[In The Sand]

Sam Calagione started on a 10-gallon system. Just sayin ;-) obviously not ideal

[nateo]

Sam Calagione started on a 10-gallon system. Just sayin ;-) obviously not ideal

He's also incredibly good at marketing and self-promotion. Yeah, life is easier if you have a lot of talent. If you don't, you'll need help.

[In The Sand]

Sam Calagione started on a 10-gallon system. Just sayin ;-) obviously not ideal

He's also incredibly good at marketing and self-promotion. Yeah, life is easier if you have a lot of talent. If you don't, you'll need help.

Of course he had to work his butt off to operate on that small of scale and prove the concept.

[Pawtucket Patriot]

IIRC, Dogfish Head was also the first brewpub in Delaware, so while it was a risky venture, there was some serious market novelty with Sam's idea. I think it may have been far more difficult to get off the ground with such a small system under today's market conditions.

[nateo]

IIRC, Dogfish Head was also the first brewpub in Delaware, so while it was a risky venture, there was some serious market novelty with Sam's idea. I think it may have been far more difficult to get off the ground with such a small system under today's market conditions.

Yeah, that was like, 20 years ago. A lot has changed since then. If people still want to start with a 10-gallon system, go nuts, but don't say no one warned you.

[Jimmy K]

Sam Calagione started on a 10-gallon system. Just sayin ;-) obviously not ideal

in 1995.  He has a lot of marketing talent and he was extremely lucky with his timing. Craft beer was a rocket on the launchpad then - now the rocket is flying at warp 5 and you have to catch it to get onboard. There is a lot of competition.

[nateo]

I remember some scrappy Pilgrims who founded a whole new country with a 5-gallon kettle and a lot of pluck. You can do it too!

[In The Sand]

I remember some scrappy Pilgrims who founded a whole new country with a 5-gallon kettle and a lot of pluck. You can do it too!

Hahahaha! All you need is motivation!!

[tschmidlin]

You can still start with 10 gallon batches if the circumstances are right, and if you're lucky you might be successful.  Mic, you use a 10 gallon system, right?  Another local place started with 15 gallons less than 6 months ago, and upgraded to 1 bbl shortly thereafter.  But the common feature of both of these breweries is they are on property where the owners live, so there is no additional rent to pay for the brewery.  That makes a really big difference.

Every pro brewer I've talked to says they would not start with less than a 10 bbl system, and get the biggest they can afford.  I know one in planning that was a 5 bbl system with 10 bbl fermenters, but then he's opening a restaurant.

Then again there are three new nanos opening in Ballard.

Running a 2 bbl system, we've had our problems - the current problem is a lack of kegs.  I've got 5 bbls of beer ready for packaging, and only 2.5 bbls of kegs to put it in.  We have 18 kegs, as of Friday 6 are tapped, 5 are empty, and 7 are backups.  We have people interested in buying our rootbeer and putting it on tap at their restaurants, but no kegs to put it in.  We have a guy who wants to put our coffee porter on tap in all 6 of his restaurants, but no kegs to give him and even if we did I doubt we could keep him supplied when we only make 2.5 bbls at a shot.  With our existing equipment we max out at 15 bbls per month and that is if I am doing it full time.  That is a tiny, tiny amount of beer.  Since I can't quit my other job (health insurance) my time becomes the next limiting factor after kegs, so realistically we can do 7.5 bbls per month.  Even doing 15 bbls per month, figure out what you can sell each keg for (we can't discuss that here), then subtract all of the costs - ingredients, fuel, CO2, electricity, rent, etc, how much is left?  How much of that do you need to reinvest to grow the business?  How much is left after that?

We are lucky that we have 3 retail outlets (2 serving right now), since we make a lot more per ounce selling it by the pint than as kegs.  But it's still not enough, especially when you consider that ice cream sales are pretty low during the winter.  We need a bigger system.

[mpietropaoli]

Really, really really really happy I came upon this thread.  I have read through each and every post a few times.  Sorry in advance for the long post, but this has been plaguing my mind for a long time.  Maybe I should have made this a separate post. 

