Learning Profitability in Craft Breweries: Essential Fundamentals for Success

As the craft beer industry has grown in recent years, consumers have benefited from many brewery options, especially in larger cities throughout the country. Many operators have gotten into business because of the passion and pure enjoyment of being able to create a product that was once only available at stores. From innovative to traditional styles, the opportunity to give customers something they have never had before is endless. A problem we encounter with this growth is small business owners know how to produce quality beer but lack and struggle with accounting and number knowledge. Below we give our best advice on how to better run a brewery for financial success, not just beer success.

1. Learn What Accounting does For Your Brewery: Most businesses suffer with understanding the concept of accounting. Software companies sell the ease of accounting with their product, however, the opposite is true. By far this is the largest misconception about accounting for any small business. If accounting/bookkeeping was so simple, there wouldn’t be a market for it, which isn’t true. We know that CPA and tax attorney services are an essential requirement for proper tax filing and payment, but all the work that is needed consistently can be confusing to how it works. Buying and hooking up all the latest and greatest brewery industry apps won’t produce accurate numbers and data unless you know how to use that software accurately. Your numbers, profits, and accounting could make or break the long-term success of your brewery business. AI may and does have helpful aspects with accounting, but human support and activity will always be needed because of the true complexity of accounting.
2. Know Cost of Each Brew : The best way to run a brewery is to know the true cost of producing the specific beer. Every time an ingredient is added to the brew kettle or fermenter, which includes water, malt, hops and yeast, to name a few, there is a cost going into the end product. Also, taxes, electricity or gas to produce each beer. Even the energy to control the temperature of each fermentation. If distribution is part of the business plan, knowing how much it costs to comprehend the profits of each sale is essential as well. Now take in the factor of how well each different style sells and the volume. It all comes down to the numbers, and if you have accurate numbers, you can get more clarity in decisions about how to sell the end product so that profitability is sustainable.
3. Have Clear ROI on All Aspects of Tap Room: If the brewery has a tap room (highly suggested as it is the most profitable concept for a brewery) you have the opportunity to drive traffic to the brewery. More people traffic should produce more sales. Marketing is an essential piece of the puzzle and giving reason for people to come is a bit more challenging because breweries have become more common vs a unique new. Creating a differentiator and stand-out draw compared to your competitors will be key. Attempts to add fun comes in the form of live bands, trivia nights, board games, bingo nights, outdoor yard games, dog days and much more. Understanding the cost of all the additional expenses and how much value they bring in as a return on investment will help business owners know where to allocate finances so more profits can be generated.
4. Determine Your Cost of Labor: One of the most expensive aspects to any business is the cost of labor. Managing well what your employee roles are creates more value and creates standards. Whether it’s an experienced head brewer, or an amazing server knowing how each person is bringing their value to the business helps you as an owner to make the best decisions about how the staff will be paid and what the business can afford. Since this is the most expensive area of business over time it is crucial to understand how well each employee is working in your operation and if their position needs to be adjusted.
5. Know the fair market value of your space: Understand the fair market value of your space: Leasing costs can be overwhelming, especially in a prime location. It is often said in business that location is everything. Ten years ago, a brewery in an industrial area might have succeeded just by existing, but that’s no longer the norm. The industry has grown, and competition has made the location more important than ever. Leases are negotiable, and if you think you’re paying too much, you can compare similar spaces to establish a baseline. Once you understand your local costs, you can have an informed discussion with your landlord about adjusting your lease. Timing is key if you are near a renewal or in startup mode because relocating a brewery is costly, but so is overpaying on a lease. The majority of the time your landlord will want you to be successful because it makes life easier for them.    

When working towards success, every effort and investment a business owner makes is important. Using the best resources effectively can significantly impact the different aspects of your business, especially if you have people who are genuinely invested in helping you succeed. It’s normal to feel frustrated and overwhelmed by the complexities of business numbers, but as a business owner, you have the freedom to seek help from trusted professional advisors. With the right support, life as a brewery and business owner becomes easier, and the path to success becomes clearer.