Starting your own winery may be a dream, but you must understand, with that dream comes expenses. Many who enjoy a glass of wine have thought about what it would be like to start their own winery. Starting any business is a challenge, and this is especially true in the wine industry. Thankfully, you can use our experience and expertise to help make this process easier. Here are some important notes for creating a winery budget in general.
What Goes Into a Business Budget?
If you want to be able to apply a business budget to a winery, you need to step back and look at what it takes to create a business budget. There are many steps involved in this process, but overall, here are the basics:
- An outline of expenses (both fixed and flexible) and returns on a monthly or annual basis
- One-off costs, such as equipment or software purchases
- Projected sources of revenue outside of the product you plan to create, if any
- A list of areas where the expenses may vary and guidelines
Ideally, you do not want to spend more than you make, but when you apply this to a winery, that is rarely the case to start. That is because wineries take time to make a profit. They need to mature before a harvest becomes available, so you need to budget for that time.
How a Budget Changes for Wineries
Your budget for a winery starts with the purchase of land in most instances. Rarely are you going to go out and buy a fully functional winery to start. Your upfront costs are going to include the land, plants, and the actual planting process. Your one-off costs can include any equipment you need on top of these costs, just to get off the ground. The cost of land is as cheap as it is going to be, so buying now is the best option, even if you cannot start your winery right away. The cost of one acre of land in California’s wine region is expected to climb to approximately $1,000,000 by 2050.
Down the line, you will need to factor in other costs, such as
- Fermentation equipment
- Harvesting equipment and labor
- Equipment to make the wine itself
- Bottling equipment
- Storage facility
- Licensing
- Trademark
- Wages for any employees
- Branding following a label approval
- And more
Your winery should be able to begin making wine in three to five years from when the land is planted. However, there are some deterrents to that timeline. You may struggle with crops due to limited water resources, frost, diseases that can damage plants, or even pests, and all of this only if your plans to plant are approved by the local government. All of this may slow your return.
Also you need to consider that wineries are seasonal. That means you need to budget costs that you must pay all year, even if you only harvest or produce wine part of the year.
Tools to Help You Stay Financially Focused
There are many tools you have at your disposal to remain focused on keeping your finances in order. One of those tools is your budget. It gives you a reminder of where your money is coming from or going to at all times. However, that is not the only tool you can use.
Setting up a spreadsheet may be a simple, yet effective way for you to visualize your flow of money. Most accounting software titles have something like this you can use. However, if you do not have one of those already, this is an inexpensive alternative. Just understand that you must be dedicated to adding in all the information you want to track. If you forget, you will have to go back, track down the information, and put it all in.
Another tool you may want to use should be software to manage your inventory. You need to track your plants, their age and location, how much produce they provided, and more. This is an essential part of the winemaking process, since it will factor into how much you charge per bottle.
Payroll is another aspect of starting a winery you must keep in mind. Unless your winery is incredibly small, you will need help. This means paychecks for the employees you hire. Payroll is more than ensuring they get their hourly wage, as there are taxes at the federal level, most states have state taxes as well, unemployment, Social Security, and more. These are numbers you must track carefully, as being wrong can lead to IRS penalties and fines.
Why is Winery Accounting Important?
The best tool you have at your disposal to remain focused on finances as you start a winery is going to be a winery accountant. They understand what goes into starting a winery, they have experience in setting up and following budgets, and they can help with things like payroll and managing your inventory. They become a tool that minimizes your time requirements while also saving you money.
Great bookkeeping is the backbone of any successful business. Many businesses believe that they can track the books themselves. Unfortunately, this can lead to missed expenses, incorrect payments, and a budget that does not cover everything it should. The best thing any business can do to ensure that the financials are always in order and nothing is overlooked is to hire a bookkeeper.
By putting a professional in charge of taking care of day-to-day activities like your finances, you can then pay attention to any part of your winery that would require your specific expertise. You get peace of mind knowing that your employees will always be paid when they should be. Plus, you also have the security of knowing your taxes are correctly filed and all your documentation is current. Those are simple assurances you get when you hire a bookkeeper for your winery.
