Cost and profit are prime considerations, whether you’re just looking into becoming a small-business beer entrepreneur or working to become an established microbrewer. Although start-up costs are considerable and it may take time to create a strong customer base, know that it is possible to realize a profit. Make it happen with a solid business plan, creative marketing strategies and by staying on top of your cost-to-profit ratio, more commonly known as a breakeven point.

Assessing Fixed and Variable Costs

Breakeven is the point at which you realize neither a profit nor a loss. Knowing how much you need to sell to reach breakeven is vital to making a bottom-line profit. It starts with a cost assessment in which you first list monthly fixed costs such as rent, wages and overhead, and expenses for utilities, insurance and consulting. Next, calculate the cost of raw materials, packaging, equipment repair, maintenance and advertising. Divide the result by the number of full 15.5-gallon kegs you expect to produce each month. If variable expenses total \$7,000 and you plan to produce and fill 100 kegs each month, the variable cost allocated to each unit is \$70 (Reference 1 and Reference 2-pdf page 2 and Reference 3).

Calculating Wholesale Breakeven

Calculate wholesale breakeven after researching current market prices and deciding on an initial selling price for each full keg of beer. The formula for calculating breakeven is (fixed costs) / (unit selling price - variable cost per unit). If fixed costs are \$18,000, the variable cost per unit is \$70 and you set an initial wholesale selling price of \$250 per keg, the point at which your business is neither realizing a profit nor incurring a loss is 100 kegs or 18,000/(250 - 70).