One of the first serious steps you’ll take toward opening your coffee shop is tocreate a business plan. This document spells out exactly what your business is, how it will be profitable, defines your customer base, explores competitors, plans for growth, and provides troubleshooting strategies should you need helpachieving your goals.
But, go the lean planning route to start
Before you dive into creating a traditional business plan (which really you only need if you’re seeking funding from a bank), we recommend creating a one-page pitch. This will allow you to quickly validate your business idea as well as get a good sense of who your market is, how you’re going to reach them and how you’re going to differentiate yourself from your competitors.
Many entrepreneurs turn to our business plan templates for guidance. Whether you’re starting a little coffee and internet café or a coffee house bistro, there’s abusiness plan template to suit your coffee shop needs.
2. Take the time to find the right building
To be successful, you need a good location for your coffee shop. You want something centrally located, a place where people already gather, and a space that’s conducive to your vision. Marc Renson, owner of Radio, Coffee and Beer, warns that finding this dream spot won’t happen overnight.
His team scoured city after city, scouting each location, even going so far as to count pedestrian traffic. He was in the market for a former restaurant, so he didn’t have to remodel everything from scratch. Finally, one day when he dropped his keys he noticed a tiny “for sale” sign in a former tavern window. After months of searching, he’d found his spot.
3. Create a floor plan
A solid floor plan is vital for a coffee shop. You want customers to have space to form a line, employees to have the materials they need within reach to quickly make coffee, and a seating area that’s comfortable. It will take some time to produce a good floor plan, Wilson says.
“Walk yourself through every scenario you can think of,” he says. “If you’re making coffee, what needs to be near you? If you’re a customer, what do you want in a seating area? Visualize everything you can and start putting those ideas down on paper.”
4. Hire an accountant
One of the best pieces of advice Wilson says he can offer a new coffee shop owner is to turn your books over to an accountant. Aside from taking valuable time away from the business, having a numbers expert works in your favor.
“You won’t be as hard on yourself as you sometimes might need to be,” Wilson says. “Plus, you will make assumptions that an accountant wouldn’t make.”
In reality, your accountant is really your small business consultant. Make sure you find someone who believes in and can help you accomplish your business goals.
5. Get local help for funding
Finding the startup funds for a coffee shop can be difficult. Renson suggeststalking with friends and family about investing in your coffee shop first. Present a solid business plan to them and ask them to invest in your business. If family isn’t an option, or if you need more cash than your family can provide, Renson suggests looking into local loan options. In some cases, local cities offer business assistance programs to offset costs. A local bank is also an option.
6. Save money for your own expenses
Aside from startup costs, don’t forget that all of your time and energy will be devoted to your new business, a business that probably won’t be profitable for around six months.
So, plan ahead. Renson suggests making sure you set aside enough money to cover your personal expenses for at least six months.
You will also want to familiarize yourself with the concept of cash flow, especially considering well over half of the businesses that fail were profitable when they went down, they just weren’t cash flow positive.
7. Shop around for everything
Most of your time will be spent in the planning and funding stages. While you work out finances, keep a list or spreadsheet of all the things you’ll need and compare prices.
Try to get at least two prices for every item you buy to ensure you’re getting a good deal. Use the internet to your advantage and look for the best prices on everything from comfy chairs to espresso machines.
8. Network your heart out
Having a hot location and brewing superior coffee will only get you so far. You need to network to maintain a connection to the area and to attract more customers, Renson says. Join the local chamber of commerce, a business association, or a local charity.
9. Start marketing before you open
If you start marketing the day you open, you’re already behind. On opening day, you want people excited to come in. To do that, you need to start marketing several months before you open. Affordable marketing options include:
Drop off free coffee to local businesses with a flyer that promotes opening day.
Set up and utilize several social media channels. It’s free advertising.
Give away coffee samples at a few local events before opening.
Try a small direct mail campaign that sends coupons to local residents.
Call everyone, including the media, to tell them about your plans to open the shop.
