6 Actionable Steps to Cut Brewery Overhead Costs
“Overhead costs” is an ugly word in every business, but especially in breweries.
That’s because, unfortunately, running a brewery comes with its fair share of these expenses, and finding ways to manage them without sacrificing quality can feel like a constant challenge.
But with the right approach, all is not lost. You can trim your overhead without compromising what makes your brewery a customer favorite.
Here are 6 practical steps to help you do just that.
First things first, what are overhead costs?
Overhead costs are the expenses that keep your brewery running smoothly, but don’t directly impact the production of beer.
For example, things like rent, utilities, insurance, and salaries for administrative staff are considered part of your overhead costs.
They support your operations, but don’t necessarily go into the cost of beer-making. You might also hear them referred to as fixed costs, indirect costs, or general and administrative (G&A) expenses.
One of the challenges with overhead costs is that they’re often tied to contracts or fixed arrangements, like long-term leases or insurance policies, which makes them harder to get out of or to lower the costs.
However, with careful planning and a bit of strategic thinking, it’s doable. Here are a few things to think about:
1. Understand and Manage Your Costs
Before you can start cutting costs, you need to know exactly where your money is going. Break down all your expenses and separate them into fixed costs (like rent) and variable costs (like raw materials). Use this information to spot any areas where costs are higher than expected. Psst.. if you’re one of our clients, we do this for you already.
Actionable Tip: Set up regular reviews of your overhead costs, either monthly or quarterly. Compare your actual expenses to your budget and adjust as needed to stay on track. Who knows—you may find that your overhead costs are actually reasonable and not the area that needs improvement in your brewery.
2. Optimize Your Lease Agreements
Rent is one of the biggest overhead costs for most breweries, but it’s also one of the areas where you can negotiate better terms. Start lease negotiations early, and compare what other properties are charging. If possible, you may want to bring in a commercial real estate expert to help you get the best deal.
Actionable Tip: When it’s time to renew your lease, gather data on similar properties and vacancy rates in your area. Use this information to negotiate lower rent or perks like free rent months or property upgrades. Don’t be afraid to negotiate—the worst thing they can say is no.
3. Review and Adjust Your Insurance Policies
Insurance is essential, but you might be paying more than necessary. Each year, review your policies and get quotes from different insurers. Consider raising your deductible to lower your premium, and make sure you’re not paying for coverage you don’t need.
Actionable Tip: Bundle your insurance policies, such as general liability and workers’ compensation, to get a discount. Also, ensure your staff is trained on safety measures to help lower your insurance costs.
4. Streamline Your Staffing
Labor costs can add up, especially if your staffing levels don’t match your business needs. During slower periods, consider reducing hours or cross-training employees to handle multiple roles. In the taproom, think about using QR codes for ordering or setting up self-serve stations to reduce the need for extra staff.
Actionable Tip: Look at your sales data to identify your busiest and slowest times. Schedule your staff accordingly, and hire part-time help only during peak times.
5. Improve Energy and Water Efficiency
Utilities like electricity, water, and gas are significant overhead expenses, but there are many ways to cut these costs. Investing in energy-efficient equipment and ensuring everything is well-maintained can save you money in the long run. Also, think about ways to reduce water usage, like installing water recycling systems.
Actionable Tip: Install a Clean-In-Place (CIP) system for cleaning brewing equipment to cut water usage. Upgrade to LED lighting and use motion sensors to save on electricity in areas that aren’t used frequently.
6. Take Advantage of Tax Credits
There are various tax credits available for businesses that make energy-efficient upgrades or engage in activities like research and development. These credits can reduce your tax bill, so it’s worth exploring your options. And don’t forget about the FICA tip credit where you can get a 100% refund on all the FICA payroll tax the business paid on tips paid to your employees.
Actionable Tip: Invest in energy-efficient systems, like solar panels, and keep detailed records to qualify for tax credits when you file your taxes. Consult a tax professional to make sure you’re getting all the credits you’re eligible for.
Need More Help Reducing Your Brewery Overhead?
Cutting overhead costs can be a challenge. Trim too much, and you might compromise the quality and efficiency of your operations. Trim too little, and those expenses will continue to eat into your profits.
That’s why we always recommend working with an expert.
At U-Nique Accounting, we specialize in helping brewery owners like you optimize costs and improve profitability without sacrificing the essentials.
If you’d like help managing your overhead or any other financial aspect of your growing brewery, feel free to book a discovery call with us anytime.
Simply use our calendar to get started.
Until next time!
By MATT CIANCIARULO
