How I Made The Jump From Home Brewing To Commercial Brewing!
A lot of people are asking me how I made the jump from brewing 23 litre batches of homebrew in the kitchen to setting up and running my own commercial brewing business – Black Tap Brewing Company.
In this article I will tell you how I personally made this jump and I will also highlight mistakes I made along the way and things I would do differently if I were to do it again.
These days I am a silent shareholder of Black Tap and don’t have much input on the day-to-day running of the business, but when I set it up it was initially just myself and my wife who decided to get the ball rolling. I then brought in a third shareholder who worked with us for a time before making the decision to pull back … and then I brought in a fourth shareholder when we relocated into the brewpub environment.
Like many of you, I caught the brewing bug and progressed quickly from beer kits to all grain brewing. The dream of starting up my own brewpub quickly set in as I browsed YouTube for videos on craft beer and brewing.
Home brewing to commercial brewing
It wasn’t long before I decided to give it a go and see what happened.
My background is in business and accountancy so I wasn’t really daunted by the prospect of setting up a business of my own and so that is what I did. That is why I set up Our Nanobrewery Project, to share this experience with those of you who haven’t had that sort of exposure and training but still want to set up your own brewery.
Here is a quick run through of how I went about making the transition from home brewing to commercial brewing.
I invested some time and effort putting together a professional business plan and supporting financial forecasts. I knew I would need to find some money to fund the start up as I had very little of my own.
My business plan was a 3 year plan, and in the first year I assumed I would be operating off a 20 gallon stainless steel HERMS brewing system capable of producing 2 casks of beer per batch or 160 bottles of beer per batch.
I actually went ahead and managed to build my own HERMS brewing system for about £700 and planned on using this to produce my first cases of beer and get them out into the world for feedback.
I based my business plan on the volumes this small trial system could manage and started sending out samples to prospective customers (bottle shops and bars) in the UK Midlands throughout the course of the start up process. The purpose of this was to line up a bunch of customers for when I successfully launched. The last thing I wanted to do was get set up and have zero prospects when the bills started rolling in.
I then spent some time looking at my business plan and making sure it showed my plans as being VIABLE. I think too many people miss this step out and produce a business plan they can throw at potential investors or lenders as a means of raising money and they fail to consider what a business plan can do for THEM specifically. Namely, whether the idea should be abandoned at this stage, that it provides you with a sense of direction and helps you to have much clearer plans and senses of direction.
What I saw when I reviewed my completed plan was that a loss was expected in year 1 but that profit would start creeping upwards in year 2 onwards. A lot of businesses fail to turn a profit in year 1. This is normal! It is better if you make a profit of course. But we need to be realistic. And practical! So don’t let this freak you out too much.
So, with this business plan my wife and I pitched our idea to the Speed Plus business start up support programme who loved our idea and made the decision to support us. It was like being on Dragon’s Den – there was a panel of judges and they fired questions at us. It was a very nerve racking experience to say the least.
The support package included £4,500 in initial grant funding (didn’t need to pay it back), 12 months support from an experienced business mentor, access to lots of free business courses and networking events and access to an interest free business start up loan of £2,000 (we could have had a lot more if we wanted it but decided not to as this one did have to be paid back).
This funding enabled us to start renting a small industrial unit and begin brewing using my newly built 20 gallon stainless steel HERMS brewing system. We were immediately able to begin selling our bottled beers to a number of Midlands based beer bottle shops.
Over that first six months we didn’t do too badly. We were able to demonstrate to the Speed Plus Program that we were making sales and using their investment well and inline with our business plan. They decided to increase our grant by a further £14,000 (no, we didn’t need to pay this back either).
This was a big win for us. It enabled us to purchase a commercial pilot brewing system and sell the HERMS I had built for £500 (almost got my money back on it). We purchased the 1bbl brewing system for about £9,000. We were also able to acquire 2 stainless steel 1bbl conical fermenters, a bunch of firkins and casks, a pallet full of mixed grain weighing a metric ton and a pallet of over 1,200 bottles, etc.
It was enough to take us to the next stage and propel us to the second year of our business plan after just 6 months operating!!
We were putting out beer to some local pubs by this stage but sales were not amazing and we were not breaking even as planned. We were doing slightly better than the financial forecasts I put together but still not turning a mad profit or anything like that.
I decided it was important to take a look at the planning and come up with some strategies to ensure my business’ survival beyond year 1. The strategy I came to was to cut out the middle man (the bottle shops and bars) and produce and sell my own beers over my own bar – I wanted to set up and relocate to a brewpub environment.
By doing this I could go from making about 90p profit per bottle of beer to about £2 profit per pint of beer over the bar. It was a no brainer! At the time at least.
And so we started looking into potential premises and we found one in Redditch. At the time of writing we were still operating out of this brewpub environment. To fund the set up of the brewpub we were able to put in some of our own money (my wife, myself and our third director) and I also registered the business for VAT so that I could claim back all of the VAT the business had spent purchasing all of the gear and rent and all the other stuff. This resulted in several grand in spare cash to be used on the brewpub.
We also took on the fourth director at this point who also invested heavily in the business to get the brewpub up and running.
What would I do differently?
Honestly, there are several lessons I learned during the course of this process.
- I would EXPECT the level of work to be far greater than I originally thought. People say that setting up a brewery is hard, but I never really appreciated this until I found myself brewing batches of beer in a freezing cold industrial unit on boxing day to meet an order.
- I would be more wary about bringing other people into the business with you and passing out shares to them. When you do this you give away a part of your business and part of the control of your business to another person. This can impact you in a few negative ways:
- If you know the person very well – things get too personal and friendships can be ruined because of the pressures placed on you in the business environment. This is especially the case if they are not pulling their weight or expect to get more out of the business than you think is fair.
- You don’t know the person well enough – personality clashes can occur and make things extremely difficult. Resentment can set in and suddenly your dream business is no longer your dream business. Your sense of vision can be lost and all the fun and excitement will go out of it.
- If you are planning on going into business with other people make sure you have really thought about what you are doing and who you are thinking of doing it with. Once the decision is made – it’s made!
- Making money in this industry can be tough! You need to be able to think outside of the box and adapt your business strategies to the environment and situations you are operating in. I would probably take better precautions to protect myself against the very real risk of the business failing.
- If you are married or in a serious relationship then expect there to be large amount of strain or pressure caused by the demands of the business. If I were to do this again I would seriously have to think about what is more important in life – money or family. If you can get the balance right then it works well … if not, then it can be bad.
I hope you have found this useful. If you have any further questions then please leave them at the foot of this page and I will get back to you as soon as possible.
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