10. Don’t just focus on the interior of the building
Of course, you’ll stress over every little detail of your shop, from what paintings to hang on the wall to the POS system you’ll use, but Wilson says you shouldn’t neglect the outside of your shop.
“Pay attention to the landscaping, signage, and exterior appearance because that’s the first thing people see,” Wilson says. Some people decide whether or not to come in based on their first impression of the building, so make it count.
Plus, by spiffing up the building you’ll start to create a buzz in the community. People will start to wonder, who is setting up shop in there? Every little thing you can do to attract attention to your coffee shop can serve as a marketing tool.
11. Have a positive attitude
Like every business, you’ll face challenges to get your shop off the ground. Renson says keeping a positive attitude when things aren’t going your way is a must. Fake it if you have to. If you get in the habit of keeping an optimistic attitude, even if it’s less than genuine to start, you’ll eventually teach yourself to stay upbeat.
See Also: Will Having a Positive Attitude Really Help Me Be More Successful in Business?
12. Hire slowly
You need help manning the register, waiting on customers, and making drinks, but don’t hire too many people too fast. Renson suggests hiring a few friends, or neighbors who will volunteer to help you out for the first few weeks. Slowly, bring on staff.
Hiring trusted staff can be tough. No matter how well someone does in an interview, you don’t know how well he or she fits until they’re on the floor. Keep a close eye on the register, Renson suggests, and don’t be afraid to let people go if they are hurting the business.
13. Be demanding
It’s okay to set high standards for your employees, workflow, and workspace. That’s not to say that you should micromanage your employees, Wilson says, but you should “have a level of OCD when it comes to how your shop runs and looks.”
Starting a coffee shop is hard work, but for owners like Renson, owning a coffee shop is the equivalent of a living a dream. If your passion led you to open your own shop, please feel free to add to this list of tips to help others succeed in the industry.
Thinking about starting your own coffee shop? You’re not alone. Coffee shops are already incredibly popular. A variety of coffee franchises to challenge industry leader Starbucks are already available, but there’s no need to spend a huge amount of money on a franchise. You can launch your own independent coffee shop or cafe as well. Just take a look at the list of essential tips below.
10 Steps to Open a Coffee Shop
Secure the Right Equipment
Start by considering the kinds of products you want to offer for sale. The type of coffee you sell will determine the equipment that you need to have on hand. That list can include a cappuccino machine, drip coffee machines, press pots or French presses. Depending on your space and resources, you might even secure a variety of different items so that you can offer a larger variety of coffee beverages for sale when you open a coffee shop.
Choose a Space
Then you’ll need to find the right space to open a coffee shop. This can range from a full brick and mortar location to a small cart or truck. The smaller the space you have to work with, the less variety of beverages and food items you can realistically offer to customers. But if you have a full shop space, you can offer a full menu of different selections.
Find the Right Location
The location of your space can also play a major part in the success of your coffee shop. If you’re opting for a brick and mortar space, choosing one that’s in a downtown area or along a major thoroughfare can really increase your foot traffic. If you’re going with a cart or truck, you might choose to set up at local fairs or farmer’s markets. Or you could even set up a coffee space within a college, hospital, shopping center or office building.
Adhere to All Local Regulations
Different states and local governments have different regulations when it comes to zoning and local health department mandates. You’ll need to check in with your state and local governments to find what they require of coffee shops in the area where you want to open a coffee shop.
Research the Competition
You’ll also need to take a look at the other businesses that sell coffee in the area. Don’t just look at actual coffee shops, but also consider diners, carts and any other business that might compete with you. Then look at the prices and offerings to see if it’s an environment where you’ll be able to compete. That doesn’t necessarily mean that your products need to be cheaper than everyone else’s, but if your products are much more expensive you should at least offer something that customers can’t get on every other cornerwhen you open a coffee shop.
