1. No category

2011
Below Deck Brewing
A Feasibility Study of Opening a
Microbrewery
Neal Bloom
Decision Sciences
12/8/2011
Contents
Executive Summary ...................................................................................................................... 3
Introduction ................................................................................................................................... 4
Business Description .................................................................................................................... 6
Industry Description ...................................................................................................................... 7
Financial Projections ................................................................................................................... 15
Conclusions ................................................................................................................................ 17
Appendix A.................................................................................................................................. 19
Appendix B.................................................................................................................................. 20
Bibliography ................................................................................................................................ 22
Executive Summary
Objective: To evaluate the feasibility of starting a microbrewery that serves quality and unique
beers in the Los Angeles area.
Business Summary





Proposed name of organization “ Below Deck Brewing”
Initial capacity of 2300 barrels a year
Beer will be sold strictly for off-site consumption only
Initial target customer is 21-39 year olds, with interest in craft beer
Community involvement through brewing education and sponsored events
Industry Summary



The brewing industry is a $100 billion industry, craft brew only accounts for $7 billion
There has been significant growth in the microbrewery/ craft brewery industry in the last
20 years, especially on the West Coast
Los Angeles is far under-represented in craft breweries per city
Location & Demographic Summary



Multiple independent cities evaluated in Los Angeles county, avoiding Los Angeles city
for ease of permit approvals: Culver City, Venice, Santa Monica, San Fernando & Malibu
Projected growth of up to 13 million in Los Angeles County by 2050
Currently eight microbreweries exist in Los Angeles County
Financial Summary




Approach: gathered estimates from area costs (rent, taxes, etc) along with known
figures from related relevant businesses to project costs and revenues
Projected 1st year net profit of $14,582
Approximately 2230 barrels of beer needed to sell to cover initial setup and 1st year
costs
Startup funding needs to be established towards $500,000
Conclusion: A microbrewery startup is a viable option to open in Los Angeles. It would benefit
from a growing and unsaturated market. Funding options will need to be figured, but it is a
profitable business.
Introduction
“Beer is proof that God loves us and wants us to be happy.” ~Benjamin Franklin
The culinary arts have long been an accepted art form. Spending three times a day to
eat, it is little wonder why people are so interested in food. With the advent of mass media, the
appeal has spread to record highs. The beverage industry shares a similar gain in prominence.
Alcohol has always had a special place in society because of its mind altering effects, whether
controversial or vastly popular. Wine making has become a larger and larger industry, with
entire regions devoted to its production
and competitions held to compare the
quality.
Beer has been made historically
almost as long as wine, with evidence
showing that the Egyptians taught the
Greeks how to make beer.
(HorstDornbusch, 2005) There is even an
Egyptian Goddess of Beer, Tenenit. (Mark,
2011). Beer was long made in the abbeys
by Franciscan Monks and still is in certain
areas of Belgium. Germany has its own
beer industry, with the entire country
Figure 1 Goddess Tenenit receives the holy beer
following the Reinheitsgebot, specific
Purity Laws, since 1516, which kept all
beers to use the exact same ingredients until 1987. (German Beer Institute, 2008) In America,
Anheiser Busch has long been the largest beer brewer for the last hundred years. When
Prohibition became law, it wiped out many small
breweries that had their place as the town tavern
and meeting place. At the end of Prohibition,
regulation was setup that only allowed for large
manufacturers of beer. This kept small new
breweries from opening up until 1979 when beer
making was deregulated. Since then, the beer
revolution has been getting stronger and stronger
in America. (Kain, 2011) The 20’s and 30’s age
group has latched onto the craft beer industry
which has fueled its added popularity. The idea
that one brewery’s Heffeweizen concoction could
Figure 2 The Rise of Craft Brewing in the U.S.
taste different than another’s is still a new idea,
even with the wine industry proving that point
again and again. The more people care about the quality and flavor of their beer, the more craft
breweries will exist.
