6 Steps to Starting a Brewery
Step 1: Choose a name and business entity for your brewery.
Step 2: Create a business plan.
Step 3: Apply for any licenses or permits.
Step 4: Register your business and get an employer identification number.
Step 5: Open a business bank account and credit card.
Step 6: Start looking at funding options.
Nearly everyone has a hometown brewery these days thanks to the fact that small craft beers became popular over the last decade or so. Plenty of people who used to brew for their own enjoyment have decided to take the next step and start a business, turning that hobby into their very own brewery.
If you’re considering how to start a brewery, it’s definitely an industry with potential. The craft beer industry made up 13% of the nation’s total beer sales in 2018, which is, truthfully, nothing when you compare the numbers to the big players like MillerCoors or Budweiser. But, what makes craft beers worth noting is that the numbers are growing exponentially while overall beer sales are declining. In 2017 small and independent brewers contributed $76.2 billion to the U.S. economy and provided more than 500,000 jobs across the country, according to the Brewers Association.
A fascination with independent, local beer makers using traditional ingredients has resulted in breweries popping up all over the map. One of those small and independent breweries is No Label in Katy, Texas, which was started by the husband-wife team, Jennifer and Brian Royo. In 2006, Brian received a homebrew kit as a graduation present, which led to making batches of beers in his garage, which led to brewing classes at Defalcos Homebrew Store, which resulted in an intense passion for beer-making. Three years later, the idea for No Label was hatched during a Royo family outing after enjoying a few of Brian’s homebrews. No Label’s first keg was sold a year later on December 21, 2010.
The Royos are only one example of the increasing number of people who are curious about starting a brewery. Of course, making a living from brewing beer can seem too good to be true. If you’re wondering how to start a brewery, here are a few things to consider so you can turn your passion project into a real business.
Step 1: Choose a Name and Business Entity for Your Brewery
The craft beer industry is becoming increasingly crowded, so much so that breweries are running out of original names—for both their businesses and the beer they produce—according to NPR. So before you get too deep into starting a brewery, first think about what your business name will be and if it’s actually available. You’ll go about checking your business name availability differently in every state, but most states let you easily check it online. Your Secretary of State’s website will likely have this database, and if not, you can also check the United States Patent and Trademark Office’s trademark database for entities with similar names. Keep in mind, you will likely want to end up trademarking your brewery and your beers.
Sometimes, the more obscure the name, the better. After all, people opt for craft brews for their unique flavor and story. The Royos, owners of No Label Brewing Company, have an interesting story behind their name choice. Brian Royo was peeling off the label of a bottle and thought, “Hey, there is no label on this beer bottle.” Plus, Jennifer and Brian wanted the name of their company to represent their family as a whole. After trying out many other names, ultimately, the Royos decided on “No Label”—a brand with multiple personalities and beers too unique to be labeled.
You should also choose your brewery’s business entity. There are a lot of different business entities out there and you’ll want to weigh your options carefully before choosing the best one for your business. Which entity you choose will depend on several factors and it will have tax and legal implications for the duration of your business’s life. Consulting with a business attorney is a wise choice if you’re unsure how to structure your business.
Step 2: Create a Business Plan for Your Brewery
No matter what type of business you’re starting, you’re going to need a plan—but because starting a brewery involves making and selling alcohol, you may need to do more planning than your average entrepreneur.
When writing your business plan for your brewery, be sure to include everything about how your brewery will operate and turn a profit, including potential suppliers, a location, where you plan to get and pay for equipment, the name of the business, the entity, all of the owners, a marketing plan, financial projections, and more. You should also cover whether you want to be a brewery with its own facilities or whether you want to do contract brewing, where you brew a beer using another company’s facilities to curb prices.
You also want to include some market research in your business plan, like who the competitors are in your area, and the type of demand there is for your new brewery. Not only will you business serve as a roadmap as you continue to work toward starting a brewery and keeping it running, but it will also be necessary to provide a well-thought-out business plan when you’re approaching potential investors and banks for funding for your brewery.
Creating a business plan may sound like a serious undertaking, and it is incredibly important to your business, but it doesn’t have to be difficult. To make the process easier, you can use business plan software, as well as a business plan template, which takes the guesswork out of what you should include, as well as making it looked polished and professional.
Step 3: Apply for Any Licenses or Permits
During your daydreams about starting a brewery, you were likely thinking about how great it would be to do something you love all day, but it’s unlikely that you were considering that brewing beer is a heavily regulated business. There’s a lot of waiting on permits and licenses, according to the Royos.
First, you need to obtain a license from the Alcohol and Tobacco Tax and Trade Bureau (TTB), the entity responsible for enforcing laws “regulating alcohol production, importation, and wholesale businesses; tobacco manufacturing and importing businesses; and alcohol labeling and advertising.” This process can take several months to complete since it involves everything from inspections to background checks on directors, officers, and owners.
