Can a Nano Make Money?
Let's see...
I always tell students to go at a minimum of 5 barrels, preferably 7 (because there is so much used equipment in that size). But there are times where a nano brewery might be the better choice.
Limited funds so it’s all someone can afford
Less scary because it’s just a little bigger than home brew
But if you go that route can you actually make any money? I was curious so I started running some numbers and tried to figure out the ideal situation where a nano could actually be profitable. It doesn’t mean you will get rich, but you will own your own brewery and can make a modest living at it. So let’s see where this takes us.
First off, I wouldn’t go less than 1 barrel. In fact there are a lot of decent used 3 barrel systems I see on probrewer/classifieds. But for this example, let’s say you want to do 1 barrel. By the way that’s one barrel (2 kegs) finished.
If this was me there are certain criteria I would look for.
Cheap Rent. Keep it under $800 per month. Why $800? Because I believe your rent should not be above 10% of your gross sales. What I really like to see though is less than 7%.
Hopefully what you rent was a coffee house, bakery, restaurant, or a bar. That’s because it will already have a lot of infrastructure you will need.
The overall price to build this thing will be with your own funds or your family’s and your beer drinking buddies. We don’t want a bank loan. So if you have enough money to convert a small warehouse, great. But that restaurant will be much cheaper.
You will have no employees. Just you, or maybe you and your spouse, or maybe you and one or two of those beer drinking buddies who will work for beer.
Your hours will be limited. I say Friday night and Saturday starting mid afternoon. It’s just you and you also have to make the beer. You could add Sunday, that’s up to you. But I see you doing an 8 hour brew day once per week, at least a half day to transfer and clean, and another half day for odds and ends.
You need to eventually be busy enough that you can sell a full keg for $6 a pint on Friday and also on Saturday. That’s one barrel per week.
All you are selling is beer and some merch.
Your pay will be a big $15 per hour. Plus profit of course.
Now what does that look like?
I’m of course guessing on some of the expenses, but you do make some money. If you would sell this business you built it would be worth about $107,000. Don’t be discouraged though, I would lay money on the fact that if people liked your beer you would be open more than 2 days per week and sales would go up, you would hire staff, and eventually move to a larger system and be off and running.
This is not the end of the story however. I want to throw something else out there as well.
Now let’s say you have this space and you have followed Dr. Frankenbrew’s advice and have this really excellent Oyster (if you don’t know what I’m talking about by now I don’t know what to say). The space looks cool so don’t let it just sit there unoccupied. The rent is already paid, you probably have wifi, the restrooms work and are clean, so let’s add something - Coffee!
For this example you keep to the original plan where you are the brewer and the bartender. But now you invest a little more for an espresso machine and other coffee equipment. You can contract out with bakeries for muffins and the like. You just need a Barista who makes $15 per hour and some profit sharing. They work every morning during the week from 7 to 11. I know from experience you can do as much as $500 per day in sales if your coffee is good and you can serve it fast. This drastically changes your profitability. Check it out.
You are now selling coffee, and I suppose some food as well. COGS means Cost of Sales. For example 8% for beer means .08 cents on every dollar collected covers grain, hops and yeast. I don’t count water, that’s too complicated for my wee brain.
Some caveats: I could see the Barista would need help during the rush. The biggest mistake coffee houses make is to only have one employee who takes an order then turns around to make the drink while everyone is standing in line. But that being said, look at how much better your brewery is doing? You’ve doubled your net profit and the value of your business.
I think this seems worth while to me if I was just starting out.
Now I want to punch some holes in this. First off, a lot depends on the location you find. For example is there parking, walking traffic, or next to a popular bike trail? Can you really find cheap rent these days?
And what about your initial investment? If this cost you $100,000 to get open, I believe you should be paid off above and beyond your profit. So I would want to get interest on that investment at the least. 5% would be $444 per month, but I prefer 10%. It’s also a better way to make money, because if you pay yourself wages you lose about 15%. That is the employee portion of Social Security and Medicare, (half) and the employers half. Oh, wait, that’s you in both instances, so 15%. With paying yourself interest however you are only taxed at your tax bracket with no Social Security or Medicare taken out.
In conclusion, I think that yes, a nano can get you started, and could even be fun. Don’t forget your business system so you can replace yourself when you get sick of brewing and bartending. This is very important. If you want, start shooting holes in this. It makes for good conversation!