The art of making beer is not one of difficult skill. There are really only four main
ingredients to beer: water, malt, hops, and yeast. What makes each beer distinct could be the
kind of hops, yeast, and malt used. The water from a different region can also affect flavor. In
the craft industry it is also becoming customary to add other ingredients into beer, whether fruit
syrup, herbs, or the West Coast favorite, triple the typical hops. The variation leaves the taster
wondering what else is out there and the tease has been set.
It is with this allure that has started a grassroots industry that has spread like wildfire up
and down the West Coast, with exception to Los Angeles. LA has been late to the game and
has only a handful of breweries that don’t have distribution outside of the city. In a city where
rush hour is a way of life, stresses of the day only compound on themselves, everyone could
use a friend and a beer every once and a while. That’s what Below Deck Brewing hopes to
offer; a community establishment for adults that leaves a positive impact to those around. This
feasibility study will take these factors into account and shows why LA deserves its craft beer.
Included in the report is a industry study, Los Angeles- specific demographic study, a break
even analysis & SWOT analysis.
Business Description
Proposed Names



“B’Lo Dek Brewery” – A conglomerate of the last names of Neal Bloom & Kasia Gondek
“Below Deck Brewing” – An easier marketed name of above, with nautical theme
“Below Deck Ale House” – A spin off bar from the original brewery
The business name Below Deck Brewing will be used for this paper.
Mission Statement
Below Deck Brewing offers local jobs, fresh beer, and a positive influence on the community.
Organization Description
Manufacturing unique craft beer styles for off plant local consumption
Industry
Adult Beverages Manufacturer and Selling of Beer
Target Customer
Middle Class Angelinos interested in trying something new.
Services
What Makes Below Deck Brewing Different
Most bars serve beers that have been ordered through a distributor and possibly the beers had
to travel a very far distance. With a local brewery like Below Deck, the beer is made nearby and
delivered with the freshest taste available. It also costs less to ship and deliver as well as create
less waste.
Initial Objectives

Attract new customers to craft beer through new style beer tasting, beer education,
community involvement and engagement.


Reach out to the other Los Angeles breweries to create a city-wide community that will
benefit from teaming together and marketing as a city guild.
Growth by name and acknowledgements by winning awards at local beer competitions
and word of mouth.
Industry Description
Definition
The American Beer Brewing industry can be segmented into two: the large breweries
and craft breweries. For the point of this project, the two sects will take on a rivalry at times, an
antagonist/protagonist role, and David and Goliath at other times. The Brewer’s Association
defines an American Craft Brewery as small, independent, and traditional with 6 million barrels
of beer or less of annual production. According to rules of alternating production, a brewer is
someone who produces beer. Production of flavored malt beverages are not considered beer
regarding this definition. To be independent means to be less than 25% owned or controlled by
a non-craft brewer of alcoholic beverages. Being a traditional brewer means to have at least
50% by volume in either all malt beers or in beers which use adjuncts to enhance rather than
lighten flavor. Some concepts under this definition is that the hallmark of craft brewing is
innovation. Interpreting historic styles with unique twists or develop brand new styles. It is typical
in the craft beer industry to be highly involved in the local community through philanthropy,
product donations, volunteerism, and sponsoring of events.
Current Trends and Statistics
Shown in Figure is the amount of breweries operating in the U.S. since the end of Prohibition,
with current amount of breweries in operation the largest since the late-1800s
Breweries in Operation
2,000
1933 to 2010
1,500
1,000
500
1933
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
0
TOTAL BREWERIES
Figure 3 American Breweries 1933-2010
What this chart does not show is the type of each brewery, which is shown in Figure 4.
