Running a successful craft brewery involves more than just brewing great beer; it's also about making smart financial decisions.
In this post, we'll delve into the essentials of crafting a financial plan that can help your brewery prosper.
From understanding your startup costs to managing daily expenses, navigating the complexities of distribution, and projecting future growth, we're here to guide you through each step.
So, let's get started on the path to turning your passion for craft beer into a financial triumph!
And if you need to get a full 3-year financial analysis of your brewery project without having to crunch the numbers yourself, please download our financial plan tailored for craft breweries.
What is a financial plan and how to make one for your craft brewery?
A financial plan for a craft brewery is an essential roadmap that guides you through the financial aspects of your brewing enterprise.
Think of it as crafting the perfect beer recipe: You need to be aware of the resources at your disposal, the type of beer you aim to brew, and the costs involved in crafting your unique brews. This plan is crucial when starting a new brewery, as it turns your passion for brewing into a well-structured and economically viable business.
So, why is a financial plan important?
Imagine you're on the verge of opening a boutique craft brewery. Your financial plan will help you comprehend the costs involved - such as renting a brewing space, buying brewing tanks and equipment, initial costs for quality ingredients like hops and grains, hiring skilled brewers and staff, and marketing expenses. It's like ensuring you have all your brewing ingredients and enough budget before embarking on a large-scale brewing operation.
But there's more to it than just adding up costs.
A financial plan can provide insights similar to perfecting a unique brew recipe. For example, it might show that importing exotic hops is prohibitively expensive, leading you to explore local, high-quality alternatives. Or, you may realize that starting with a small, dedicated team is more feasible than employing a large staff right away.
These insights help you avoid overspending and overextending your resources.
Financial plans also serve as a tool for forecasting and identifying potential risks. Suppose your plan indicates that reaching your break-even point – where your sales equal your expenses – is only achievable by selling a certain number of barrels or bottles. This realization underscores a risk: What if sales don't meet expectations? It prompts you to consider other strategies, like hosting brewery tours or selling merchandise, to generate additional revenue.
Now, how does this differ for craft breweries compared to other businesses? The primary distinction lies in the nature of the costs and the pattern of revenue generation.
That’s why the financial plan our team has developed is specifically tailored to the craft brewery industry. It addresses unique aspects that cannot be generalized to other types of businesses.
Craft breweries face specific expenses, such as quality ingredients that may vary in cost, specialized brewing equipment, and compliance with particular health and safety standards. Their revenue can also be more variable - seasonal brews might boost sales at different times of the year, in contrast to businesses with more consistent product offerings.
Clearly, our financial plan takes all these unique factors into account. This way, you can create precise financial projections for your new craft brewery venture.
What financial tables and metrics include in the financial plan for a craft brewery?
Creating a financial plan for a new craft brewery is a pivotal step in ensuring the success and sustainability of your brewing venture.
It's important to realize that the financial plan for your future craft brewery is more than just numbers on paper; it's a strategic guide that assists you through the early phases and supports the long-term operation of your business.
Let's begin with the most essential element: the startup costs. This encompasses all that is required to open your brewery for the first time.
Consider the expenses of leasing or purchasing a location, brewing equipment, initial inventory of hops, grains, and other brewing ingredients, furniture, decorations, and even the signage for your brewery. These costs provide a clear view of the initial investment required. We have detailed these in our financial plan, so you don't need to search elsewhere.
Next, factor in your operating expenses. These are the recurring costs you will face, like salaries for your brewing team and staff, utility bills, brewing supplies, and other day-to-day expenses. Accurately estimating these expenses is crucial to understand how much your brewery must earn to be profitable.
In our financial plan, we've pre-entered all these values, giving you a good idea of what they should represent for a craft brewery. Naturally, you can adjust them in the 'assumptions' section of our financial plan.
A key table in your financial plan is the cash flow statement (included in our plan). It illustrates the expected cash inflows and outflows in your business.
This is a monthly (and yearly) projection that includes your anticipated revenue (the money you expect from selling your brews) and your projected expenses (the costs of operating the brewery). This statement is vital for anticipating periods when you might need more cash reserves or when you can consider expansions or upgrades.
Another critical table is the profit and loss statement, also known as the income statement, which we've incorporated into our financial plan.
This important financial document provides an overview of your brewery's profitability over a certain period. It lists your revenues and deducts expenses, showing whether you're turning a profit or incurring a loss. This statement is particularly valuable for assessing the financial health of your brewery over time.
