Starting Your Coffee Shop: Planning Your Coffee Shop Budget

How to Budget for a Coffee Shop

Develop a Coffee Shop Budget Successfully

Starting a coffee shop requires you to deeply examine the costs involved. Having a well-developed coffee shop budget will help you avoid any financial surprises and prepare for those costs before you start.

Your coffee shop budget is an important element to take control of right from the beginning. Unfortunately, many people have difficulty addressing the costs of starting a coffee shop business.

Coffee shop startup costs can be a murky subject that people tend to avoid.

We're here to clear the air! 

In addition to helping you figure out your coffee shop budget, we are dedicated to providing you with some essential “starter information” to help you take the first steps in starting your coffee shop successfully.

Let's get started!

Embrace Your Coffee Shop Budget

Make Your Budget a Part of Your Business Planning

A coffee business has many moving parts.

Learning about each of them is important. We hope this article will bring together your entire coffee shop business concept, coffee shop menu ideas, and coffee business location options.

As you start to develop your coffee shop business concept, you will better determine practical steps to opening your first coffee shop and then developing your budget.

Once you begin to lay everything out on the table, you will quickly see how all of these elements fit together. Each expense you factor into your coffee business spending plan will begin to expose your overall budget.

If you're not careful, expenses can grow rather quickly and impact your ability to have any funds left over to see you through to profitability.

Embrace your coffee shop budget.

It's the one true strategy to ensure that you are in control.

We strongly recommend writing everything down clearly in a coffee shop business plan.  Doing so will help you see where exactly you can adjust your expenses to better suit your budgetary needs.

Facing Your Coffee Shop Startup Costs

Confronting the coffee shop startup costs can be difficult for many to do. But it's absolutely necessary. Doing so will empower you to understand and control your coffee shop budget.

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.

These little things can quickly add up to lots of expenses.

When you start a coffee business, you can easily get buried in cost overruns and debt. Often, this could lead to a coffee shop failing and ultimate closure.

When some coffee shop owners realize they need more money to sustain themselves, they are already way too deep to back out. This leads many into a desperate situation of looking for money to bridge the financial gap.

However, with better budgeting and general awareness of the common pitfalls, many coffee shop owners can avoid this tragic scenario.

Additionally, avoiding a financial catastrophe can be made early on by simply deciding that you want to see all startup costs before moving forward with your coffee shop business.

While you can't anticipate every cost of opening a coffee shop, you can plan for them. 

Our recommendations to start things off: Write down everything you will need to set up your coffee shop or drive-thru coffee stand. The more you get down on paper, the better prepared you will be to understand what your coffee shop business will cost. 

Be aware that your coffee shop budget will often be determined by several factors. These include your coffee shop concept, menu, location choice, build-out, coffee equipment, and permitting fees.  Consider the elements of a coffee shop budget graphic below. 

Elements of a Coffee Shop Budget

Coffee Shop Startups Costs:

Adding Up The Small Things For Your Budget 

As stated, much of your financial needs will vary depending on your coffee shop concept, your coffee shop menu, your coffee shop location,  as well as the condition of the location you plan on setting up (Will you have a major remodeling project ahead of you?)

Additionally, you will also want to factor in many of the small but important things. These might include unique fixtures and furniture pieces that go well with your coffee shop design. They may also include necessary plumbing installation, lighting installments, and new equipment. You will find that these items cannot be overlooked. So budget them in and be liberal with the amount you will need to spend for each of them.

In fact, it may be better to over budget than to find yourself out of cash because you figured the costs would be lower… much, much lower. 

Pro Tip:

Separate Your Personal Finances From The Start

We also recommend separating your personal and business finances as early as possible. This will help keep your finances stable and give you a better picture of how much money you must spend on your coffee business.

This may require establishing your business as a separate legal entity in your state or country. You can create a limited liability company (LLC) or some other business structure that works for you. Once this is done, you can set up your business checking account and separate your money for your coffee shop.

To do this:

• Create your legal business structure
• Open up a separate business bank account

The Evolution of Your Coffee Shop Budget

Your coffee shop concept may naturally change as your planning meets with the realities of starting your specific coffee shop.

If so, consider what that change will mean for your existing budget.

Prepare for the evolution of your coffee shop budget. For example, it would be wise to allocate a financial buffer – or what I like to call “financial slack.”

You must provide a little margin of error on all your financial calculations. This will help ensure you have enough cash for your next goal. 

You may want to do this by overestimating each item on your cost list. Provide yourself some “slack” of, say, 10% of the anticipated costs. Again, it's better to have a few more dollars in your account after everything is paid to be many dollars short.