1800
1600
1400
1200
CRAFT BREWERIES
1000
LARGE BREWERIES
800
600
400
200
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
0
Figure 4 Number of Large and Craft Breweries by Year
Though the industry has had a boom since the mid-80’s, 81% of beer sold in the year 2000 was
made by one of the big three breweries, Budweiser, Miller, or Coors. In 1980 there were 45
breweries in the U.S, and in 2010 there were 1693 breweries. (Bureau of Labor Statistics, 2011)
But with the large increase in breweries, total production did not follow the same trend. In 1979,
total domestic production of beer in the U.S. was 183 million barrels while in 2010 total
production was 194 million barrels. Accounting for the import and export (which has grown from
3% to 13% of the total consumption from 1980 to 2010) markets comes to a total U.S.
consumption of 208,349,068 gallons of beer in 2010. In 2010, the overall beer industry was
down 1% in sales from 2010 but craft beer sales were up 15% in the first half of 2011. The
overall U.S. beer market is a $100 billion industry, while craft beer accounted for only $7.6
billion.
With craft breweries though, because of distribution laws and general size of batches, it is a
better estimate to look at smaller markets to understand true trends for the average brewery,
though has been said, the majority of Americans live within ten miles of a craft brewer.
(Shutterstock, 2010) In 2010, of the 2131 breweries with active permits, California ranked 1st in
most breweries with 318. This was an increase from 2009 of 13 new breweries in the state.
( Tax and Trade Bureau, 2004 to 2010, 2010).
There is also a split of different beer producers within the craft beer realm, as seen below in
Figure 5
Figure 5 2009 & 2010 split of craft beer producers
The different split is based on number of barrels and where they are sold. To be considered a
microbrewery, the brewery makes less than 15,000 barrels a year. A brewpub is one that sells
25% or more of its beer on the premises, most of the time paired with a restaurant. Regional
craft brewery makes between 15,000 and 60,000 barrels while also using 50% or more malt
based beverages. A large brewery is considered large at 6 million barrels a year or more. As it
is shown, large breweries did have much growth between 2009 and 2010, while regional craft,
brewpub, and largely microbreweries did.
At current state, microbreweries have
opened up in larger cities using the city as a
rally point. For example, in San Diego, there
exist 36 breweries and brewpubs and
collectively they call themselves the San Diego
Brewers Guild. Together they put on beer
festivals where attendees can try every brewery
Figure 5 San Diego Beer Week and SD Brewer’s
represented, meet the brewers and compare
Guild thank the public for 2011 Beer Week
companies. This is largely the way to introduce
new beers to the customer. What has become
commonplace for craft brewers is a “week” of pushing beer through the community called Beer
Week. Through collaboration with “beer bars” (bars that only serve specialty craft beers) and
brewers, events are put on nightly for the industry to have a more public face. The reality is beer
weeks now last up to 2 weeks, sometimes longer. In San Diego, Beer Week entails only San
Diego establishments, whereas Los Angeles Beer Week, while markets itself as a 14 day
celebration of beer culture, though features many more San Diego breweries to allow for the LA
public to meet the San Diego scene. This is reasonable as Los Angeles has only 6
microbreweries in the city with a population 3.8 million, while San Diego has 1.3 million. It would
seem that there is a disparity
between number of breweries
in Los Angeles and a market
that has proven it is hungry for
craft beer.
Figure 7 LA Beer Week Marketing
Industry Direction
The industry has proven that over the last 20 years, it can grow. It has lasted through
several recessions and still appears strong today. California has maintained it rank as state with
the largest amount of breweries, but prestige and leadership of the industry are not necessarily
within the state. The largest beer festival in the U.S. is the Great American Beer Festival in
Colorado each summer and the largest craft brewery is the Boston Beer Company out of
Massachusetts. If California wants to maintain its edge, it will need breweries to come together
to lead the state in the future. As the larger microbreweries continue to find prosperity, they will
inherently grow larger and probably will become a larger distributing house for other beers, as is
seen with Stone Brewery. Stone is one of the largest regional craft breweries of San Diego and
has recently become a distributer of other national microbreweries which allows for market
penetration.
