In this three-part series, we examine the steps to transforming your passion for homebrewing into a business, with advice from the owner of Pennsylvania-based Hop Hill Brewing Company and financial insight from our friends at My Numbers Guy.
The kitchen is a mess, the whole house smells like wort and you’re sipping on your favorite local lager – ah, it’s homebrewing day again. It’s become a typical activity for you and your closest friends, one that’s yielded dozens of batches, and during today’s steps you casually joke about opening up a brewery, while daydreaming about the name, the logo and the styles of beer you’d sell.
It’s something you’ve mentioned half-heartedly for years, just like that trip to Europe.
You’ve got the brewing experience, you’ve got the passion for craft beer – so, why not take it to the next-level? But before you start scouting locations, pricing equipment and ironing out the business plans, you should know that there’s a lot of moving pieces in starting a business, especially a brewery, and although it might seem intimidating to take the leap, becoming a beer-producer isn’t impossible if you have a plan.
Just know, before making any decisions, it’ll take patience, money and persistence.
“In the midst of the homebrewing, we started the conversation down the road, and that took a good year and a half to get the information and the understanding of if we could do it,” said Gregory Smith, owner of Hop Hill Brewing Company.
Located in Bethlehem, Pennsylvania, Hop Hill was founded by Smith and several other cohorts almost four years ago after nearly five years of sporadic homebrewing, taking his batches to local events and receiving a positive response from drinkers. It was around the third year when the group got the itch to elevate their hobby to a business.
“It started the conversations of, ‘Should we do this and how do we do this?’” Smith recalled. “That whole conversation and research and reading multiple books probably took about a year and a half, until we got to that point where we were actually taking that first step of moving forward.”
While Hop Hill was nothing more than a dream at that point, Smith and company jotted all sorts of ideas on to paper, to better recognize the exact specifics of their new endeavor. That means figuring how everything would be set up, exactly what areas they wanted to serve and what kind of beers they would brew. And then they expanded on those ideas to fill in the holes of their business model. Once the ideas were realized, it came time to figure out how to make them a reality and within their budget. Understanding the financial requirements was the most important part to the first step, so they knew what each person needed to put into Hop Hill to really create what they envisioned.
Some breweries are solo ventures but more often than not it’s a group effort, started much the same way Hop Hill was, with a few friends who share an affinity for craft beer. When they first started, Hop Hill didn’t have any employees, just the original homebrewing crew, but while that always sounds good at the very beginning, it can often create some challenges as the business evolves and becomes a reality.
“If you’re going to do a partnership, make sure you have a lawyer and a legal partnership agreement set up in advance,” said Remington Trolli, the founder of My Numbers Guy. “Money changes people, so if there’s a lot of money involved with it, it can skew the relationship as well as the business. Having that document behind you, I think, helps protect everyone involved and helps protect the business as well. A few hundred bucks is a drop in the bucket compared to what you’re going to spend – it’s absolutely money well spent and should be budgeted.”
My Numbers Guy specializes in bookkeeping for the trades and small businesses, simplifying tasks so that business owners can focus on growing and with Trolli having spent several years as the financial advisor at another local brewery, and later doing the books for a couple others, he knows the financial side of the beer industry.
While a legally binding agreement is necessary, be careful how you look to tackle the matter. Throwing a lengthy and intimidating document at your new business partners feet right off the bat might not be the best way of doing it, as it can be off-putting. It’s best to not spring it on them but instead broach the subject once money is officially involved and things get serious.
“It’s definitely what you want to have in place before any money gets involved,” Smith admits. “Some people might be taken aback by the pressure that’s put on by a document like that, because it is an overwhelming document when you see everything that’s involved with it. I wouldn’t, out of the gate, just be like, ‘You need to sign this if we’re going to do anything.’”
Looking back on it, there’s one thing Smith would do differently about Hop Hill’s legal agreement. He would have included wording that gave a way out to every member of the crew, because sometimes life just happens. And sometimes a member might not carry their own weight, so to be able to easily walk away can be beneficial to all involved.
With ideas on paper and potential legal challenges figured out, it was time to build the brewery. To do so, Smith and his partners had to work their way backwards, figuring out what they hoped the endgame would be, even before the first beer ever made it inside a glass. There’s so many types of breweries these days, there’s nomadic breweries, brewpubs, hyper-local breweries and regional breweries and you have to decide immediately which is the right category for your business.
“What you have to decide at the beginning is where you’re going to go down the road, so that way you can backtrack,” Smith added. “And see, ‘I can start at this point, financially it works for me, the size and place works for me, but is this where I want to go down the road?’ You don’t want to put too much money into it if you plan on expanding quickly and growing fast or else you’re going to be in so much debt at the beginning, you’re never going to be able to grow and get to the next size because banks aren’t going to let you keep debt, over debt, over debt.”
Planning for the future, and the potential growth of your business, can be just as important as any of those other first steps. A lot of it rests on the location, which can be vital to success. Foot traffic and vehicle traffic can be very beneficial but aren’t a requirement, as business parks can sometimes offer cheaper location options, so what did Smith desire? He wanted to become a destination, based on other breweries in the area.
“Once you put multiple breweries in one spot, you’re expanding the distance of customers coming to you,” said Smith, whose brewery is within four miles of six other beer-producers.
Smith wanted a location that didn’t have another brewery super close but was still close enough to turn Hop Hill into a brewery destination. Much the same way people bar hop, drinkers might be more inclined to travel to a certain brewery knowing another one is within a short distance.
Determining the size and location can really depend on the planned financial budget.
“Figure out if you’re going to be on a storefront in a busy town or if you’re going to be a little off the beaten path and then you can figure out from there, ‘Ok if we have X amount of customers a day, we can sell a pint at six bucks and our profit margin is X,” said Trolli.
Once the location is chosen, it’s time to get to work on all the things that bring the brewery to life, from the equipment to fresh coats of paint to all of the behind the scenes grunt work. Smith and his crew were still heavily focused on all of the homebrewing at this point, continuing to go to events to get Hop Hill’s beer into the hands of drinkers. That way, a small minority would know exactly what the brewery had when it was time to officially open.
Stay tuned for next time, as we focus on purchasing equipment and securing permits.