The key to developing a winning coffee shop budget

Always be honest with yourself about the costs associated with your coffee shop business planning.

All the costs.

Putting everything “on the table” will help you make appropriate business and financial decisions and keep you from extending yourself too far.

Knowing how much things are going to cost will help you plan for contingencies (if necessary), as well as provide you with information when it comes to borrowing and raising capital for your coffee business. So start your research early and start pricing things out, everything from your espresso machine to your table and chairs.

The time spent researching and planning your coffee shop is an invaluable investment. It will likely payout in you spending less money and time – two things we never have enough of. Of course, there are always risks to starting a coffee shop. By planning early, you will surely minimize those financial risks.

Steps to Building Your Coffee Shop Budget

Step #1:

Decide on Your Coffee Shop Concept

Determine the type of coffee business you want to start.

If you have ever daydreamed about opening your own coffee shop, you may have already kicked around some coffee shop ideas in your head.

Settling on your coffee shop concept can take time. Whether you want a drive-thru coffee stand or a full-fledged café and bookstore, the startup costs and day-to-day operational costs will vary.

However, you can move to step 2 once you determine your concept.

Further Reading: How Much Does a Coffee Shop Owner Make?

Step #2:

Determine The Factors of Your Coffee Shop Costs

Figure out how much money you'll be able to get to start your coffee shop business. Every independent coffee shop is different, so that the costs will vary. They differ in:

• location
• concept
• menu offering

Your location will factor in big when it comes to costs. Some real-estate or rental spaces can cost will jump considerably if you are in a prime business area. Downtown or nice shopping centers may boost their rental costs because the demand is so much higher at these locations.

Additionally, the amount of space you have will also determine your costs. In the U.S., rental costs are often determined by the cost per square foot. The more square footage your space has, the higher the costs will be.  Developing your budget with these factors and others will help determine how much money you'll need to launch your coffee business. Your concept and menu also play a big role in determining your costs.

Cost Factors and Their Related Budget Items

Step #3:

Learn Everything About Retail Coffee

The coffee industry is enormous. 

There is so much to learn! It's important to be familiar with the processing of coffee, understand the supply chain, and the coffee roasters you may partner with.

The small investment in time and money in learning about how your coffee shop fits into the coffee industry as a whole will pay off. Learning about retail management, such as inventory management, accounting, pricing strategies, marketing, etc., will be essential for your success.

Get the help of real-world coffee shop owners and business experts. Or consider investing in our Complete Coffee Shop Startups Kit. It's packed with everything you need to know about retail coffee.

Step #4:

Prepare a Coffee Shop Budget Proposal

Preparing a budget for your coffee shop doesn’t have to be fancy. Simply write down all of your expenses (and don’t miss anything) about the concept you wish to create. A coffee shop business plan will help.

Determine how much your business concept will cost. Then, determine how much money you will need to secure. A coffee shop business plan will help you articulate your concept and should allow you to prepare a solid budget proposal. We offer a tailor-made coffee shop business plan template to help you quickly organize.

Further Reading: How Long Does It Take to Open a Coffee Shop?

Step #5:

Adjust Your Coffee Shop Budget as Your Plan Evolves

Things often change – and so will your coffee shop business plan.

As you begin to develop your coffee shop business plan, your coffee shop budget will begin to change as well naturally.

You may realize that you will need more resources in certain places and less in others. Don’t be afraid to adjust your coffee shop budget.

Be sure to update your coffee shop business plan to reflect these changes. Don't over-complicate your budget. Simple is better. But don't leave out anything else either. 

Your budget and costs are a part of a long mathematical equation. If you keep on entering under-estimated numbers, you will be way short on money.

Try to stay true to what you believe the real costs of opening a coffee shop will be for developing your business. These estimates are for you – only for you. So, there is no reason to soften the numbers.

Additionally, there is no reason to exaggerate the anticipated sales, and there is no reason to be dishonest with yourself about the costs, and the true financial picture.

Step #6:

Decide on a Clear Path (Simple is Better)

Once you have the budget in line for your coffee shop, consider developing benchmarks that include dates. Begin with the coffee shop grand opening date and work backward.

Determine the steps that you need to execute in your business plan. Your coffee shop business plan, once written, should provide you with a clearer path to execute your plan. 

Remember, try not to over-complicate things. Keep it simple. Create a list, complete an action, and move on to the next step.

Step #7:

Take Steps Every Day Towards Opening Your Coffee Shop

Your coffee shop will be built in pieces over time. 

