanobrewery, say, out of your garage. When I talked to my state board, they were very explicit about having a place of business outside of your home, but maybe it’s because I’m applying for a wholesaler’s license right off the bat and they don’t want you to distribute out of your living room.

So, potential startups, there’s your first warning from startup land: Be ready to pay out up front and be ready to wait.

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Categories: brewery, startup
Posted By: erik
Last Edit: 03 Jun 2010 @ 10 30 AM

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