While a great benefit of the industry today is that there is always a new beer to try, this
won’t always be the case. At some point, customers will put their flag of allegiance in the ground
and drink a certain beer more consistently. This will start to weed out certain microbreweries
and create the larger regional craft breweries.
For a microbrewery to truly stay small and cater to the local community, it needs to find a
way to be sustainable within the community. There needs to be mutual gain for the community
and brewery to co-exist. The microbrewery scene would benefit in learning not just how to make
profits, but how to cater to what the community needs.
Industry Competitiveness
Instead of making light beer like the large breweries of the 80’s, microbreweries tried a
new approach to competing. Instead of trying to compete in the sales or marketing front, it
boasted a freshness of local beer with a larger selection of styles of beer at lower batch sizes.
(Stack, 2010) While this has proven to be a great growth area, craft beer is still only 7% of the
U.S. beer market. In turn, large breweries are the largest competition. The example of this is
how hard distributorship is in Los Angeles. Anheiser-Busch owns a brewery in the San
Fernando Valley and therefore to get a new beer into a bar or retailer is incredibly hard. This
hurts the craft brewing industry because customers don’t realize they have a choice of beer, not
just light beer for the Big Three, which make up over 80% of beer production.
What also makes competition is where a brewery is
located. Certain cities have welcomes the small American
business of craft beers and created incentives. The
Federal Government lowered the per barrel excise tax for
breweries producing under 60,000 barrels per year from
$18 per barrel to $7 in 2005 which has also helped craft
beer flourish. There is by no means saturation though,
especially in Los Angeles. It turns out the main competition
is wholesale distributors. The common method of delivery
from brewer to customer is the three-tier system. The
brewer sells to wholesaler who sells to retailer. Below Deck
Brewing will try to skip the wholesaler in the first few years, by
selling to local establishments. The other plan is to sell to
wholesaler like Costco who also is the retailer.
The microbreweries in Los Angeles are currently: Eagle Rock Brewery in Eagle Rock,
Nibble Bit Tabby in Downtown Los Angeles, Golden Road Brewery in Atwater Village,
Craftsman Brewery in Pasadena, El Segundo Brewery in El Segundo, Ladyface Ale Company in
Agoura Hills, Hangar 24 in Redlands, Ohana Brewing Company in Downtown LA.
The Orange County Breweries are: Bootlegger’s Brewery in Fullerton, Beachwood Brewery in
Long Beach, Cismontane Brewery in Rancho Santa Margarita, Tustin Brewery in Tustin, The
Bruery in Placentia
An example of Beachwood Breweries website shows where else to find their beer.
Figure 8 Beachwood Breweries beer found at other local locations
Of the other locations, only one is in Los Angeles, the rest in San Diego, even though
Beachwood Brewery is in Long Beach. It is this favorability that also causes competition.
Location and Demographic
Location of any
business is an
important aspect of
business planning.
With Below Deck
Brewing, a storefront is
not as important
because the kind of
business is more
industrial and
warehouse like.
Needing high ceilings
would be important for
the brewing and holding tanks. Also easy access for supply delivery and keg mobility to be
transported to parked delivery trucks would be nice to have. Industrial grade electricity, air
conditioning and natural gas will be a necessity and therefore those kinds of utilities should be
looked for in finding a location. There will not be anything sold in-house until a few years after
start up. But it doesn’t hurt to pick an accessible, safe, and clean area. Since there is a want to
have occasional brewery tours and community events at the brewery near a populated area
would be ideal, especially if an additional tasting room is achieved a few years down the road as
well.