Like a puzzle, every piece is essential to fit just right to open your coffee shop business one day. Therefore, you should consider committing to taking one step every day towards reaching each benchmark until you open your coffee business.

Do something every day to move your coffee business plan forward.

Develop your benchmarks and establish baby steps for each of them. That means taking the time to learn, do the necessary research, and prepare. 

Every day, choose a step to take and move forward. You’ll be surprised how far you will get if you consistently work on your coffee shop planning.

It means something as simple as carving out the time in your schedule to put towards your business on a basic level. Consider reading our article, 30 Steps to Starting a Coffee Shop.

Make the Time to Develop Your Plan

When it comes to starting a coffee shop, the accessibility to money and planning matters, but so does carving out the time for you to start a business.

Once you decide to move forward with opening your coffee shop, consider dedicating one or two hours a day to your business. 

First, start by investing in your knowledge of how to start your coffee business.

Our Coffee Shop Budget Starter Recommendations

Recommendation #1

Get Organized

There are several elements to developing your coffee shop budget. Organize your thoughts, ideas, your ‘to-do' lists, and anything else that is going on in your life to make yourself a better planner. Additionally, getting in the right “headspace” will allow you to budget more accurately.

Recommendation #2

Settle in on Your Concept

Once you determine the type of coffee business you want to start, you create a necessary framework to build out your budget. If you're going to start a drive-thru coffee stand, a mobile food truck, or a full coffee bar – your chosen concept will reveal your next steps and budgetary items.

Recommendation #3

Scout Potential Coffee Shop Locations

After determining your coffee shop concept, you will want to determine where you would like to sell coffee.  Start looking early in the process. Drive around. Explore different communities. Look at patterns of traffic and determine where the potential is. Your coffee shop location will significantly impact your overall startup budget, so start early and take your time.

Recommendation #4

Develop Your Coffee Shop Menu

Your coffee shop menu is linked to every element of your budgetary planning. Take a moment to decide what types of beverage and food items you'd like to sell at your coffee shop. Or rather, determine what kinds of things your target market will respond to.  From there, you can choose your coffee shop equipment.  And yes, your coffee shop equipment will impact your budget, too!

Recommendation #5

Write Down Your Plan

As you begin making decisions, write everything down in a thorough business plan. A coffee shop business plan will ensure that you have all your thoughts and ideas fleshed out and the budget that comes with those ideas. Write down all your anticipated expenses in an understandable chart. This will ultimately form into your “coffee shop budget.”

Creating a budget for your coffee shop doesn’t need to be fancy. However, it does need to be thorough.

As you will see below, I have created a straightforward sample budget for you to consider. Depending on your business concept, menu, design, and a host of other important factors, items will need to be added, and costs will need to be adjusted.

Take a moment to consider the following sample budget (below) for a coffee shop or coffee stand. What items will you need to add?

Recommendation #6

Determine Your Funding Mix

After you build out your budget, you can next determine what your funding mix will be. Your funding mix is essential to those sources of financial resources you can use for your business.

Let's take a look at a sample budget next…

Your “Sample” Coffee Shop Startup Costs*

*Please note: This list does not include your coffee shop equipment costs, labor, contract labor costs, and other supplies you will need to start a coffee shop business.

As you go through each cost, you may start considering your coffee shop menu, the condition of your location, and of course, your overall budget. This is not an exhaustive list. Consider what items you will need to add. What items will you seek to avoid? What will you need to change?

Your Coffee Shop Business Property Lease

Your coffee shop business property lease is more than just your monthly rent. It also contains the terms of your occupancy.

These terms of your property lease can mean any number of things, including the times you can operate, the taxes you pay, the menu you serve, etc. Considering the location and the condition of your location is essential to your budget. Depending on your vision, budget, and location's current state, you may need to spend money to get it ready for use.

Building out your space may or may not be a good financial idea and a good long-term strategy. Your property lease ultimately impacts your bottom line, your ability to conduct business, and your ability to increase your profitability.

The signing of your coffee shop business lease is significant. If you enter into a poor lease for multiple years, you could be sinking your business's success before it can take off.

Our Complete Coffee Shop Startup Kit offers an excellent one-hour interview on the subject of your coffee shop business lease. (You should not miss this interview!)

Okay, let's continue by considering the following sample coffee shop business items below:

Your Sample Coffee Shop Startup Budget

Part 2

(5,700 + 5,900 + 22,000 + 2,200 = 35,800)

Your Coffee Shop Budget Analysis 

The above list is certainly, incomplete.

The complete budget list varies from one coffee business to the next. Feel free to add/edit it. (Again, this is just for illustration purposes only!)

