Are you a wine lover who has dreamed of opening your own winery? It seems ideal, but it takes a large investment of time and money. However, if you have what it takes, it can be a rewarding and profitable business.
A winery grows grapes and makes wine and sells the wine onsite, online, and in retailers under their own brand. Some wineries also have an onsite restaurant and may offer tours of the winery.
According to Statista, the wine industry market size was $68.1 billion in 2018. According to IBIS World, the growth rate from 2016 – 2021 was 3.6%. The industry benefits from positive economic trends as people have more disposable income for more expensive beverages.
The industry was impacted by the pandemic as restaurant and hotel sales declined, but it is expected to rebound as the pandemic winds down. According to International Wines and Spirits Research (IWSR), the market size is expected to increase 2.4% from 2020 – 2024.
Your target market will be wine enthusiasts and travelers to your area.
Skills, Experience, and Education Useful in Running a Winery
There are several specific skills that you will need to open a winery.
- Experience. You should have experience working in a winery so that you know how it works and how to make wine. You’ll need to develop your own wine recipes to make your brand unique.
- Knowledge of wine. You need to have an extensive knowledge of wine to know tastes and trends.
- Business knowledge and experience. You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
- People skills. You’ll need to build rapport with your customers so that you retain them as customers and keep them coming back.
Costs to Start a Winery
Here are the typical costs you will face when you open a winery.
- Setting up a business name and corporation costs approximately $200.
- Business cards, brochures, postcards for marketing $200 – $300
- Website setup $100 –$200 for a basic, do it yourself website, $1,000 – $2,000 for a professional site
- Land costs will vary based on where you are located, but 10 acres could cost $500,000 to well into the millions.
- Facilities construction and preparation, plus land preparation depending on the size of the winery $500,000 – $2,500,000
- Vineyard costs such as farm equipment, tools, pesticides, etc. – $10,000 +
- Equipment, such as crushers, fermentation tanks, filtration systems, bottling line, refrigeration, forklift, etc – $50,000 +
- Insurance $200 – $600
- Initial marketing such as Facebook ads or search engine optimization for your website $500 -$1,000
Steps to Starting a Winery
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your winery should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as doing some market research and knowing who your target audience is, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Step 2: Name the Business
Finding the perfect winery name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Related: Tips and ideas for naming a winery
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
Related: Comparison of Business Entities
Step 4: Select your Location
The type of land on your location needs to be favorable for growing, and you should be in a location that is near highways, preferably in an area that people travel to.
Equipment and inventory storage will need to be considered as well.
In addition, the location will need to be suited to planting vines for the types of grapes being grown. Some varieties are only suitable to certain climates, while topography can be another consideration as well.
The actual calculation will vary on the type of wine being produced, but as a general rule of thumb, one acre of vines can produce 4 tons of grapes, which can produce around 600 gallons of finished wine. Since it takes 3-5 years for a vine to produce fruit, it may make sense to purchase grapes from other vineyard owners. It takes approximately 20 pounds of grapes to produce a gallon of wine.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
The licensing and regulations for wineries can be frustrating as there is a lot of paperwork to be approved to sell. Each state has different requirements as to how much wine can be sold in the winery and different requirements for selling to distributors and wholesalers. Approval from the state for a winery license and Alcohol and Tobacco Tax and Trade Bureau (TTB) will be required, and in some cases, the county as well. Labels will also need to be approved by the TTB before selling wines.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a winery is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.
Step 8: Get your Marketing Plan in Place
A winery will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a winery include social media marketing and online advertising, as well as postcards and flyers, and road signage. Developing a website can be a significant expense, but it can also give your winery greater visibility online. You will also need a plan to sell to retailers, restaurants, and hotels.
Step 9: Get Insurance
A winery needs several types of insurance for full coverage:
General liability insurance can help protect you from third-party claims of bodily injury and property damage.
Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hiring Employees
You will need employees to help you run your winery. Employees with good customer service will be needed in the tasting room. On the production side, a good winemaker will be critical if you don’t have wine-making experience and labor to tend to the vineyard. Make sure that you select people with appropriate experience.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your winery is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
How Much Can You Potentially Make Owning a Winery?
The average sales for a winery company are $6.3 million, but that includes very large wineries and brands. A small winery will make much less.
Things to Consider Before Starting a Winery
Running a winery or any business will have its challenges. You need to be prepared and make sure that you know what you’re getting into.
Marketing and acquiring customers will be your biggest challenge and an ongoing expense. You will face a lot of competition, so your marketing will need to make you stand out.
You will be risking a significant amount of money opening a wine business. It will take time and hard work to see a profit. If your wines are not accepted by the market due to taste, you will not succeed. The risk is very high.
Talk to other business owners for tips on starting a business and do your homework to determine costs. Research other wineries to see what they offer and what prices they charge.