Next, brewery owners need to apply for applicable state and local licenses. Check with your state and local governments to find out which business licenses you need to obtain, as these will vary by state. You also might want to consider consulting a business attorney to make sure you’re covering all your bases, since starting a brewery without the proper licenses and permits can result in serious penalties.
Collin McDonnell, the cofounder of HenHouse Brewing Company, gives all potential brewery owners a dose of reality on the federal and state agencies you also likely haven’t thought about, but will definitely have to deal with:
“There are federal and state agencies that get all up in the business of any booze maker, and the wastewater treatment folks in your municipality will want to have more than a few words with you before you start operations. There are far more agencies you will need to report to than you realize, and the first thing you should do when you decide to start a brewery is to contact all of them and ask if they have a punch list of compliance items for breweries. More likely than not, they don’t, so don’t be discouraged when they can’t give you advice on getting your operation off the ground.”
Step 4: Register Your Business and Get an EIN
Just like how getting licenses and permits is a different process in every state, so is registering your business. But you can apply for an employer identification number, or EIN, from the IRS which is a federal agency. That EIN will be an identifying number you use when filing taxes, applying for bank accounts, and more.
You can apply for an EIN online on the IRS’ website, or on the phone, by mail, or by fax. Your online application takes just minutes and you almost immediately get your EIN while the fax application can take four business days to process and by mail, you might be waiting up to four weeks.
In terms of registering your business, registrations are state-specific and will change depending on where you are. This is another area where consulting a lawyer might be a good idea if you’re feeling a bit lost during this stage of starting a brewery. You want to make sure you have your business registration squared away before you go ahead and start brewing.
Step 5: Open a Business Bank Account and Business Credit Card
While starting a brewery may sound more like a dream, it’s important to remember you’re running a business—and that business will hopefully be making money, meaning you’ll need a business bank account to keep that money in and a business credit card to make business-related purchases. Having both of these entities will help you establish business credit and as you use them bot responsibly, your credit score will continue to rise—which will be important if and when you seek funding.
You may be wondering why you need separate business accounts and why you can’t just use your personal bank account and credit card. But keeping your business finances separate from your personal finances is key for several reasons. When it comes time to get a loan or financing, you want to show proof that you’re responsible with your business’s money and that you pay your business credit card on time. Additionally, handling your business taxes will be significantly easier if you can easily separate what you spent on your business versus your personal expenses. Plus, your overall business finances will be easier to manage when you can clearly distinguish between business and personal expenses.
You’ll have lots of options when it comes to choosing a business credit card and a business bank account—including business checking accounts, which are useful for all small businesses, and high-yield savings accounts, which can help your money grow if you can leave it in the bank rather than invest it directly back into your brewery. Shop around for the best bank and credit card to find the best fit for your new, and hopefully growing, brewery business.
Step 6: Look Into Funding Options
When you were considering how to start a brewery, funding was probably not your first concern. But now that you’re well on your way to starting a brewery, it’s time to get serious about the costs and how you’ll handle them. How much does it cost to start a brewery? The consensus from people who’ve done it is that it’s an expensive endeavor.
Jacob McKean, founder of San Diego-based Modern Times Beer, wrote about how he raised $1.25 million to start his brewery. He admitted that he could have started a brewery for less, but then he would have had to “compromise quality, sacrifice worker safety, put off crucial purchases, make [himself] inefficient, and worsen the consumer experience.”
When asked what the Royos needed to get their brewery off the ground, Jennifer tells Fundera: “A lot of money.”
By far, your greatest expenses will revolve around equipment—because starting a brewery require a lot of equipment, including kegs, bottling and canning lines, cooling systems, storage tanks, fermentation tanks, cleaning equipment, and so much more. The good news is there’s equipment financing, which can front you the necessary cash to buy all this equipment as you start your brewery. Equipment financing is typically easier to qualify for because the equipment serves as collateral, meaning if you stop repaying the loan, the lender will repossess the equipment.
Beyond equipment financing, you may also look for an investor or a startup business loan. While the initial cost of starting a brewery is great, there are several financing options you can explore to make it possible. This is also where having a solid business plan comes into play, as potential lenders and investors will want to know you’ve done your research and have a concrete plan for how to make your brewery a success.
Read more in our complete guide to brewery loans.
How to Start a Brewery: The Bottom Line
We’ve explained the first steps for how to start a brewery, but now it’s up to you to take the reins and start the real work. Developing the perfect craft beer recipe may have seemed like the hard part, but now it’s time to apply that same dedication to legally starting a brewery as an official business.
And the work doesn’t stop with this list. You’ll also want to think about buying business insurance and, once your brewery is up and running, hiring your first employees, managing your taxes, and more.
The best way to start a brewery is to take it one step at a time. By being thoughtful about your brewery and the unique beers you’ll soon offer to the public, starting a brewery can be an attainable dream. Cheers to that!