Starting a business is an opportunity to put your unique touch on a company. Operating a brewery allows you to be creative, and build a loyal following.
Selling your brewery presents a number of challenges, and a business broker can serve as your trusted guide throughout the process.
Overview of the Brewery Industry
As of July 2019, the brewery industry in the United States generated annual revenue of $33 billion through almost 9,000 businesses employing more than 89,000 people. Unfortunately, the industry has been hit hard due to the COVID-19 pandemic and lockdown orders. The associate executive director of the California Craft Brewers Association, Leia Bailey, mentions that “Craft brewing is a very low margin business.” With 75% of craft beer consumers reporting that they will wait to return to craft breweries sometime between June to late August, the future of the industry is unclear.
Small brewers face several ongoing challenges:
- A smaller brewer cannot negotiate supply contracts based on a large amount of volume. These businesses must pay higher prices for materials compared to a large brewer.
- All brewers are subject to commodity price fluctuations, including the cost paid for hops, grain, and other materials.
- Small brewers have higher supply costs and must charge consumers higher prices to generate a reasonable profit.
- Smaller brewers must comply with the same regulatory requirements as large producers. There are a number of regulations that address the health and safety of customers that buy beverages.
Brewers can sell on-premise or distribute off-premise through retail locations, bars, restaurants, and grocery stores. Off-premise sales are on track to improve year over year for 2020, but the increase has not been able to make up for the loss of on-premise sales.
What makes a brewery attractive to a buyer?
The Value Proposition
Successful brewers frequently change their product offerings based on consumer tastes, and they have strong customer relationships. Assess your business and determine which of these traits apply to your business:
Uniqueness in the market
High-performing brewers create attractive products, and many offer a unique retail experience for customers. You can generate a loyal customer following if your products are unique and of high quality.
Financial track record
Succeeding in the food and beverage industry can be difficult, and changing customer tastes require businesses to adapt. A brewer that can generate consistent profits and cash inflows will stand out from others in the industry.
Recurring revenue streams
Consider this quote from the Harvard Business Review: “Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.”
Valuable companies generate repeat business, which leads to a consistent stream of revenue. A brewery that keeps customers coming back is a valuable asset.
If your brewery has some of the traits explained above, you may decide to explore a business sale. There are several steps you should take to prepare for a possible sale.
Preparing for a Sale
Take action on these issues, so that your business is well positioned for a sale.
Analyze your company operations, and document all routine tasks in a procedures manual. Using a manual reduces confusion about each task, and serves as a training tool for your staff.
Assess your accounting system, and use technology to save time and to produce accurate financial statements. Use software to manage accounting, invoicing, and other tasks.
Your managers produce value, because they make smart decisions to grow sales and profits. If there’s a gap in your organization that is holding you back, find a manager who can fill the position. Delegate more of your management tasks to your team.
Review your contracts with partners, employees, vendors, and customers. Many of these agreements must be changed if you sell your business. Find out where your contracts stand now so that you can make plans for an eventual sale.
Create incentive compensation plans for valuable employees, so they’re motivated to stay after a business sale.
A business sale requires careful thought and planning, and a business broker can be your trusted advisor along the way.
Work With a Business Broker
Business brokers can help with these issues:
- Use industry knowledge and marketing efforts to find buyers
- Understands the seller’s motivations, and the potential obstacles to a sale
- Find buyers who are ready to provide documents for due diligence
- Pricing: Use metrics to determine the business price
- Research: Analyze the sales of similar companies, and industry trends
- Negotiates the final price on seller’s behalf
An effective business broker can make all the difference in a company sale.
A Success Story
The owners of Cheboygan Brewery recently worked with the business brokers at Raincatcher and finalized their business sale. In this video, the owners explain how the experts at Raincatcher helped them sell their business.
The owners did not have a plan to improve the value of the business until they worked with a business broker. Raincatcher developed a marketing plan that presented Cheboygan Brewery’s value proposition. Once the sale process started, Raincatcher put a system in place to speed up the data collection and due diligence process.
Both owners were happy with the terms of the sale, and noted that Raincatcher’s help was critically important.
Work With a Trusted Advisor
At Raincatcher, our business brokers focus on the seller’s needs, not our own.
Our objective is to educate the seller about their options. If it makes sense to work on the business, we will recommend affiliates that we partner with in order to help the owner maximize the value of their business. The Raincatcher team has worked with thousands of businesses, and we all have the small business entrepreneurial spirit.
Raincatcher works with other professionals, which may include an exit advisor, valuation expert, accountants, and attorneys. Our firm uses industry-leading proprietary valuation resources to value your business.
We will be your trusted advisor throughout the entire sale process, so you can sell your business at an attractive price.