Tips for your Brewpub or Brewery Valuation

Tips for Improving your Brewpub or Brewery Valuation

According to the U.S. Brewers Association, there is continuous growth in the brewing industry. The rise of the business is due to increasing and consistent demand for the unique and flavored taste of the drink. On the flip side, passionate producers are working hard to meet consumers’ demands. But, sometimes, due to unfavorable situations, business professionals in Dallas or Austin have to sell their brewpub or craft brewery business. Selling a brewery business is not easy without determining the company valuation and understanding if the price justifies selling the business.

Factors To Consider During the Brewery Valuation

Valuation is a crucial aspect of owning a brewery business (even when you are not considering the idea of selling). Since it is the process of determining the worth of a brewery, it requires a thorough assessment of all the assets, liabilities, and multitude of relevant factors that influence the value of the business. While understanding that there are fundamental factors, there are also certain things that people fail to understand during a brewery valuation process, which can result in inaccurate valuations. In this blog, Adam Noble Group will discuss several factors that you should not fail to consider during a brewery valuation.

1. The Brewing Equipment

The equipment utilized in a brewery is a fundamental component of the business. The valuation of a brewery must include the used fair market value of the brewing equipment. Moreover, while calculating the valuation, consider the equipment’s age, condition, functionality and cost to replace with like condition used equipment. The condition of the equipment should also be adjusted based on its maintenance, repair and reconditioning history.

2. The Inventory

The inventory of a brewery is another crucial factor that should be considered during a brewery company valuation process. The value of the inventory should be assessed based on a combination of cost and added value, depending on the degree of finishing. Raw materials such as hops, grain and packaging are typically valued at current cost.  The value of finished goods and work in progress should include the added value of production labor and relevant overhead. The inventory should also be adjusted for any spoilage, waste, or damage that has occurred.  Obsolete inventory should be noted and excluded from value.

3. The Licenses

A brewery must have the necessary licenses and permits to operate in DFW, Houston, Austin, or other Texas city. NOTE: brewery license and permits vary for EACH state. The value of these licenses may also be included in the brewery valuation, depending on the type of business appraisal.  For instance, a buyer will be required to obtain new licensing and permits in an asset sale. The value of the licenses can also vary depending on the location and the license type. Some licenses may require renewal fees, which may also be taken into account during the valuation.

4. The Brand Value

The brand value of a brewery is an intangible asset often reflected by the relative production and sales of the brewery, which, in turn, can significantly impact the value of the business. The brand value is affected by the brewery’s reputation, customer loyalty, and market position. The value can also be affected by factors such as marketing strategies and advertising campaigns.

5. The Financial Records

The financial records of a brewery are essential in determining the value of the business. The valuation should consider the revenue, expenses, and profits of the brewery. The financial records need to be provable and verifiable.  The Cash Flow to owner (often called adjusted EBITDA) includes the business net income plus all provable owner comp and perq’s, further adjusted for one-time, non-recurring income or expenses. Additionally, the valuation should also consider the financial projections and forecasts for the business. This information can provide insights into the future growth potential of the brewery.

Call the Professionals for Craft Brewery Valuation!craft brewery business valuation

The brewery valuation process is complex and requires a thorough assessment of many factors that influence the value of the business. While the brewing equipment, inventory, and financial records are critical components of the company valuation, the licenses and brand value should not be overlooked. A comprehensive valuation in Dallas or Houston that considers all these factors will provide an accurate assessment of the brewery’s worth and help ensure a successful transaction.

If you have been asking “how to buy out my partner” or “how to complete a business valuation”, then contact the experts at Adam Noble Group, LLC. Whether you are planning to sell or purchase a business, our experts can provide you an independent, third party business valuation.adamnoble

For 3 decades, we have been guiding business owners and their families CONFIDENTIALLY to exit their Brewpub or Craft Brewery businesses with the BIGGEST paycheck of their life!