Just because local breweries are generally thriving and seeing significant growth, it does not mean individual craft breweries are not finding it challenging to stay out of the red and in the black.
It can be particularly difficult during the initial months and years after launching a new brewery business for companies to avoid debt and make a healthy profit. However, if your small brewery is struggling to stay in the black, there are several steps you can take to stay on top of things and start being profitable.
Here are five tips for success that you will want to take note of.
1. Remember That Debt Can Sometimes Be Useful
First off, it is worth mentioning that debt is not always as bad and scary as it seems. That is, as long as you have a solid plan in place.
Many new breweries and other startup companies get into debt during the initial stages in order to fund their businesses. But if you take on debt, you should have a firm plan in place that indicates when your break-even stage will occur and how much you will be able to make in profits in the coming years as a result of funding your local brewery with borrowed funds.
As long as you make your debt work for you, not all debt has to be bad.
2. Stay on Top of Your Costs
By staying on top of your costs, you can manage your money better and avoid getting into unplanned debt. It all begins with budgeting.
When you budget well from the offset, you can stay in the black. So, make sure you know what all of your costs will be, from production tools and employee salaries to inventory costs and marketing expenses, and also factor in unexpected costs.
It is a good idea to use accounting software such as these QuickBooks alternatives to help you budget and stay on top of all your costs.
The first thing you should do is make a list of all of your different expenses, such as ingredients, bottles, packaging, forklift hire, insurance, subscriptions, travel expenses, and office expenses. You can then budget much better and avoid getting into debt in the first place.
Also, make sure you budget for future expansion. If you want your brewery to be successful, you will need to grow your business, perhaps by opening taprooms in new locations or exporting your beer to international territories.
But when doing things like the latter, you will have many additional costs that you need to plan for, such as transportation, storage, and varying profit margins. The more you expand, the more costs you will have.
3. Make Sure Invoices Are Paid Promptly by Communicating Well with Your Clients
One simple but highly effective thing you can do to stay in the black is to ensure your invoices are paid on time. If clients are continually late in paying your invoices, you could easily find yourself struggling with your finances each month.
To make sure invoices are paid on time, focus on communicating better with your clients. If you communicate regularly with your clients and build up good relationships with them, they are much more likely to not neglect your invoices when they arrive.
To speed up payments, you could even introduce discounts or special offers to clients who pay early.
4. Use Better Software to Manage Your Inventory
If you do not stay on top of your inventory, by ensuring you always have the right amount of stock and do not have too little or too much of the items you need, you will be able to take better control of your finances and avoid going into the red.
Many breweries are used to using things like Google Sheets to organize their inventories. But using Google Sheets can actually be an inefficient and timely process. And as every business owner knows, time means money.
So, it is no wonder that many local brewing companies now use industry-specific software to stay on top of their inventory levels.
For instance, Ollie offers an alternative to Google Sheets. Ollie’s software was built by brewers for brewers. You can maintain your inventory automatically in real-time, which will save you countless hours updating spreadsheets, and manage every part of your production on any device.
For example, you can log on to your tablet anytime to see which ingredients are being used for the beer recipe your workers are currently producing. Ollie’s software will automatically remove the items that are being used from your inventory and you will be able to see exactly what your inventory costs are.
5. Explore Other Revenue Streams
Staying on top of things like your finances, production methods, and expansion plans will enable you to control your money better and make a profit. But to stay in the black, you should also look at other potential revenue streams. By widening your range of products and services, you could quickly turn a higher profit.
Here are just a few ideas you will want to consider.
Can Your Beers
If bottling beer is costing you a lot of money and making it difficult for you to gain a decent margin, look at selling more of your beverages in cans. By canning your beers, as well as bottling them, you will not only save costs. You will also be able to sell your beers to a broader customer base.
Sell Kegs
If you are currently selling bottles or cans but not kegs of beer, you should look at selling kegs to bars, restaurants, and other clients.
You can shift a lot of your product in one go, get paid reasonably quickly, and generate higher profit margins than you may be able to with bottles and cans alone.
Open a Taproom
If your local brewery does not operate a taproom where customers can sample and buy your beers, you are missing out on what could be a very lucrative revenue stream.
Remember, you can avoid various overheads when you sell your beer directly to customers at a local taproom. Furthermore, by creating a great place where people want to hang out, you will create a loyal customer base and you will see word-of-mouth recommendations flourish.
Run Events
By holding specific events, such as beer-tasting events and brewing masterclasses, you can quickly expand your revenue stream. You could also consider doing offsite events and functions.
Sell Merchandise
Finally, you can make more money and stay in the black by selling merchandise like T-shirts with your logo on and books about how to get started as a home brewer.