Well what a bad surprise we received today about purchasing our equipment. Instead of our equipment costing us about $550,000, we just got a 10% surcharge! I blame myself, and I would recommend to anyone else who plans on starting a brewery to take note. Watch the exchange rates and know the forecasts! When a business needs to order equipment, fluctuations in the exchange rate can have a massive impact on costs.
Let me give you an example, from the time that we wrote our business plan about 4 years ago to today, the Canadian dollar has gone from about $0.95 Canadian for $1 American to what it is today $1.09 Canadian for $1 American. As you can imagine this is crushing, and seeing the Canadian dollar lose $0.03 in one week, has become too much for us to handle. We are purchasing some US dollars.
Unfortunately, this means that the cost of every dollar in equipment we buy, will now cost us about $0.10 more. Just so you know, here are the costs for our equipment, at least what we have budgeted in our plan:
- Brewhouse $250,000
- Bottler $100,000
- Fermenters and Conditioning Tanks $150,000
- Misc Equipment $50,000
So all the costs of this equipment just went from $550,000 to about $605,000, as the suppliers we are working with accept American money only. That sucks so hard I can’t even begin to tell you. I feel so stupid for not thinking ahead to this possibility and changing some money over months ago. If we had done this even just 2 months ago we would have saved about $25,000 in costs.
So this leads us to a point that we must now consider. Do we raise more money to pay for this cost overrun? Do we look to purchase our equipment locally? Or do we reduce the size of our equipment and shave some costs off that way? Maybe there is a combination of a couple of these to make it work.
At the end of the day, there isn’t much that we can do about this. All we can do is manage our actions from here on out. It is a tough lesson for us to learn, and while there isn’t a lot that I can do about this, I can at least help someone else out to save some money.
Eek. Stupid exchange rate can get you every time. I hope you guys figure it out. My fingers are crossed that the dollar rebounds a bit in the next few days and you guys can manage the overages.