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Any business owner faces hurdles, but last year was particularly challenging for brewers and bar operators. According to leaders at the Brewers Association, rising operating and material costs and increasing competition made growth hard to come by.
That’s why knowing your business costs is critical for long-term success. Overspending or running your business without a budget can lead to significant financial troubles, such as not being able to afford a surprise expense or withstand a slower-than-usual season. These experiences can not only require you to close, but they also prevent you from growing at an ideal rate.
Despite challenges in the industry, your business can still thrive. Oakland-based Ghost Town Brewing Company, for instance, navigated tough conditions by relying on business tools that enabled them to focus on their growth.
Whether you’re planning to open your bar or brewery or, like Ghost Town Brewing, are expanding your footprint, knowing your expenses is vital. Here’s a closer look at what your upfront and ongoing expenses can look like, as well as how you can use your business technology to track and manage these costs.
Typical upfront costs for breweries and bars
Breweries and bars have unique startup costs. Equipment and inventory just scratch the surface of what your business needs to spend. Additional costs include real estate, licenses and permits, and hiring your team. Planning for start-up costs appropriately can help you avoid a cash crunch that takes down your business before it gets off the ground.
- Renovations and decor: If you rent or lease a business space, you’ll likely need supplies and elbow grease to prepare your it for operations. Expect additional costs if you hire decorators or installers rather than doing the work yourself. Plumbers and electricians are likely necessary as well for custom wiring and piping. Spending can cost around $200 to $250 per square foot for renovations.
- Equipment and inventory: You can often save by buying used brewing equipment or bar supplies, but even still, it’s not uncommon to spend up to six figures to get up and running with the right equipment, including fermentation tanks and kegs. While breweries need inventory, such as grains, hops, and yeast, bars must also stock up on beer, wine, and spirits. And both businesses need point-of-sale systems to check out customers and review their sales data.
- Licenses and permits: Alcoholic beverages require licenses and permits to brew and sell. While costs vary by state and municipality, initial permitting generally isn’t optional. If you need the support of a legal professional, you may pay hundreds of dollars per hour. Costs here can exceed $10,000, depending on your location and what you’re selling.
- Health and safety: Insurance companies and the Occupational Safety and Health Administration (OSHA) often enforce substantial requirements to keep you and your team safe. Restaurants, bars, and breweries are ripe for injuries due to broken glass or slippery floors, and you may need to invest in safety gear, supplies, and training for a safety-first start-up. The cost of an injury can be much more than a modest investment in anti-slip mats, railings, and other safety gear.
- Glassware, menus, and more: If you sell directly to customers, you’ll need menus, glassware, silverware, washing equipment, sanitary cleaning stations, and additional supplies. Even breweries with wholesale-only operations must buy bottling or canning equipment and proper cleaning tools and supplies. Costs vary based on the size of your establishment and could reach five figures for glassware alone.
- Staff hiring and training: Initial staffing may be more costly than you realize. Highly skilled recruitment for managers and brewers can require using pricey online platforms or costly recruiters. Publishing and operating a hiring event can be expensive. After hiring, you need to train everyone to your specific business standards.
Brewery and bar ongoing expenses
You can breathe a sigh of relief once you’ve put your upfront costs behind you, but that’s not all it takes to run a business. Ongoing costs add up quickly, so knowing your costs and determining a budget can help you achieve or maintain profitability. Real estate, staffing, and supplies comprise a large portion of ongoing costs, but you should also plan on other monthly, annual, and periodic expenses.
- Real state and location: A physical location is often needed to brew beer or sell your product, so consider leasing or buy real estate. Many breweries prefer the savings of operating in an industrial area, while bars may be willing to take on the added expense of picking a busy commercial location to capture foot traffic. If you run a brewery and bar in one, you may need ample space in a busy area, leading to significant ongoing costs. Real estate costs vary dramatically by location.
- Utilities: Electricity, gas, water, and internet are familiar to just about everyone, but paying utilities for a business can be expensive. Breweries need a lot of water to make beer and abundant energy to heat large brew kettles. You’ll need around four to six liters of water for each liter of beer produced. Heating and air conditioning can be another significant cost, particularly in large spaces. Your climate and location influence rates and energy needs. All-in utilities for a bar may cost around $2,500 per month.
- Maintenance: Routine and surprise maintenance bills can be a major cost center for alcohol industry businesses. You can likely predict which items need servicing from time to time. A breakdown can bring businesses to a halt, and paying a service to come out and fix your taps, pumps, HVAC, and other systems should be expected occasionally.
- Staff wages and benefits: Payroll is one of the largest expense categories for many businesses. For some businesses, health insurance and other benefits are a major expense. Some payroll platforms can help you estimate and manage human resources costs.
- Inventory restocking: You’ll need to restock as you sell your products. Breweries should plan on regular purchases of ingredients to keep the fermenters and tanks full. Bars and restaurants must buy beverages, food ingredients, disposables, and other single-use items to fulfill orders with fresh and tasty dishes. Depending on your sales volume, this could cost around $10,000 per month.
- Marketing and advertising: While a lucky business may catch a break on social media or the local news, marketing is an ongoing process. Particularly in the ultra-competitive beer and bar industries, keeping up customer demand generally takes work and a marketing budget. Breweries and bars often spend around 3% to 6% of sales on marketing.
- Software subscriptions and service fees: You’ll need to track every sale, transaction, purchase, and dollar moving through your business.
How Square can help: Managing finances for your bar or brewery
With all the costs associated with opening and running a bar or brewery, tracking them can be a feat. That’s where the ecosystem of Square solutions can come in handy, offering tools to help you run your brewery, bar, or brewpub finances with end-to-end tracking.
Whether selling from a physical storefront or making mobile sales, a trustworthy and efficient payment system is necessary. Square for Restaurants and point-of-sale (POS) systems help you process nearly any transaction, whether with a card or cash. Square for Restaurants is an all-in-one software solution that can manage your bar or restaurant from the cash register to the back of the house. For Ghost Town Brewing, using Square POS and Square for Restaurants helped streamline operations and cut back on training staff or learning the technology. Instead they could focus on their growth.
To handle your team’s payroll, hour tracking, benefits, and payroll taxes, Square Payroll is a competitively priced system that’s easy to use with an intuitive interface. According to the owners of Torch and Crown, a New York City brewery and gastropub, “With archaic restaurant POS systems, it’s like trying to drive an 18-wheeler on a winding road at 200 mph. You can’t make corrections in real time. With Square, it’s like driving a Porsche where you’re able to react and adjust to things. This is so important as we get busier and continue to grow.”
Lastly, as your business grows and you begin to need additional technology, such as accounting software and an enterprise resource planning (ERP) platform, you can easily access everything you need in one place using integration capabilities.
With a good handle on finances, you can focus on delivering the best quality product and customer experience possible, encouraging excellent customer reviews. The end result? Your business is destined to grow and thrive.