Hire Some Staff
Depending on the size and offerings of your business, you may need to hire some staff to help you serve customers and run the day-to-day operations. The amount of staff you’ll need will depend on your budget, the area where you want to set up, the amount of products you plan to serve and your hours. If you’re running a small cart with just regular old coffee, you may be able to do it yourself. But if you’re starting a shop with a full line of coffee products and other food items in a high traffic area, you’ll likely need a larger team.
Source Specialty Items
You may be able to get away with selling regular old wholesale coffee to some customers. But more and more people are becoming aware of the differences in quality among coffee suppliers. That means they’re getting picky about where their coffee comes from. So it can be beneficial to find a specialty blend or reputable roaster that more sophisticated coffee buyers will appreciate. You can even create your ownsignature blends to help your products really stand out from the competition.
Think About Food Items
It’s not a necessity, but a lot of coffee shops find it beneficial to sell some sweets or other food items to go along with the coffee. If that’s a part of your business plan, you’ll need to also consider the equipment that you’ll need to make those food items. You also may need to adhere to some additional regulations in order to serve food to customers safely.
Furnish Your Space
If you have the space, you can also set up some places for your customers to sit and relax in your coffee shop. Invest in some couches, chairs and tables to make it a comfortable environment for people. And maybe even offer free WiFi to attract connected customers.
Market Your New Business
Once you have all the essentials in place, it’s time to market your new coffee shop. Even if you’ve set up shop in a high traffic area, your business could benefit from some additional marketing activities. At the very least, you can set up a website and social media presence to make it easy for online customers to find and communicate with your business. You might also consider local ads or sponsoring local events.
When you are serious about starting your coffee shop, you will want to take a few minutes (perhaps with a large cup of coffee), and jot down all the little things that you will need to obtain, so that you can open your coffee shop efficiently.
Of course, the list will essentially bring together your menu and your entire business concept. Once you lay everything on the table, you will quickly see that all of these things needed to start your business. The more research you do, the cost of your coffee business will become more clear.
Certainly each purchase will begin to whittle down your savings account – or your overall budget. Nevertheless, we recommend writing everything down clearly, that way you can see where exactly you can adjust your purchases to suit your budgetary needs.
Don’t Be Afraid of the Face Your Startup Costs
Confronting the coffee shop startup costs may be difficult for many to do, but it will empower you to control your budget – and help you realize whether or not you are ready to start your coffee business.
The mistake we often see is that new coffee business owners don’t anticipate the number of “little things” they will need for their coffee shop. By the time they realize the necessity for more money, they are already way too far in to back out completely, at least without doing some major damage to their savings. Of course, this leads them in a desperate situation looking for money to bridge the gap.
Evading this error can be done early on by simply deciding that you want to see all of the startup costs before moving forward with you coffee shop business.
Our Recommendation: Write everything down. Your financial needs will vary depending on your menu, your concept, and your location, but anticipate everything anyway. From the fixtures, furniture to the possible plumbing, and coffee inventory. It’s better to over budget than to find yourself knocking on your neighbour’s door for more money.
We also recommend that you separate your personal finances with your business finances as early as possible. You will need to know where that “red line in the sand” is – so that your business efforts doesn’t destroy your personal finances. Additionally, you should consciously give yourself a little slack. Perhaps, you may want to do this by over-estimating each item on your costs list, providing yourself a “slack” (that’s my technical term) category of, say 10%, of the anticipated costs.
The first thing is to be honest with yourself about the costs. All the costs. Putting everything “on the table” will help you to make appropriate business and financial decisions – and keep you from of extending yourself too far. Knowing how much things are going to cost, will help you plan for contingencies (if necessary), provide you with information when it comes to borrowing and raising capital for your business.
Keep in mind that this is a real business investment that you plan to grow and make a handsome profit. There are always risks. You should work hard to minimize those risks with planning and educating yourself on the retail coffee business. Of course, the reward is that you create a robust business that appreciates and generates healthy profits and cash flow. In essence, you are budgeting for your future growth and profits.