Simply running down this sample list, you’ll see that everything will need to be purchased or accounted for before you open your coffee shop business. 

Nevertheless, if you put these sample lists together (5,700 + 5,900 + 22,000 + 2,200 = 35,800), you will need about $36,000 before you even pour your first drink. (This also does not include your time, your labor costs, and other miscellaneous expenses.)

This may also be a very conservative figure, depending on your business concept and the remodeling costs, to ensure your appropriate vision.

The physical building out of your coffee shop takes planning – and perhaps the hiring of contractors – which adds additional costs. You may also have some legal fees, administrative fees, and other unforeseen costs.

Remember, adding a financial slack of at least 10% to each item will help address higher costs than expected. So, if you wish, consider adding $3600 as your budget in this scenario. 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, I believe that you can always save money by starting a coffee shop. This is especially true if you start planning early and adjust to a lower-cost coffee shop plan. The more thoroughly you plan, the greater the chances that you will make better money-saving decisions.

That’s why we recommend our Coffee Shop Business Startup Kit, which includes our coffee shop business plan template. It also contains 15 hours of relevant discussions on important topics you will be spending money on.

Your Coffee Shop Break-Even Point

If you're an American football fan, you know what it means for your team to be right at the goal line – and ready to score. If you can punch into the end zone, you will reach profitability. Getting to your break-even point is an important milestone that needs to occur before you score any profits.

Your working budget should always be aware of the end zone -or the break-even point. To be able to determine your coffee shop break-even point, you will need to be able to:

• Forecast your expenses
• Forecast your sales
• Anticipate your costs

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 commercial real-estate broker fees, coffee equipment costs, travel costs, possible consultant fees, build-out and contractor costs, etc.

While not the scope of this article, it is often recommended, with the help of an accountant, to amortize your equipment costs over time (break up the costs over the span of a few years) and embed those costs within your annual and monthly expenses. 

For more information on coffee shop break-even point as it relates to your budget, read our post, Calculating Your Break-Even Point for Your Coffee Business.

How Can You Forecast Your Coffee Shop Sales?

To establish any financial forecast for your coffee shop, we're going to need a few data points. You can get these data points by estimating or using existing receipt figures.

Existing Coffee Shops:

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, menu, and 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.  

New Coffee Shop Businesses:

For new coffee businesses, you will have to create rough but realistic estimates. This can be done using various data points, such as pedestrian or vehicular traffic, customers from neighboring businesses, or customers from nearby competitors.

For more information, read our article, How to Start Your Coffee Shop from Scratch.

Practical Steps to Budget For Your Coffee Shop

We offer a sample budget template with our Complete Coffee Shop Startups Kit, which also details items you'll most likely need to budget for. However, if you like, you can consider developing your own budget.

Our recommendations if you’d like to develop your own budget is the following:

Consider using a spreadsheet with Excel or Google Docs

Having everything broken down via rows and columns can help you keep track of dates, items, costs, timelines, and notes.

Break things down into categories

Breaking things down into categories can help you compartmentalize your expenses. For example, consider establishing categories for Coffee equipment, Furniture, Materials, Branding, Inventory, Labor, etc.

Consider researching the brands, models, and prices that you'll need, and write down your estimated costs for each item. Develop a subtotal for each category. This way, you'll be able to know how much you're going to need to spend

Keep your budget handy

Your coffee shop budget is a working document. Keep your budget file readily available on your desktop, tablet, or phone so that you can enter or make changes when necessary. Keep it close and use it often.

Write down everything

Write down everything. You can always change and delete items you eventually may not use, need, or purchase. It’s better to overestimate your business than underestimate it.

Create your coffee shop funding mix

Once you determine your budget, you will want to create a coffee shop funding mix. Your mix will detail the next step of your budget flow – which is where you will get the money from. This is essential. Detailing how you will fund your coffee business will allow you to move forward with your coffee shop action plan.

Best Coffee Shop Budgeting Practices

• Be honest with yourself about the numbers.
• Honor the time it takes to plan your budget.
• Spend time researching costs (and determine where you can save).
• Get help and learn everything you can about running a coffee shop.
• Create a coffee shop funding mix.

Are You Ready To Get Started?

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Coffee Shop Startups

Based in Seattle, Washington, USA, Coffee Shop Startups is dedicated to providing you with the most relevant information on how to start a coffee shop business successfully. Over the last 11 years, we've helped thousands of aspiring coffee business owners worldwide. We harness the experience, wisdom, and knowledge of many successful coffee shop owners to help you increase your chances of success and profits. We support business owners who want to start a coffee business by providing them with valuable information on starting their coffee business successfully.