How To Start a Microbrewery in 8 Steps

You could get a keg and spend $200 on a kit to make beer in your basement. It's a great place to start, but it's not going to turn you a profit or into a successful brewery business.

To succeed in this $24 billion industry, you must invest a large amount of cash into your brewing equipment. You can look at $250,000 up to $2.5 million to build your location to brewing capacity. That startup cost also includes real estate, rent, and building costs.

Brewery startup costs begin with the brewery equipment. Common equipment includes:

• Barrels
• Boilers
• Bottles
• Brite tanks
• Fermentation systems
• Heat exchangers
• Kettles
• Kegs

Equipment alone costs anywhere from $100,000 to $1 million, depending on the extent of your brewery business plan and needs.

Reinforcing the floor and installing the specialized plumbing and electrical lines is expensive for your building or space.

You will now make two early decisions: what to name your craft beer business and how to structure it.

Do You Have a Unique Business Name?

If you can answer the following questions, then you likely have a unique name you can trademark for your IPA business.

• Is any other brewery using this name?
• Does your name sound like another microbrewery?
• Would customers think you are associated with another company with that name?
• Is the internet domain name available?
• Is anyone using that name in your state?
• Is anyone else using the name nationally?
• Can you trademark the name with the U.S. Patent and Trademark Office?

If yes, your name for your own microbrewery is unique. You should consider trademarking both the name of your brewery and the names of your unique beers. Remember that you can't trademark a generic name — like "wheat beer," for instance. It must be a unique name for that wheat beer, like "Amber Waves of Grain."

Next, register that trademark name with your state. You should then trademark that name with the U.S. Patent and Trademark Office (USPTO). After approval, you can use the ® symbol after the name.

Now that name is yours. You can sue for damages and infringement if others use it illegally without a license. It also adds good will and value to your microbrew business.

Did You Pick the Best Business Structure?

The type of business structure you create should be a joint decision among you, your attorney, and your accountant.

Most small business startups like microbreweries are limited liability companies (LLCs). You will likely incorporate it as an LLC because it provides liability protection for the owners without a corporate income tax.

A very small, one-person nano brewery could be a sole proprietorship. Your business could also be a partnership or a limited liability partnership.

Writing a Business Plan

Every new business needs a business plan, especially one that requires hundreds of thousands of dollars in startup costs.

Some professionals can write you a business plan. You could use our FindLaw template.

A good business plan includes the following sections:

• Executive summary
• Objectives and mission statement
• Keys to success
• Company summary
• Inventory needs
• Market and competition analysis
• Web plan
• Management summary
• Financial plan
• Legal regulations summary
• Appendix

Any lender wants to see a sophisticated, professional business plan to give you the financing you need.

Funding Your Microbrewery

Ordinary bank loans targeted to specific neighborhoods are an excellent place to start.

Emphasize with the lender that you will bring business into the whole neighborhood (if you have a taproom), employment, and an upgrade to the community. Many cities and civic organizations will also have grants for new businesses employing people.

If you do not qualify for standard bank loans, consider applying for a Small Business Administration (SBA) loan. These loans can offer lower interest rates. There are also marginalized community loans or programs through the SBA.

A major part of your business plan is creating a marketing plan. The first step in developing a marketing plan is identifying the target customer base. You then figure out where and how you will reach them.

Before you pick your microbrewery location, ensure there is room for your business in that local market. There's a fine line between a beer trail of microbreweries and an oversaturated market.

Who is your target customer? You are usually appealing to young professionals, millennials, and the hip crowd in your community. They come from tech, music, politics, or the neighborhood. You must find them and show them they need to drink your beer.

Do You Have a Strong Social Media Presence?

Your social media presence is the centerpiece of your target community's awareness of your new craft brewing business. The real pro tip of social media is consistency. Post at least once daily on every platform.

Don't forget about your reviews on Google and Yelp. Many potential customers or visitors to your area look to those reviews first. Invest in Google and Facebook ads. Remember that your target audience is on social media all the time. Go where they are.