Know what kind of coffee business you want
(This may take some time)
Know what your budget is (or will be) and how much you will need to get up to profitability
Learn everything you can about the retail coffee business
Prepare a budget proposal (through a business plan)
Adjust your budget as your plan evolves
Decide on clear path to execute your plan (Simple is better)
Take steps every day towards your goal (learn, research, prepare)
Starting Your Coffee Shop Business Planning: Are you ALL in?
Your profits will come from your detailed planning, investments, and passion. Getting it right from the start is important. Educate yourself on what really matters when it comes to your costs – this includes your equipment costs, your lease signing, and other important details. When you are starting up your coffee business, you will have many one-time costs, which you may include as fixed costs – and you will have many variable costs that are on-going costs.
These variable costs grow as you grow. For example, as you grow, so too will your inventory needs grow (therefore the cost of your inventory will increase). Additionally, new hires or extra time on the clock will grow. These are variable costs. So, this is a good thing as long as your pricing your items well and managing your labor costs efficiently.
Overall, this variable costs are not a bad thing, as the more profit you will also be making. In addition, you will need additional startups funds that are unique to launching a coffee business. For example, you will need to pay for inspector fees, health department fees, fire department fees, and other items such as insurance premiums, and your deposit for your lease, etc.
These costs are often overlooked by many jumping into their first business . Additionally, and perhaps more importantly, each of these elements vary in the time they take to “check off your list”.
For example, it may take an additional 1, 2, or 3 extra months to simply get your county health department to sign off and give you the green light to open your business if certain things aren’t up to code. Will you have enough to cover three months of your lease without making a single sale? Consider the costs of any potential delays. As in anything, consider planning a little more than you actually budget – and allow for more time so that the necessary paperwork, inspections, etc. get done.
Recommendation #1: Set Up Your Own Coffee Shop LLC and Business Bank Account
Before you actually finish your coffee shop business plan or even before you start spending any real money on equipment or leases, you should create an LLC in your state and establish a bank account.
You can then add money to this bank account and spend money for your cafe using funds from this bank account. If you choose not to legally set business up as an LLC, consider setting it up as a corporation or a non-profit. Whichever legal structure you decide, make sure its done before you spend any real money. That is anything over several hundred dollars. For more information see Tips to Starting Your Coffee Shop.
In the next sample table, we’ll write these sample costs down (to get your thoughts flowing). You may need to add more or subtract some items (which will vary from coffee shop business to coffee shop business).
Recommendation #2: Start Creating a Budget (Edit and Add When Necessary)
Your “Sample” Coffee Shop Start Up Costs
First Month’s Lease
Second Month’s Lease
Utility Connection Fees/ Deposits
LLC Fees and Other Business License Fees
Please note: In addition to these basic fees, you will need to spend money on a variety of things to ensure your business is ready to launch. Some items will take care of themselves, other items may be needed to be added. Either case, I have added some sample costs below (again, to get your thoughts churning as you plan your own coffee shop or coffee stand business). As you begin to go through them, you may start considering your own coffee shop menu, the condition of your location, and of course, your overall budget. Consider, what items you will need to add? What items will you seek to avoid?
Remember Your Coffee Shop Business Lease
The signing of your coffee shop business lease is important! Our Coffee Shop Startup Kit offers an excellent one-hour interview on the subject of your coffee shop business lease. (You should not miss it!)
Considering the location and the condition of your location is essential to your budget. Depending on your vision and your budget and the current state of your location, you may need to spend money to get it ready to use. Your lease ultimately impacts your bottom line, your ability to conduct business, and your ability to increase your profitability.
Okay, let’s continue by considering the following sample coffee shop business items below:
Your Sample Coffee Shop Startup Cost (Budget) – Part 2
Your Leasing Space (Physical Space)
Mop sink and Install
Convection Oven (If needed)
Commercial Drip Coffee Maker
Computer, Printer and POS system
Chairs and Tables
Dishwasher (If needed)
Internal Displays and Signage
Outside Signs and Displays
Coffee Beans Inventory
The above list is certainly, incomplete. The complete list of course, varies for every coffee business establishment. Feel free to add/edit it. Simply running down the list, you’ll see that everything will need to be in place before you open your business. If you are still in the planning stages of your coffee business, it’s a good list to keep updated.