Also, don't overlook the break-even analysis (included, of course). This calculation informs you of the revenue your brewery needs to generate to cover all costs, both initial and ongoing. Understanding your break-even point is crucial as it sets a clear sales target.
Furthermore, our financial plan includes additional financial tables and metrics (provisional balance sheet, financing plan, working capital requirement, ratios, charts, etc.), offering a comprehensive and detailed financial analysis for your upcoming craft brewery.
Can you make a financial plan for your craft brewery by yourself?
Yes, you certainly can!
As highlighted earlier, we have crafted a user-friendly financial plan specifically designed for craft brewery business models.
This plan includes financial projections for the initial three years of your brewery's operation.
Within this plan, you'll discover an 'Assumptions' tab that comes with pre-entered data, encompassing revenue assumptions, a comprehensive list of potential expenses relevant to craft breweries, and a staffing plan. These figures are fully customizable to match the unique requirements of your specific project.
Our all-inclusive financial plan covers all critical financial tables and ratios, such as the income statement, cash flow statement, break-even analysis, and a provisional balance sheet. It's perfectly tailored for loan applications and suitable for entrepreneurs at all levels, including novices, without requiring any previous financial knowledge.
The entire process is automated to do away with the need for manual calculations or intricate Excel tasks. Just enter your data into the specified fields and choose from the available options. We've made the process straightforward and user-friendly, even for those not accustomed to financial planning tools.
If you face any difficulties, please feel free to contact our team. We promise a response within 24 hours to help resolve any issues. In addition, we offer a complimentary review and adjustment service for your financial plan once you've completed all your assumptions.
What are the most important financial metrics for a craft brewery?
Succeeding in the craft brewery business requires a deep understanding of both the art of brewing and the science of financial management.
For a craft brewery, certain financial metrics are particularly crucial. These include your revenue, cost of goods sold (COGS), gross profit margin, and net profit margin.
Your revenue reflects the total income from beer sales, providing insight into the market's reception of your brews. COGS, which includes the cost of ingredients like hops and grains, as well as direct labor, is essential in understanding the direct costs linked to your product.
The gross profit margin, calculated as (Revenue - COGS) / Revenue, shows the efficiency of your brewing process. The net profit margin, representing the percentage of revenue left after covering all expenses, indicates the overall financial health of your brewery.
Projecting sales, costs, and profits for the initial year involves analyzing various factors. Begin with researching the local market and identifying your target customers. Estimate your sales based on elements such as local demand, competition, and pricing strategy.
Costs can be categorized into fixed costs (like rent for the brewery space and utilities) and variable costs (like brewing ingredients and hourly labor). It's vital to be conservative in these estimates and to account for seasonal variations in both sales and costs.
Creating a realistic budget for a new craft brewery is essential.
This budget should cover all anticipated expenses, including rent, utilities, brewing equipment, initial ingredient stock, labor, marketing, and a contingency fund. Allocating funds for unforeseen costs is also crucial. Maintain flexibility in your budget and revise it regularly, adjusting as needed based on actual performance.
In the financial planning for a craft brewery, key metrics include the break-even point, cash flow, and inventory turnover.
The break-even point determines the sales volume needed to cover costs. Positive cash flow is critical for smooth operations, while a strong inventory turnover rate suggests efficient management of your brewing supplies.
Financial planning can vary significantly between different types of breweries.
For instance, a brewery focused on mass-market beers might emphasize rapid inventory turnover and cost-effective ingredients, targeting high-volume sales. Conversely, a boutique brewery specializing in artisanal beers might incur higher costs for premium ingredients and labor, focusing on premium pricing and customer experience.
Recognizing signs that your financial plan may be unrealistic is crucial. We have outlined these in the “Checks” tab of our financial model. This provides guidelines for quickly correcting and adjusting your financial plan to yield relevant metrics.
Warning signs include consistently missing sales targets, rapidly diminishing cash reserves, or inventory issues, whether running out too quickly or accumulating without use. If your actual figures consistently diverge from your projections, it's a clear sign that your financial plan needs to be revisited.
Finally, the key indicators of financial health in a craft brewery's financial plan include a stable or growing profit margin, a robust cash flow that covers all expenses comfortably, and consistently meeting or surpassing sales targets.
No worries, all these indicators are thoroughly “checked” in our financial plan, and you will be able to adjust them as necessary.
You can also read our articles about:
- the business plan for a craft brewery
- the profitability of a a craft brewery