Figure 9 The microbreweries in Los Angeles
Other advice received is that going through LA’s bureaucracy to get approvals, especially for
alcohol-producing permits may be best to avoid. Independent cities thought of to look at are
Culver City, Venice, Santa Monica, Malibu, and San Fernando. All areas have commercial
warehouse space, though the ones near the ocean have the highest rent, which is something to
consider. While the brewery itself may not need to be near high population zones, Culver City,
Venice and Santa Monica are on the Westside of LA, with high tourism centers, which Malibu is
also a tourist destination and therefore will have plenty of alcoholic beverage dispensing
establishments to sell beer to for retail sale. San Fernando is in more of a suburban area and
therefore lower rent costs. It is not terribly far to deliver to LA city locations.
City Comparisons:
Figure 10 Population by age and income 1
In Figure 10 is the age and income break outs for the five cities that were research for potential
for Below Deck Brewing headquarters. It’s interesting how many more 25-39 year olds in Venice
compared to all other cities. The young workforce relates well to the up and coming craft beer
scene, which lends itself well for potential employees. Santa Monica, Venice, and Culver all had
the largest group of middle class population which also lends itself to potential customers who
more frequent nightlife like bars and clubs. All five cities had a manufacturing industry but San
Fernando’s was a much larger percentage of employment per industry per city. Having a larger
population with a manufacturing background is good for a job pool. Culver City had the second
largest and Venice the third for highest percentage citizen employed in manufacturing.
With these simple projections, Venice will be used from this point as 1st choice for place
of manufacturing for Below Deck Brewing. Along with being near the water which ties into the
name, Venice provides a young, active and engaging community that will hopefully open its
arms up fully to a new business.
Like other cities, Venice has
experienced growth in
terms of real estate value,
number of businesses
opened as well as payroll
increase. From the year
2000-2009, median home
prices rose from $410,000
to $845,000. Number of
business establishments
increased from 826 to 1086.
The total citywide payroll
also increased from $204
million to $348 million.
Figure 11 City proper of Venice, CA
Location Conclusion
After review of many independent cities of Los Angeles, Venice appears to be a city
aligned with similar needs and traits of Below Deck Brewery. The growth of the city, the vicinity
to water and ample industrial property are all exceptional opportunities for the brewery. The two
greatest assets of Venice are its large percent of employees in the manufacturing industries as
well as young age range for interest in craft beer as well as potential employment.
Financial Projections
This section includes financial projections for Below Deck Brewing. It includes estimated
start-up costs of equipment for production of beer, per unit cost of each barrel, first year
production rates and first year estimated revenue. The majority of the costs are estimates from
a range of sources and may not be complete, but are a safe range for an initial starting point.
First, a visual introduction to the brewery process:
Building Requirements
As can be seen in
Figure 12, there are a lot of
large equipment involved in
the direct manufacture of
beer. What isn’t shown is the
quantity and scale of these
pieces of equipment. What
is typically needed is about
4000 square feet for a
brewery the size Below
Deck intends to work with.
(Sound Brew) Space will be
leased with warehouse
facilities like loading dock,
ample plumbing, natural
gas, commercial electricity, and sewage. In table 1 below, the estimated fixed costs are
presented. What is included is $150,000 in used brewing hardware with installation, as well as
other equipment for loading. These costs equal a first year fixed cost of $295,600.
Figure 12 The typical commercial brewing 1
Brew Equipment and Installation
Equipment Depreciation
Delivery equipment (trucks, dollys, etc)
Yearly Insurance
Yearly Rent
Legal Fees
Sales and Marketing
Initial Fixed Costs
Total Fixed Costs at end of year
$
$
$
$
$
$
$
$
$
150,000.00
15,000.00
20,000.00
3,600.00
48,000.00
5,000.00
54,000.00
229,000.00
295,600.00
Table 1 Fixed Costs for First Year of Operation
Certain assumptions should
be explained. The equipment
depreciation is based on
straight line depreciation with
an estimated life of 10 years.
All fixed costs are also
assumed all paid up front,
except insurance and rent,
which are paid monthly at a
fixed rate.
In table two, the unit cost is displayed, which accounts for the variable costs of brewing the
beer.