<inhale>

Re: me - I am in a strange place with beer.  I have brewed just shy of 50 5-gallon batches.  I have become decent at it.  Haven't won a comp yet, haven't even placed other than hedonistic comps.  But I make good beer.  I know how to control cold-side and fermentation.  I know how to pitch the right amounts of yeast.  I like to think I can tweak a recipe.  I make good beer and I spend ALL my free time reading about, talking about, thinking about, and (oh yeah) writing about beer on forums like this.  I just took my BJCP tasting exam, I have brewed 10 batches so far in 2013.  I have had an appointment cancel multiple times and have brewed a batch with the 'found' time.  I've actually left work on a slow day to brew.  I have a few friends (free spirited types) who tell me I should quit being such a pragmatist and 'work in beer'.  I spend the majority of my spare energy (the most VALUABLE of commodities in my mind) on it. 

I have an undergrad degree in finance, training from a top 5 commercial bank, a masters degree in real estate finance, 10 years experience in banking, a year and a half of law school (one of the biggest, if not the biggest scam out there), and a good, steady job that pays well above the median salary and allows me and my wife some nice luxuries.  I know I can do just about anything, its just a question of where I want to deploy my energy and if I have the balls to do it.  I have seen plenty of startups fail, have liquidated plenty of them, and I know selling beer is a hell of a lot different than brewing beer for and enjoying it with one's family and friends.  Yet it still haunts me that I should be spending my life doing something surrounding this.  I have an opportunity to move back into a business development role at my employer and get my company to pay for my wife and I to move back to our home town.  It would/will be a great life for us.  Yet beer still haunts me.  I can write a business plan, build a cash flow, a DCF, figure out an IRR, glad-hand/chin-wag with investors, and could go to a release party and get everyone just as psyched about beer as I am.   

Yes, there would be A/P and A/R.  Yes, there still would be licensing.  Yes, there would be keg leases, disputes with landlords, a $#!tload of grain to clean up, payrolls almost missed, sleepless nights worrying about the loan I took against my 401(k), shelf space, a $#load of competition, shelf space, capacity issues, spoilage, breakage, oh yeah, shelf space, etc etc etc.  But its beer.  And its awesome.  And we all know it. 
 
When I throw out the 'yeah, you know I really love it BECAUSE its recreation and NOT work' to my friends (one of whom is in the wine industry), the response is "that sounds like someone who has never really done what they loved for a living".  I suppose there is something to the notion that as soon as your 'love' becomes 'the way you put food on the table', it changes.  Maybe not for the better.  But I don't know that for sure.  And I won't know until I try to make it my life.  Maybe I'll never know. 

Re:  Financing Options (this is actually where I might add some value and not just vent my frustrations - People have said it well on this thread prior to my chime in.  As Steve Hindy from Brooklyn said (paraphrase), "don't let lack of money stop you from pursuing your dream.   There is money out there, but you need to be able to tell your story.  You can find the money.  But you need to be willing to work.  Work harder than you have ever imagined, but you will have to give some things up". 

Debt is cheaper on paper than equity.  However debt has its dangers too.  In my job, I live this everyday.  I manage 'distressed' commercial relationships for a super-regional bank (its been a 'growth industry' since 2008).  Before that, I was a small business lender.   Standard 'shelf' Laser-pro bank documents (note, guarantees, security agreements) essentially allow the bank (ie someone like me now) to come in and nuke your business if we want to and/or are the least bit uncomfortable.  Its not because banks are heartless, banks (like breweries) just operate on razor-thin margins and are in the business of managing risk, as opposed to selling suds.  Now, typically,  MY BANK does not operate that way (though every bank is different and could give far different top-down directives based on their need to maintain capital levels and NOT charge-off/write off bad loans).  1. it gives us a bad reputation in the community, 2. It usually makes sense to work with a business before you liquidate it.  That being said, banks don't have enough people in my role these days.  I am managing way more relationships than I should.  Which MEANS that it is more efficient for me to just EXIT a relationship (ie have a UCC Article IX creditor sale of my collateral, which could be fermenters, kegs, brite tanks, mash tuns, etc. and sue the principals for whatever is left) than let them limp along on forbearance agreement after modification agreement after loan extension.  Banks essentially need to be 'right' on 99.5% of their loans to make money.  Banks (despite their ad campaigns) are NOT your business partner.  They are banks and they need to protect their depositors' dollars. 

Re: All the people on here who are DOING WHAT THEY LOVE  Thanks!  You guys are what give the rest of us spineless working stiffs hope.  Don't get me wrong, I like what I do and love the people I work with.  But I have to believe that if I actually summoned the stones to sacrifice a bit of lifestyle to do what I really love, it would be a different life I would lead.  I am not sure if I could live with the 'entrepreneur's night-sweats', but part of me would sure love to find out. 

