Many aspiring coffee shop business entrepreneurs are interested in the topic starting a coffee business with no money or very little money. This article is one in an occasional series that discusses the possibility of starting and opening a coffee business with little money.
Want to start your cafe with no money? Is that even possible? That’s what one ingenious, young, and gutsy owner did. Using a completely different and novel method of starting his business. In this article we discover how a young man with big dreams, ambition, and purpose, set out to create of the most popular coffee shop in his town – without having a lot of money.
Note: Starting a coffee business can be a very time consuming and expensive venture, but it can also be very profitable as well. We believe that before launching into any business where your financial future or livelihood is at stake, you should seek out the most relevant information as possible. We here at Coffee Shop Start Ups have aimed to provide you with a well-versed and dynamic set of interviews, along with other resources (including our Coffee Shop Business Plan Guide) to get you well underway to start planning your coffee shop business.
The most common question about starting a coffee shop business:
Is there a way to start, open, and operate a coffee shop business or coffee cart with little or no money?
Well when it comes to opening a coffee shop, the truth is this: You will need money to start a coffee business or any business for that matter. Proper planning and budgeting is essential for your success.
But excellent planning often reduces your startup costs and financial losses. Certainly, you will also need money to sustain yourself during your launch, and the personal money to keep your mortgage or rent up to date.
The real question however becomes: Just how much money will you need to start a coffee shop? (Further reading: We’ve discussed a small coffee shop budget here)
It is true, that money (or lack of it) can be a real barrier to many potentially great coffee shop businesses. Of course, you can go the traditional route and borrow money from a bank or investors, you can choose to borrow from family and friends, “crowd source”, and simply self-finance with your personal savings, equity, or credit cards. Certainly, each of these options have their own positive and negatives that need to be carefully weighed out before you make your decision. To be sure, when you ask other people to invest in your business idea, they will want to know how much you are putting into your business or what other things you may be “bringing to the table” that might ensure your success.
Whichever decision you choose, you will need to develop a comprehensive coffee shop business plan that is thorough and well written. Now, we offer an affordable Coffee Shop Business Startup Guide that can help you with the planning of your coffee shop business startup. With hours of relevant interviews, our guide also works to improve your general knowledge about the retail coffee industry before you actually start writing your business plan. This makes our coffee business guide unique among others currently available on the market.
Take Away Points:
- Adequately Plan for your Coffee Shop
- Budget Conservatively
- Determine Sales
- Determine Your Break-Even Point
- Get Help to Increase Your Knowledge-base (From our coffee shop business guide or someone else’s)
An Emerging Coffee Business Model: The “Cooperative Ownership” of Your Coffee Business
The following is a discussion of one business model you may consider:
You may have heard the term “Food Co-op” or “Farming Co-op”. There are real estate Co-ops (cooperatives) as well. Cooperatives can vary in size, scope, and objectives, and thrive in any possible industry or field – if they are organized and planned out correctly, they can allow partners to start practically any organization with minimal resources from traditional startups. Of course, there are pros and cons to any type of entity structure, this includes retail coffee shop cooperatives. It is, however, a very viable option for those who do not have much capital to start a business. They may however have other assets that can contribute to the cooperative.
The basic idea is that a cooperative allows a community (members or owners of the co-op) with the same objective, with the ability to pool together their resources to create and develop a viable retail coffee operation. In this case, we are talking about a coffee shop business.
In the following interview, we discuss bringing the co-op model to the retail coffee shop. There are obvious benefits to a co-op model and possible drawbacks, as well. Our goal is to provide the information you need to “think out of the box”.
The first benefit is the ability to actually establish your coffee business. By spreading out the inherent risks to the formation of any business, you pool your expertise, energies, and you are able to reduce your individual start up costs. The challenges to starting a coffee business under a co-op model may also be present. For example, there may be too many decision makers, the decision of one person can ruin the entire coffee shop trajectory. The ability to delegate and establish roles will be very important to establish and follow.
The following are the Basic Points of a Coffee Shop Business Cooperative:
Finding the money to start your coffee business can be a challenge for anyone. If you are trying to decide how to move forward with your coffee shop or stand in light of your available funds? If you have a certain level of limited funds, you may need to borrow or go through other types of funding options.
