Setting up a micro-brewery might seem like a lot of fun, but like any business, it isn’t for the feint hearted.
What is the cost of setting up a micro-brewery?
Like setting up most businesses, they’re not always cheap and if you want to do things right, it’s worth the initial upfront investment.
You could potentially spend anywhere from £40,000 to £200,000 when starting your micro-brewery, or if you opted for a nano-brewery it could be even less.
There are certain factors that will impact the upfront costs, such as the scale, type of equipment you’re buying, premises and location, just to name a few.
There are money saving options, such as purchasing re-conditioned equipment or financing them, so you don’t have to see a huge dent in your cash.
How can you fund a micro-brewery?
There are multiple options to funding a micro-brewery, it is all dependent on your situation.
- Use cash – if you have cash available and can ensure there will be enough left after the up-front costs to maintain a consistent cash flow, this could be the easiest route to funding the brewery.
- Finance – finance individual pieces of equipment, seek a term loan, consider a Start-Up Loan (max £25k link to start up), or if you have an existing business with assets, consider refinancing those.
For more ideas on funding options, this post lists different types of finance available for businesses. (link to everything you need to know blog)
How to manage your cash flow
Brewers face a unique challenge when it comes to cash flow as beer duty must be paid up front monthly.
According to gov.uk beer duty is chargeable on the following types of beer if the strength of the beer is more than 1.2% alcohol by volume (ABV):
- Any other description of beer
- Anything else made or sold described as beer or a beer substitute, including beer mixed with non-alcoholic drinks – for example shandy
It’s important to note that beer duty must be paid regardless of whether customers have settled their invoices.
So, how can you mitigate this potential cash flow problem?
You may find yourself waiting to be paid from your customers and spending a lot of time chasing payments, this is where invoice finance can help.
There are two main forms of invoice finance:
Invoice Factoring – Cashflow support but without the hassle of collecting payments.
Invoice Discounting – Cashflow support and keeping control of collecting customer payments.
Simply put, rather than waiting for customers on long payment terms to pay, invoice finance bridges that gap and provides a quick, efficient, and effective solution.
We know red tape isn’t the fun part of starting a business, but it’s legislation that can’t be ignored.
- Obtain a licence to brew from your local Customs and Excise office.
- Register with your local Environmental Health Officer.
- Inform Trading Standards if you will be packaging beer.
- If you’re selling to the public on-site, you’ll need a premises licence (and planning permission).
- Joining an association is highly recommended as it can offer networking and training opportunities – The Society of Independent Brewers (SIBA) is a great place to start.
What is your route to market?
Unless you want an expensive hobby, creating a clear marketing and sales approach is essential.
Before attempting world-wide domination with your new brewery, stay local. Local and regional loyalty is a micro brewer’s trump card.
Look to local pubs and hotels. Keep in mind also that selling casks will be more profitable as opposed to bottles.
Starting a micro-brewery will be time consuming, physical, and demanding. You’ll also need to develop a distinctive brand and product through a lot of research, trial, and error. But if you are committed and consistent you may just see some results from it.
To see if we can help you, head over to our Contact Us page and one of the team will be in touch.