Making it Official

We had the recipes and the passion all sorted but now we had to make it official and get some money. We’d spent a good chunk of our savings on the pilot kit and converting mums garage in to a nano brewery so investment or a loan was a priority.

The most boring part at the beginning is the legal and admin aspects you have to jump through and everything you need in place before you can sleep easy knowing that no-one from HMRC is going to come and close you down at any moment because you didn’t fill in a form. Personally I would rather drink bin juice than fill in a form but there’s no getting round it.  It’s safe to say this is a blog post just for not yet started breweries or the super curious but here goes.

Again like the previous posts and a lot of aspects of starting up a business there are companies you can pay to sort out all of the paperwork for you and if you can afford it then hats off to you but if, like us, you don’t you’ll have to get all of these elements sorted.

Health and Safety

We got lucky with environmental health as our EHO contact, who we can’t name, is the nicest bloke ever and has the mindset that his job is to support and help businesses be as safe and responsible as possible which sounds pretty reasonable eh? There are of course EHO’s out there who look at their job in a different light and see themselves as some sort of food police officers so it’s really down to luck of the draw with this one. One thing we learned from our guy is that beer is considered a low risk product by most councils. The ingredients aren’t as risky as raw meat or dairy from a microbiological standpoint and not as delicate as distillation ethanol. The biggest danger of beer is up to the person who drinks it and their behaviour but in terms of production it’s not as stringent as other products.

Before we decided to register with the council we put together all of our paperwork using their online guides and templates and contacted them for help and advice. This is something that all councils are supposed to help with and you won't be penalised at this stage if you’ve missed things or made mistakes. Each authority differs in how they want to categorise you and register the business. It is quite common to need a food production premises licence in other parts of the UK but for us we just registered as a food producer with an online form. At some stage of set up though you will be inspected by an environmental health officer - EHO - and it is best to be as prepared as possible.

What they look for is that you’ve thought about yourself, any employees and the public for each stage of production and in a best case scenario you have this written down with a plan of action for each element. For example our pilot kit ran off gas so we needed a fire risk assessment, extraction plan and preventative measures in place in case something went wrong. It’s like that for everything from walls to filtration. The last blog has a picture of Nick in the nano brewery we built and even though it was a converted garage we got a 5 star food and safety rating. There are examples online of the paperwork for other breweries and some go in to massive detail about the brewing stages. Our guy stopped me 1 minute in to what was going to be a 10 minute presentation on fermentation and the science behind it.

As with everything else we’ve written about if anyone would like the paperwork we filled out for our inspections on both premises we will happily share them

Companies House

Registering was simple and more about how we wanted to structure the company and is a very individual decision that if you have access to accountants and business advisers I highly recommend using before you fill this stuff in. Luckily my granddad is very experienced in banking and business so helped us massively with the set-up and documentation. The most fragile element we had to organise was the relationship that me and Nick have within the company. There are countless stories of friends getting in to business and falling out with each other which is understandable but we wanted to avoid at all costs.

We decided to set up as a private limited company by shares meaning that we set a nominal fee to each share value, £1 and apportioned 100 shares for the control of the business. The clever split we did though was to pick a third person who is impartial as a split vote shareholder. In barefaced me and nick each own 49% of the business and our mutual friend has a 2% share so that if we ever disagree on a plan of action or a recipe or anything at all we could go through a cheaper mediation where our friend makes the final decision. It helped us that our 3rd person is someone we both met at nearly the same time, works in the industry and is extremely trustworthy.

Brewers Licence

Not as difficult to get as you might think but is essential and is wise to get before you apply for AWRS approval. I was quite surprised at this stage that there isn’t a brewing test involved or references of any beer related experience. The brewers licence is just you saying to HMRC that you exist and you are ready to pay duty on any beer produced so make sure of everything before this one begins.

There is a very simple form to fill in (BPH1) which you have to send in with a plan of the brewery with dimensions and tank positions. When we applied I hand drew this and it was approved with no issues. The whole process takes 45 days and they do not rush this. We got our certificate on day 44 if I remember. It is worth saying that if any of the HMRC or government forms and procedures look intimidating just ring them. The duty department at HMRC are super friendly and helpful and same goes for everyone we’ve spoken to in connection to each stage of setting up. Just like the environmental health department it’s their job to help and support you, not to needle or dissuade.