Use your social media accounts to help you create an email list for newsletters and promotions. Keep your newsletters to a minimum to avoid people from unsubscribing in large numbers.

You can also partner with local social influencers, online and offline. Your microbrewery can host political gatherings, open mics, trivia nights, ping-pong tournaments, and game nights.

Many new microbreweries decide not to sell food on the premises. They often make arrangements with local restaurants for food deliveries. Sometimes, the local demographics prefer having food trucks in the parking lot. This saves you the effort and costs of starting a restaurant and a brewery.

If you want to sell food along with beer, you will also be subject to laws and regulations for restaurants. FindLaw has a guide to opening a restaurant to help you through this process.

The beer industry has several laws and rules specific to this business.

State Laws

Each state has different beer distribution laws, definitions of what constitutes "beer," reporting requirements, and excise taxes on beer. Remember also that, besides each state's beer-specific laws, you must follow each state's alcohol laws. This includes the various state permits you will need to open, sell alcoholic beverages, and continue in business.

Depending on the state, you may need to pay excise taxes and put up a brewer's bond.

State Beer Distribution Rules

Brewing and selling your beer at one location (or several you own) is one thing. In most states, though, it is another thing to distribute your beer outside the four walls of your brewery tasting room. It could be a good part of your business plan to distribute your new beer to local stores and bars. Know your state rules because you may not be able to do that. Or, if you can, it may be more difficult than you expect.

Most states do not allow a brewery to distribute its product. These states require a licensed distributor to do so in a "three-tier system."

The three tiers are:

• Manufacturer
• Distributor
• Retailer

If a state allows a brewery to distribute its product, every state's distribution laws and rules are different. You will have to know the laws of your state.

Federal Beer Laws and Regulations

From Prohibition in 1919 until Feb. 1, 1979, home beer brewing was illegal on the federal level. "Home brewing" became microbrewing over time.

The sale of beer is taxed under Chapter 51 of the U.S. Tax Code and regulated under the federal Alcohol Administration Act. Your tax advisors and lawyers can help guide you through this particular maze. It can be difficult to do on your own.

The federal government regulates commercial beer sales through the Alcohol and Tobacco Tax and Trade Bureau (usually called the TTB) of the U.S. Treasury Department. Here is its industry startup tutorial.

Federal Brewer's Notice and Brewer's Bond

The most time-consuming part of starting a brewery is getting your federal commercial brewing license, a Brewer's Notice. You can apply online, and there is no application fee. The TTB has to approve your complete operation — name, labels, recipes, and processes.

You'll be subject to a background check and on-site inspections. This approval process can take from six months to a year. The brewer's bond renews every four years. A local surety company should be able to handle this for you.

Local Permits

You will need all the standard business permits and local business licenses.

You will likely need construction permits, whether building a new structure or modifying an existing one. Before you open, you must pass fire inspections and receive a certificate of occupancy.

Depending on the jurisdiction, you may need a sales or use tax license or a sign permit.

You will hire employees, and you will pay taxes. Your first hires will probably be in the back brewing. Your first step in this process will be to get a federal Employer Identification Number (EIN).

As you hire employees, you must ensure they can legally work in the United States and fill out the proper paperwork (Form I-9) to prove this.

Run background checks on your new hires, particularly those who will handle money. It is a good idea only to hire employees who are 21 years of age or older since that is the drinking age.

You are responsible for doing your employment taxes. This is usually a job for your accountant. Also, each state has an excise tax for selling beer. You must file and pay this tax.

If you want customer loyalty, employee loyalty is where you should start. Pay a living wage and offer good benefits where it is possible and appropriate to do so. Make it fun to work there and pay attention to your employees' needs. If you can't give them what they need, you will not be very happy with what they deliver. Neither will your customers.

A small brewery is essential to any city's landscape, and you want to be a welcome community member.

You will need several kinds of insurance for your new brewery. Common types of business insurance policies include:

• Business liability insurance. Your financiers or franchisor may set minimum policy limits.
• Commercial umbrella insurance
• Worker's compensation insurance to cover on-the-job injuries by workers

A local insurance agent should supply all your needs in this area.