Winery Accountants Keep You Focused
Understanding the costs of running a wine business can help you create the most appropriate budget for your winery. Do you have everything at your winery insured? This is an expense that is overlooked at times, and that could lead to major problems down the line. It is vital you have everything insured if you want to run and grow your winery into a solid business. The insurance should cover both your equipment and your property.
When you begin having a harvest, you also need a winery accountant as they can help you determine your cost of making wine. If you sell the wine for too little, you may lose money. However, if you price it too high, then no one is likely to buy. You need to know the right amount to sell it for, and that should be based on the exact costs you have per bottle you create.
Turn to Protea Financial for Help with Your Winery Expenses
Wine is the drink of choice for many of us after a long day at work or just to warm us up on a cold winter day. For those who have considered starting a winery, make sure you have the right approach in mind. Focus on your budget and expenses from the start.
Making wine is a challenge, but those challenges become easier when you have the right tools. A winery accountant is a tool that is necessary if you want to truly succeed in your endeavor. You want someone that can use their experience and knowledge to help you push forward. You need someone you can trust to go through this experience with you.
Turn to the experienced winery accountants of Protea Financial. We can answer any question you may have on financials, budgeting, or accounting for your winery. We are here to help.
Frequently Asked Questions: Starting a Winery
1. What are the initial costs involved in starting a winery?
Starting a winery requires substantial investment. Initial costs include purchasing land, vineyard establishment, equipment, and licensing fees. Expect to spend at least $600,000 for a small-scale winery. Major expenses involve land acquisition, planting, fermentation tanks, bottling machinery, and labor.
2. How do I choose the best location for my winery?
Choosing the right location is crucial for a successful winery. Consider climate, soil quality, accessibility, and proximity to markets. Ideal conditions include good drainage, adequate sunlight, and minimal risk of frost. Engage with soil experts and analyze local weather patterns to ensure the best environment for grape cultivation.
3. What permits and licenses are required to open a winery?
To legally operate a winery, you need several permits and licenses. Federally, you must obtain an Alcohol Production License from the TTB. State and local permits vary but typically include health department approvals, environmental permits, and zoning permits. Early application is essential due to the complex and lengthy approval processes .
4. How long does it take for a winery to become profitable?
Wineries usually take three to five years to start producing wine, but profitability can take longer. Factors affecting profitability include initial investment, scale of operations, and market conditions. During the maturation period, budgeting for ongoing expenses without immediate returns is crucial.
5. What equipment is necessary for winemaking?
Essential winemaking equipment includes fermentation tanks, wine presses, destemmers, bottling lines, and storage tanks. Additionally, you will need pumps, filters, and lab equipment for quality control. Investing in good quality equipment is vital to ensure efficient and consistent production.
6. Can I start a small-scale winery at home?
Yes, starting a small-scale winery at home is possible. Begin with a manageable budget and scale. Essential steps include obtaining basic winemaking equipment, securing necessary permits, and creating a small vineyard if space allows. This approach is ideal for personal use or small-scale commercial operations.
7. What are the biggest challenges in starting a winery?
The primary challenges include high initial costs, obtaining permits, and the long maturation period before producing marketable wine. Other obstacles include managing vineyard health, dealing with pests, weather variations, and navigating complex regulations. Effective planning and expert consultation can mitigate these challenges.
8. How do I market my winery and wine products?
Marketing a winery involves building a strong brand, engaging with local communities, and leveraging social media. Hosting tastings, events, and tours can attract visitors. Partnering with local restaurants and retailers helps in product distribution. Investing in a robust online presence also expands reach.
9. What is the role of a winery accountant?
A winery accountant helps manage financial records, budgets, and regulatory compliance. They ensure accurate bookkeeping, manage payroll, and provide financial insights. This expertise is crucial for maintaining financial health, especially given the industry’s high initial costs and delayed profitability.
10. How does climate impact grape growing and winemaking?
Climate significantly affects grape growing, influencing the quality and characteristics of the wine. Key factors include temperature, rainfall, and sunlight. Grapevines need a balance of warmth and coolness for optimal growth. Too much rain can cause disease, while frost can damage vines. Climate suitability is essential for vineyard success.