Cost Factor per barrel
Direct Labor
Malt
Hops
Yeast
Filter Media
CO2
Water
Electricity
Natural Gas
Cleaning Chemical
Sewage Charges
Federal Excise tax
State Excise tax
Miscellaneous
Cost
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Total Unit Cost
33.95
17.50
2.00
0.15
0.50
0.30
0.50
2.00
0.70
1.50
1.56
7.00
6.20
0.25
In establishing a unit cost, this is per
barrel. It is standard to sell the product in
kegs, which is converted by 1 barrel
equaling 2.067 kegs. Table 3 shows the
revenue by choosing an industry
standard of $100 a keg.
Price per keg
Kegs per barrel
Revenue per unit
$100
2.06666667
$206.67
Table 3 Revenue Calculation per Unit
$74.11
Table 2 Variable Costs per Unit (Richardson, 2003)
A base lined production schedule is displayed in Table 4, estimating brewing three days a week.
This will allow for two other days of the week to be used for setup, cleanup, kegging, and
delivery if the same staff is utilized for brewing and delivery, if possible with a minimal staff in
the first year.
Barrels Produced per Brew Session
Brew Sessions per day
Brew Sessions per week
Barrels produced per year
Table 4 First Year Production Output
15
1
3
2340
With this given output and the unit cost, it
is able to establish a first year total
revenue of $483,600.
Using the Break Even Equation of Break Even Volume = Fixed Costs / (Revenue per Unit- Unit
Cost), it is shown that the break even volume is 2230 barrels, which is 110 barrels less than
the total year output. Using the Production Schedule in Table 4, Break Even Volume would
occur with three weeks left before one complete year of production. Table 5 shows the total
dollar amounts for the year.
Total Variable cost per year with total barrel output
Total Fixed Costs for the first year
Total Revenue
Total Net Profit (loss)
$173,417.40
$ 295,600.00
$483,600
$14,583
Table 5 Total Costs and Profit for Year 1
Sensitivity Analysis
Two sensitivity analyses were completed on first year estimates. One analysis assumed
a 10% increase to unit cost. With this assumption, break even volume followed at 2362 barrels
of the 2340 first year production, so break even just within less than a week early of 1 year of
production. The second sensitivity analysis assumed a reduced revenue per keg of $90 instead
of the $100. With this assumption, a break even volume was found at 2641 barrels for break
even, so 300 more barrels past the years production, which would take an extra 6.67 weeks to
produce.
Funding Analysis
With the given startup costs, variable unit costs, and break even amount, it is seen that
funding will be needed for at least the first three years until the total yearend profit can sustain
the next years costs (see Appendix for yearly costs and profit.) An initial amount of at least
$500,000 is needed for the first year fixed and variable costs and $320,000 for subsequent
years. It is not until the fourth year that the fixed and variable costs are covered from the
previous year profits, therefore funding will be needed for the first three years, all assuming no
change to production amount each year or changes to unit costs and fixed costs after year one.
Conclusions
From the total analysis put together in this report, it would seem that opening a
microbrewery is a viable option as a new business opportunity. The craft beer segment of the
beer brewing industry is showing 20+ years of growth and microbreweries still only account for
7% of total beer market in sales. Compared to other cities like San Diego, with 40+ breweries,
and still no sign of saturation as more breweries are opening up, Los Angeles has ample
potential for customer base within the city limits, let alone distributorship to other counties and
regions.
With an analysis of the Los Angeles area demographics, Venice was picked as a viable
location to manufacturer beer for its younger than other areas average age, relatively high
population of manufacturing-related jobs, and potential growth in the Los Angeles area.
A look at financials revealed that producing 15 barrels a batch, 3 times a week would
make 2340 barrels of beer per year or 4836 kegs. Selling a standard keg at $100 would create a
break even volume of 2230 barrels, so able to break even within a year. The initial costs would
be on the order of $500,000 but if the ability to obtain funding exists, so does profits early within
opening the brewery. As is common saying in the brewery industry though, ‘to make a large pile
of money in the beer business, start with a small pile of money.’
