Budgeting for a brewery's second year of trading

Start from what actually happened

Put your first year's actual monthly figures next to the original budget. Some lines will be close. Others will be wildly off: utilities higher than planned, kegs to other bars slower to grow, food sales stronger. Every big variance is information.

Do not simply add 15% to last year's numbers. Year one includes the opening rush, months of slow ramp-up and one-off costs like fit-out snags. Strip those out first. What is left is your true run rate. That is the base for year two. Our guide to first year brewery cash flow explains why the opening months mislead.

Build sales month by month, not as one number

Beer sales in India move with the weather and the calendar. Summer months usually bring higher volume, the monsoon can slow footfall in many cities and the festive season from roughly October to December brings parties, bookings and dry days alike. Your year one data shows how strong those swings are for your location.

Budget litres by month and by channel: taproom, kegs to other venues, packaged beer. Then apply your actual average price per litre for each channel. A budget built from litres is far easier to check against the brew log than one built from rupees alone.

Here is a small example. Your taproom sold 3,200 litres in April last year at an average of ₹850 a litre across all pour sizes. With a ₹20 price rise on a 400 ml pour, roughly ₹50 a litre at the same volume, April's budget becomes 3,200 litres at ₹900, or ₹28.8 lakh. Each month gets the same treatment, with its own volume from last year's data.

Plan growth you can explain

Every rupee of growth in the budget needs a reason: a price rise, more accounts, longer opening hours, a new packaged beer. If you plan 25% more taproom sales, write down where those drinkers come from. If you cannot, plan less.

Check capacity too. A 500 litre brewhouse brewing four times a week produces about 2,000 litres before losses. If your budget needs 2,500 litres a week in peak months, you need more brew days, more tanks or a different plan.

Budget the costs year one did not show

Several costs arrive in the second year that the first year hid:

• Licence renewals. Many state licences renew each year, often with a fee. Check the date and amount for each one you hold.
• Maintenance. Pumps, seals, gaskets, chiller servicing and mill rollers start to need attention. A common rule of thumb is to set aside a small percentage of equipment value each year for upkeep.
• Rent escalation. Indian commercial leases often step up on a fixed schedule. Read your lease and put the new figure in the right month.
• Staff increments. Your first team will expect a raise. Losing a trained brewer costs more.
• Loan repayments. Any moratorium on equipment loans may end in year two.

Set cost of goods from your real yield

Year one shows what your beer actually costs per litre, not what the recipe sheet said. Use the real figures: the malt you bought against the litres you sold, the CO2 you bought against the kegs you filled. If losses from brewhouse to glass ran at 15%, budget 15% unless you have a specific plan to bring them down.

Raw material prices move. Ask your malt and hop suppliers for their expected prices for the coming year and use those. Imported hops priced in dollars or euros also move with the exchange rate, so add a margin for currency.

Turn the budget into a cash plan

A budget that shows profit can still run out of cash. Lay the monthly budget into a cash flow: when sales are collected, when suppliers are paid, when excise falls due, when licences renew. The month with the lowest cash balance is the one to plan around.

Most brewery cash crises in year two come from a predictable mix: a big licence renewal, a slow monsoon month and a malt order placed ahead of summer, all landing in the same few weeks. You can see that collision months in advance if you look.

Review it every month

Once the budget is set, compare actuals against it every month and update the forecast for the remaining months. A budget is a plan, not a promise. Our guide to budgeting for marketing in the first two years covers one line in more depth.

Your first step: export last year's monthly actuals into one sheet beside the original budget. Mark every line more than 20% off. Those lines decide your second year budget.

Common questions

Should a second year brewery budget just add growth to year one?

No. Strip out opening one-offs and the ramp-up months first, then build sales by month and channel from the true run rate.

What costs often surprise breweries in year two?

Licence renewals, equipment maintenance, rent escalation, staff increments and the end of any loan moratorium.

How often should a brewery review its budget?

Monthly. Compare actuals against budget and update the forecast for the rest of the year.