Nevertheless, if you put the lists together (EUR5,700 + EUR30,100 = EUR35,800). So, you will need about EUR 36K before you even pour you’re first drink. (This also does not include your time, your labor costs, and other miscellaneous expenses.)
Also note, this may be a very conservative figure depending on your business concept and the remodeling costs to ensure your appropriate vision. Building out your coffee shop takes planning – and perhaps the hiring of contractors – which adds additional costs.
Remember, about adding additional slack of at least 10% to help with costs that run higher than expected. So, if you wish, consider adding an additional $3600 as your slack account. This additional money should be used for your startup costs. And hey, if you go under budget, you can use that money to help sustain your business as you move toward profitability.
However, if you plan early, you will be able to make better decisions that will save you money over time. That’s why we recommend our Coffee Shop Business Plan Guide.
Your Coffee Shop Break-Even Point
To be able to determine your break-even point of you coffee business you will need to be able to:
Forecast your expenses
Forecast your sales
Your “break-even point” really means the point at which you generate enough revenue to cover all your expenses. To be sure, investors, bankers, or serious partners will ask you what your break-even point will be. By figuring out your break-even point beforehand, you can see if your sales forecast will be high enough to finance your operating cost.
But as in many different things, the devil is in the details. While the fact is true: your break-even point is the point where your revenue covers all your costs – many will often play with the “costs” figures.
For example, you will have one-time upfront costs like security deposits, possible broker fees, equipment costs, travel costs, possible consultant fees, furniture costs, etc.
I encourage you with the help of an accountant, to amortize your equipment costs over time (breakup the costs over the span of a few years) and embed those costs within your annual and monthly expenses. OR… at least acknowledge their existence by categorizing them with your cost structure.
For example, by embedding your startup costs (variable and fixed costs) within your operating expenses in a manner that works best for you – you can be sure that your revenue will not only be covering your day-to-day operational costs but the costs associated with starting your business.
To be sure, most of your cost are controllable based on your needs, we often call these variable costs. They include such expenses as your payroll, your costs of sales (what it costs to deliver coffee and snacks to your customers), utilities, inventory, administrative expenses, and your promotional costs). Your fixed costs and variable costs, and embedding your “one-time” startup costs, should be added all together and divided by a specific amount of time that you choose (annually, monthly, weekly) and then calculated with your sales (or estimated sales).
Your sales will need cover these cumulative costs.You must use these factors to determine your break-even point.
Starting Your Coffee Shop: How do you forecast your sales?
Okay, so we know that to do our “due diligence” for our coffee shop business planning, we’re going to need some data – or some information by which to base our decisions on. There are many data points that we’ll need to consider when it comes to determining our coffee shop budget. But how do you determine your future sales? How can you even arrive at the point of figuring out your actual sales receipts?
Answer: Well, to be sure, it’s a bit of an art and a science. If you are buying an existing business, you will want to see the last couple of years of sales receipts or profit and loss statements. Getting this hard data will play an important role in determining your own sales as you take over the business.
Of course, you will want to make some adjustments to future sales as you change your pricing, your menu, and your marketing. Additionally, you should learn to count customers during the process of buying an existing stand or selecting a specific location to start a coffee shop or espresso drive-thru stand.
While not the scope of this article, consider this brief article on counting customers for your coffee business here.
It Always Comes Down To The Math
Coming up with the data will be your job. But it’s easier than it sounds and its the numbers. The feasibility of realizing your coffee shop dream always comes down to the math. Learn to play with the numbers. Don’t be intimidated by the math. The numbers aren’t out to “get” you. They don’t have any power over you.
By starting early in getting your data points, you will be able to open your coffee shop with confidence. You will be able to approach investors or barrow money with the confidence you will need.