Appendix A
SWOT Analysis
Strengths
Variety offered compared to major breweries
of light beer
Knowledge of the community for
understanding of micro & nano economics and
interests
Management experience in construction and
production at a batch scale
Opportunities
Proven growth in industry, even through two
recessions
Internet marketing and sales offer much less
cost to seller and much broader exposure
Ease of shipping and communication allows
for world market penetration
Weakness
Lack of reputation compared to competition
Limited financial base compared to major
players
Lack of clear cut channels of distribution
Threats
Price of products depend on commodity price
fluctuations
Existing competition is moving towards
backward and forward vertical integration,
including growing own materials on farms and
getting in the distribution business
Selling only initially by keg and not in glass or
can only leaves about 10% of the total beer
market to get into
Appendix B
1st year break even analysis
Total Yearly Volume by month (BBL)
0
195
390
585
780
975
1170
1365
1560
1755
1950
2145
2340
Total Cost per volume Total Revenue per volume
$
295,600.00
0
$
310,051.45
$40,300
$
324,502.90
$80,600
$
338,954.35
$120,900
$
353,405.80
$161,200
$
367,857.25
$201,500
$
382,308.70
$241,800
$
396,760.15
$282,100
$
411,211.60
$322,400
$
425,663.05
$362,700
$
440,114.50
$403,000
$
454,565.95
$443,300
$
469,017.40
$483,600
Monthly Costs and Volumes in 1st Year Production
$600,000.00
$500,000.00
$400,000.00
$300,000.00
Total Cost per
volume
$200,000.00
Total Revenue per
volume
$100,000.00
0
195
390
585
780
975
1170
1365
1560
1755
1950
2145
$-
Total Cost and Revenue chart for Year 1, Intersection of two lines is Break Even Point
2nd Year Production and Break Even Analysis
Total Yearly Volume by month (BBL)
0
195
390
585
780
975
1170
1365
1560
1755
1950
2145
2340
Total Cost per volume Total Revenue per volume
$
145,600.00
0
$
160,051.45
$40,300
$
174,502.90
$80,600
$
188,954.35
$120,900
$
203,405.80
$161,200
$
217,857.25
$201,500
$
232,308.70
$241,800
$
246,760.15
$282,100
$
261,211.60
$322,400
$
275,663.05
$362,700
$
290,114.50
$403,000
$
304,565.95
$443,300
$
319,017.40
$483,600
Monthly Costs and Volumes in 2nd Year Production, less Initial Equipment Costs
$600,000.00
$500,000.00
$400,000.00
$300,000.00
Total Cost per
volume
$200,000.00
Total Revenue per
volume
$100,000.00
0
195
390
585
780
975
1170
1365
1560
1755
1950
2145
$-
Total Cost and Revenue chart for Year 2 of Production, Intersection of two lines is Break Even Point
5 Year Cash Flow
Year 1
Year 2
Total Variable cost per year with total barrel output 173417.4 173417.4
Total Fixed Costs for the first year
295600
145600
Total Revenue
483600
483600
Profit from Previous Year
14582.6
Total Net Profit (loss)
14582.6 179165.2
Year 3
173417.4
145600
483600
179165.2
343747.8
Year 4
Year 5
173417.4 173417.4
145600
145600
483600
483600
343747.8 508330.4
508330.4
672913
5 Year Total Revenue, Cost, & Profit
References for finding costs for break even analysis: (Wikipedia), (Love to Know), (BP
Plans), (eHow), (Dennis Briggs, 2004), (Funding Universe)
Bibliography
(2010). Tax and Trade Bureau, 2004 to 2010.
BP Plans. (n.d.). Retrieved December 06, 2011, from Brewery Business Plan:
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