Well, the last 36 hours has been full of angst on behalf of both Iain and myself. We finally received a detailed budget from our general contractor, and to put it bluntly, we are going to be way over budget on building our brewery. It is an extremely bitter pill to swallow, especially after the increases we have made throughout this process to our budget. At the end of the day, we are building a much larger brewery than we anticipated, and with a larger brewery comes bigger costs.
When I look back at my old copies of the business plan, I have to chuckle to myself as I once thought the retrofit of a warehouse, not including equipment, was going to cost about $400,000. I look at that number and can’t help but think how naive I was. That is both a good thing and a bad thing. If I knew how much this endeavour was really going to cost I might have passed on following this particular dream. I thought the $400,000 was enough to put up some walls, trenches, upgrade power, and put all the equipment in. Boy was I wrong. This was about 2012 when I was really starting to get into planning this brewery
Fast forward to late 2012, and after much encouragement from other brewery owners that I met with, we increased this amount to about $550,000. In my mind, this was an increased of about 30% over my initial budget, and I thought this would be plenty. But as you learn more about what is required to retrofit a warehouse, the number keeps getting chipped away. All of a sudden, the additional money that came with a bigger budget seemed to have disappeared.
Fast forward again to early 2013, and it was time to increase the retrofit budget again. It just seemed impossible that with tasting rooms and their pending approval, along with the realization of additional costs with most spaces, that we could retrofit a space for any less than about $650,000. At the time, this seemed like a good number, and even included a sprinkler upgrade and water line upgrade. We figure we would be free and clear, so we charged ahead with this number in our mind.
It was at this time we started to inquire with investors about financing our brewery. We based many assumptions on this cost, including how much we needed to raise from angel investors. $650,000 seemed like our golden ticket to get everything we wanted. So we charged on and hoped that we could what we wanted for this amount.
Then in the summer of 2013 we found what would eventually become our warehouse. It was bigger than we really needed, but it gave us an excellent location, and most importantly a great landlord that wanted a brewery in his building. We had our architect in, a couple contractors, some sub trades, engineers, etc and they all pointed to a retrofit cost of about $725,000, depending on a lot of things, such as electrical upgrade and flooring. I have written about these items in the past, and they were huge uncertainties with out space. So we moved forward with a newly increased budget of about $725,000 for a retrofit.
So fast forward to this week. We met with our architect and general contractor to discuss the quotes they have received from sub trades (like mechanical contractor, electrical contractor, concrete slab specialist, etc) and also the budget from our general contractor on all the little things that make up our brewery. All of this information, along with our wishes and desires, was put into a spreadsheet and at the very bottom of a huge excel file, there sat what was the anticipated retrofit cost of our brewhouse. The total estimated cost for our retrofit was (drum roll) …. $925,000.
It is hard to put into words what was going through my mind when this was presented. It was like someone kicked me in the stomach …. and then kicked me again. It was awkward for our architect and our contractor, as they could see that what I had believed and what I had assumed was wrong. I must have looked like a deer in headlights. Even now, I am fully consumed by frustration and anger that I just can’t seem to shake. How is it possible that I ever thought $400,000 was enough? It just seems plain old absurd!
We are so deep into this process, so far down the road, that there is no option but to find solutions. For starters, it is very likely that the tasting room will have picnic tables and used chairs, be lacking any real artwork and design aesthetic, and have very little “extras” that other tasting rooms might have. We have also had to dial back a few optional pieces of equipment that we hoped to have for the brewery. Essentially, there will be a cascade of changes that are mostly out of our control, in addition to some extra cash that we need to raise from investors.
If I could pass some information onto others, I would make note of the following costs you might be looking at:
- Electrical Upgrade – $75,000 and up
- Mechanical – $125,000 and up
- Tasting Room – $50,000 and up
- Labour costs – $100,000
- Development and Building Permits – $10,000
- Concrete – $25,000 and up
- Boiler and Installation – $35,000
- Contingency – Easy 10% of your budget
- Architect Fees – $25,00 and up
- Engineer Fees – $20,000 and up
- Management Fee (from General Contractor) – Cost plus 10%
- Epoxy Flooring – $15,000 and up
Of course there is a long list of other small items, and they have all creeped up in cost, as we have a 9,000 square foot space.
In another few months, I will be sure to post all of our business plan online, so you can see for yourself what all the details in starting a brewery are. For now, just know that what you think things will cost, will likely double from your initial estimates. Just hope and pray that you have way more money than you need, or at least a network of people who would be able to offer some financial support to your business.
I hope to have some answers to our dilemma early next week, and I will pass along any notes I have on how to find savings in a budget that doesn’t seem to have a lot of wiggle room.