AWRS

The Alcohol Wholesale Registration Scheme for the unacquainted is what you have to be a part of to sell alcohol from one business to another so you’ll see this at the bottom of most breweries invoices and on their website somewhere. Any deals you do with suppliers of any standing, distributors or customers who care will be started off with an AWRS check. It is a registry of approved businesses and was set up by HMRC to tackle fraud so that you can’t make bathtub beer and sell it to pubs or face a hefty fine.

To register involves submitting all the information you have about the business up until that point, waiting another 45 day period and going through an hour long interview where a  very nice AWRS agent will make sure you are who you say you are and you’re going to sell beer responsibly. It kind of makes sense there is the point underlying all the wonderful bits about brewing that you’re making something that is mild poison and can be abused by people who sacrifice any form of grace after 2 pints.

Loan

We tackled money last of all. The other stages don't cost much at all and without any of the legal stuff in place there’s an easy denial headed your way from your lender. For many the crowdfunding route is a great one to go down and definitely a few years ago this would have been a super viable option to get all of the start up capital required but with so many breweries doing it and the market growing how it has we opted against it. BrewDog kind of smash the crowdfunding model better than anyone and I’ll cover our experience with crowdfunding in our next post, but to get your entire start up amount from this isn’t as likely to succeed as you’d think.

We also didn’t want to begin with any private investment as it would have been at the sacrifice of a good stake of the company or a terrible interest rate on a loan. It’s also a hard sell for a relatively risky market and an unproven company. I’m sure there are other ways to get it but for us we also have never had to drum up investment in our career so it seemed foolhardy to try and hinge the financial future of the business on something we couldn’t do confidently. We also wanted to grow the business to a point ourselves and have some proof behind us before involving other people and their money.

In hindsight we had so many examples along the way where a problem would arise and if we had a slightly more stacked bank account could have been solved with cash instead of sweat and tears. I’m sure we could have chopped a year off the start of the business if we had an extra 20k but building it at such grass roots does mean that we know every aspect of our business front to back from the fire paint used on the ceiling to how each of our analysis spreadsheet works.

For the start up capital in the end we used the government start up scheme which offers reasonable interest rate loans which are secured to your personal account after an approval process. Meaning if you get your loan approved the debt is in your name and not tied to the business. When you apply you get given a finance vendor who guide and help you through the process. Our vendor was outset finance and if you do go down this route there’s a heap of business support you can use and grants you can apply for once approved. Unlike previous posts I can't post the actual documents we used for the loan application as the info in there is personal and private but I’ll give a basic rundown of our experience. The application is a 3 step process with step 1 being pretty easy info you have to fill out on a form which gets checked and a credit check goes through to make sure you can pay the loan back. Step 2 involves submitting all your documents including a solid business plan, cash flow forecast, personal survival budgets, bank statements and a bunch more documents. Step 3 is a final vetting process including an interview, ours was on the phone, and signing of loan contracts. This took us approximately 2 months from start to finish including about a month to get the business plan together. Easy right?

The major thing that I would say we got wrong at this stage was to underestimate certain costs. Fuck up costs. The advice you see a lot is to take your proposed budget and double it which I, rather arrogantly, thought was advice for people who couldn't plan very precisely. I put together a brewery shopping list before we began buying equipment that was so all encompassing we thought it was airtight. I think from memory there were 300 researched items on the original.  I accounted for delivery, VAT, lead in time and every scenario we would encounter in our first 3 months and left a 4 grand backstop to help us with cash flow thinking that it would be as simple as filling shopping baskets and assembling the brew kit when everything turned up.

However, what we found out is not everyone you deal with is as invested in your project as you are. I would say about £2,000 of the equipment we bought didn’t work as advertised or was faulty and had to be replaced with something else. False economy isn’t advertised on a lot of websites and quotes. We also got into a legal situation with a tradesman during construction that halted things for 3 months, sucking up money and time which again I can’t give out details of. When equipment changes trade quotes change too for installations. My biggest piece of advice for starting a business is to just follow the double your budget advice. Also never give out dates to people of when things will be open or trading or will happen as your project will almost certainly take longer than you think. And lastly if you go in to any agreement with someone whether it’s a supplier, tradesman, friend or family member, write down what you want from it, when you want it done by, how much you can spend and add as much detail as possible and get it signed. It’s a difficult mindset to adopt for some, we wanted to be trusting with everyone we did business with and make friends with everyone we dealt with to get started but you quickly need to harden that edge and be as clear and professional with everyone, and I do mean everyone.

So we had a business plan, money, recipes but no work space…..