Re: The BUSINESS of beer  My wife's 2nd cousin is a sensory analyst/QC guy/Doemens-academy-certified brewer who now works for a top 5 craft in QC.  I had an hour conversation with him a few months ago about how it might not be the worst idea to 'keep brewing right where it is' in my life.  Beer is 'heavy and cheap' as he said.  Its competitive as hell.  Maybe I'm better off hanging out and ENJOYING beer at a beer release party instead of pushing it to vendors. 

I understand that every fly fisherman can't become a guide on the big blackfoot, and everybody who loves to get drunk and play golf with his buddies can't become David Feherty.  But I've had a lot of hobbies, and none of them have infected me like this one. 

re: the OP:  Do it :-)

Sorry for the rant and thanks for reading if you haven't fallen asleep.

<exhale>

[Jeff M]

^
A spirited and passionate Sum up of how many of us feel. I applaud your ability to put it to text.

[majorvices]

IIRC, Dogfish Head was also the first brewpub in Delaware, so while it was a risky venture, there was some serious market novelty with Sam's idea. I think it may have been far more difficult to get off the ground with such a small system under today's market conditions.

Exactly. And, as Tom said, if you have your brewery on your property or some arrangement like that then circumstances are going to be different. But IIRC Mic was about 2 months into the 10 gallon system thing and was looking at going 1 bbl. And there in lies the problem. Every thinks they can start out selling their homebrew but then suddenly you are faced with the reality of how tiny that amount of beer really is. As long as you are doing it just for the love of it and don't plan on making money then you can make all the 10 gallon batches commercially you want. I am far more greedy with my time and beer. If I brew a 10 gallon batch I want to be sure that most of it goes primarily in my belly. But also, unless you have a specific agreement with an establishment don't expect pubs/restaurants to keep your beer on tap if you can not supply demand. Bars/Restaurants don't like having down taps, it's a waste of money. You may find that 10 gallons a week is not enough to afford one tap at one pub.

FWIW I'm not trying to squash anyone's dreams. Just giving some reality and perspective from hard learned experience.

[hopfenundmalz]

Sam Calagione started on a 10-gallon system. Just sayin ;-) obviously not ideal

Larry Bell started in 1985 with a 15 gallon soup pot. Sam had a Sabco Brew Magic.

There is the story (maybe from an interview) from Larry Bell that after years of brewing he went to a lawyer to start the procedure of bankrupcy. The lawyer said it would cost $1500 dollars to do it. Larry said if he had $1500 he wouldn't be there, and left the office. May not be true but I like the story.

Founders was at the point the creditors were about the foreclose. They went out and bought a set of bolt cutters just in case the doors were padlocked (that would have been more trouble I think). They still have those as a reminder of where they were.

It is a little harder than"

1. Open Brewery
2. .......?
3. Profit!

[nateo]

Debt is cheaper on paper than equity.  However debt has its dangers too. . .  Banks (despite their ad campaigns) are NOT your business partner.  They are banks and they need to protect their depositors' dollars. 

Let's say you have very little money to invest, like many of the other posters here. You get investors to fund 90%+ of the brewery. You run the brewery. The brewery doesn't do well under your leadership. How long will your business partners keep you in charge of the brewery, before they force you out?

The craft brewing industry in the US is mature. Sam Calagione and Larry Bell were like Bill Gates and Steve Wozniak in the '70s. There was no personal computing industry, so they made one. In a nascent industry you can start in your garage. In a mature industry, the barriers to entry are much higher and the potential profits are much smaller.

If you really want to start a craft brewery on the cheap, I'd look at doing it in a dynamic economy with a lot of room to grow, but not much of a craft beer industry, like Brazil. I've seen a few guys on the German homebrew forums do that, because the liquor laws there are very friendly to start-ups, and $20k USD goes a long way.

[majorvices]

Fwiw in certainly not implying starting tiny isn't doable because I'm testament that it is. All I'm saying is be prepared for a lot of work and no money. It wasn't until ver recently, like the last 6 months, that I felt like I was really running a brewery I could feel proud of, and not because of the beer quality but because of the amount of labor I was investing for such an insignificant amount of beer but if you Re willing to put in the labor - and you have solid recipes and make great beer - you can make it work.