However, if you are looking for something different, perhaps a Coffee Shop Business Co-Operative can/will work for you? Maybe. And if not, perhaps, there are certain aspects of a coffee shop co-op that may be applied to your own coffee shop business.
Your Coffee Business: Ownership and Management
What is a Coffee Shop Business Co-Op?
- The worker-cooperative-ownership means the workplace is owned and democratically controlled by its workers. Every aspect of the business is shared equality – including the labor, expenses, risk, and profit.
- All of the employee-owners are full-time workers for the business, share all management, commercial and creative decisions equally, have the same amount of ownership and get the same amount money from the business. This type of organization can be helpful if a small group of willing coffee entrepreneurs share the same vision and make it a point to share the implementation of the business management.
Making Decisions in a Coffee Business Co-Op
- There is a danger in having too many decision makers in any business, but especially a coffee shop business. With more than 4-5 people, it would be more difficult to make basic business decisions.
- Certainly, if you will engage in a coffee business co-op model, you must trust each other to make decisions and not micro-manage colleagues.
- You need to have the right type of people: people that are committed, willing to take an initiative and that are self-confident, but also have humility and won’t derail a project when they don’t agree with something.
Further Reading: How To Start a Coffee Shop Business With No Money
Benefits of This Kind of Business Model
- With only one or two decision makers, they are inherently limited in their perspective and being able to guess what customers may want and need. Possibly expanding to 3 or 4 cooperative owners may help create the diversity of thought that will lead to the successful development of your coffee shop.
- Compared with most business owners, this model provides a better perspective of what customers want because the owners are the people working with the customers every day. So decisions are based less on theory or intuition or number crunching and more on knowing what the customers need and want from working with them every day, which is a big advantage over other companies.
- Worker decision making about the workplace is quite powerful from both a business perspective and also it makes everybody happier personally.
How to select co-workers for Your Coffee Co-Op
In the beginning, you might be the first (and currently the only potential co-owner). You’ll have to go on a search to find others willing to be co-op owners with you. Selecting two or three other co-owners may be difficult. After all, finding another person with the same vision and passion to start a coffee business may be challenging. You may have a variety of opportunities to search for other others through your existing work place, through the internet, or organizations you belong to.
Here are a few things to consider for your coffee business:
- Like other business, it’s a messy process, but don’t be scared about that. Be willing to adapt and change your mind.
- This idea can work if the coworkers aren’t friends. Allow the relationships to grow within the context that you are going to be working together, you are all going to be accountable, and you are going to be professional with each other. On the other hand, opening a co-op with personal friends can be difficult. It takes courage to tell a friend he is slacking off and do it in a way that won’t hurt the work or personal relationship.
- There may be people besides your friends who are more interested in pursuing the idea and be more similar to you as a person.
- If you have an idea for this kind of thing, start finding people who want to do it before you take on the heavy lifting. Even if you have a great idea and are the one to initiate the business, if you have a collective, the others need to provide their input from the very beginning.
Role of personality in Your Coffee Business
- It takes a special type of person to want to work in the service industry.
- Even if others share the cooperative philosophy, it doesn’t mean that everybody is perfect for every collective. While others may like the general idea, they may not be right for a coffee shop. Each cooperative business is going to need a particular kind of personality type and the needs of the people are going to be different.
Challenges faced before opening Your Coffee Business
In an interview with one successful Coffee Co-op owner, we discussed the real challenges of opening a coffee business and asked with to share any insights of that particular time – that is, the time just before opening up a coffee business.
“There was always a lot going on at once, and it was difficult keeping them all moving forward,” he reflected. “Finding other people was the first difficult step of the process.”
Here are a few other notes he shared:
- There will be a lot of things that you want to accomplish and you’ll be working with various proactive people, and so you need to set priorities and figure out what you want to focus on.
- Don’t rush. It has to be a long-term venture. You need to take the time to prepare for it properly and work out as many things as possible before you open.
Establishing your coffee business entity
Here at Coffee Shop Start Ups, we’ve written extensively about how to start a coffee business. With a “Co-op”, things are really no different. You will have to decide on a business structure for your coffee business. Whether it’s an LLC, corporation, or Cooperative.
Consider the following:
- You have to understand how your state works in terms of incorporating a business. You have to figure out who to file with (state and local agencies) and figure out what kind of business entity the state will recognize.
- In many instances, you don’t need the state to officially recognize a worker cooperative to have one. Just be an LLC; it will be the easiest and most advantageous as long as you don’t have to compromise your principles. You can have equal number of owner and managers.
Your Business Location and start-up money
- First, get your business plan together.
- Decide on the location(s) that you think you want to be in, then you will want to narrow it down and look for a specific property.
- Don’t do things like look for a location and then get your fund funds in a compartmentalized way (one at a time). You will have to do several things at the same time! This is why keeping organized from the very beginning is essential. (A business plan will help you start off on the right foot).
- Be patient and take your time to find the perfect location.
Your Coffee Business Lease and Lease Negotiating
- Almost any landlord or property manager is going to want you to have a business plan.
- You also want to come up with a “business resume,” something you can show to a perspective landlord, and explain why you will be a successful business owner. You have to prove that you are personally capable and financially capable and that it won’t be a risk for them. They want a long-term renter.
- You don’t need to have money yourself, but you need to be connected to money. In other words, having a potential backup investor may be needed. The landlord will want some collateral (guarantee) that the business is going to work out, especially if you are a first-time business owner.
- It’s a challenge to determine the duration of the lease. The lease gives you the legal right to keep running the business. The first few years are essentially putting in the work to make the rest of the years worth it. You’ll want to make it through it, but not be committed to a long term if it doesn’t work out.
- Read the lease carefully. Don’t rush into anything. Once you sign a lease, you can no longer back out.
Our Coffee Shop Business Plan Guide Offers a one-hour lease negotiation audio interview with a lease expert you will want to hear before you start looking for a location for your coffee business.
Prep work for Opening Your Coffee Business (vendors, cash register, inventory, etc.)
- You have to figure out who the customers are going to be to decide on the vendor, but try to figure out the vendors before you start.
- It’s easy to get committed to vendors, but you want to keep things like that as an open decision. You won’t know what is best until the business is actually running.
- It’s hard to know the impact of social media on your business, but don’t take it for granted. We tried to build excitement for the project for a whole year in advance. You don’t want to wait until the last moment.
- It helps build community even before you open.
- With more “likes” on social networks, you have more customers to invite to events and inform about new product offerings.
A Coffee Business Plan Template You Need
Starting up your coffee business takes a lot of time, thought, and planning. Certainly the level of planning from here on out will be determined by where you are along the process of opening up your business. Everything from your location, choosing your equipment, to determining who your vendors are, will be important to your short and long term goals. If your dream is to start a coffee shop, you may consider certain aspects or elements of a co-op to help you further your dream.
By pooling in resources, you may be able to jump the hurdle that stops many potentially profitable coffee shops from being born – money! Without the adequate capital, it will be difficult to launch any coffee business. However, if you can pool four or five individuals with say at 20% stake in the business, you just may be able to address many of the barriers that many “would-be” coffee business owners face.
Needless to say, whichever direction you choose to go through, it will require planning, planning, and then a little more planning. Where should you begin? We recommend that you start with creating a business plan. A business plan will help you articulate your vision for your coffee shop business. In addition, it will save you time, money, and possibly tears in the long run!
For more information on starting a coffee shop continue reading our in-depth articles on our blog. When you are ready to take your business planning to the next level, consider investing in our Coffee Shop Startup Kit – complete with a business plan template and 13 hours of audio interviews with retail coffee professionals.
Focusing your attention on your concept and bridging your ideas to actual funds can be achieved. But you have to have a plan. You have to know what your doing. We recommend starting here with learning about the retail coffee business from the real stories of real coffee shop business owners and business experts.
- Learn from other coffee experts
- Get the advice from veteran coffee business owners
- Hear their unique stories and learn from them
- Avoid their mistakes
- Save money and time
- Learn how to develop your business plan
- Get the confidence you need to get started
Our Coffee Shop Business Startup Kit:
Further Reading: How to Start a Coffee Shop Business With No Money