How to Start Your Coffee Shop on a Budget

How to Start a Coffee Shop on a Small Budget

Dream Big. Start Small.

How to Start Your Coffee Shop on a Small Budget

You have big coffee shop dreams. 

But what if your small coffee shop budget isn't on par with your grand dream for your business?

First, don't be discouraged. Many successful coffee shop owners have started a coffee shop on a small budget.  Many even started a coffee shop with no money at all!

While money is often the biggest hurdle in starting a coffee shop – or any business – it doesn't have to be. When challenged with starting a coffee shop with a small budget, this might be the best time to up your game.

In other words:

• It's time to get creative.
• It's time to think strategically.
• Is it time to start thinking… small?

That's right. It's time to turn your disadvantage into one of your most significant assets by thinking small.

Sometimes thinking small has its benefits.

A brief list of benefits of starting a small coffee shop:

• It costs less money to start a small coffee business! The investment you will make will be considerably less than a full-fledged café. A coffee shop with a full kitchen, coffee bar, and adequate seating space could cost you $250,000 to remodel, build-out, and buy the coffee equipment for. Yet, a relatively small coffee operation may cost you only $15,000 to $35,000.

• Your day-to-day operations will be less expensive. For example, you probably might not need a large number of staff or baristas. As you'll soon discover, labor costs can quickly add up per shift.  Variable costs such as utilities, coffee, etc., can add up the costs.

• With a small staff, you can learn as you grow about HR (Human Resource) issues, such as payroll, workers compensation, and insurance.

• Inventory: You will be able to learn about how to manage your inventory better and reduce waste.

• Ability to build your brand. Starting a small coffee shop means that you can slowly and effectively build out your brand. All this while testing your marketing before “going big.”

Starting a coffee shop on a low budget requires a little thinking outside the box, strategic steps, and adjusting your plans right from the start. But it also starts with thinking “small and scalable.”

In this article, we're going to discuss how to start a coffee shop on a small budget.

If you have ample money backers, angel investors, or a rich uncle who's willing to write you a fat check, then this article is not for you. Instead, you'll want to read our article, Steps to Opening a Successful Coffee Shop.

However, if you are wondering how to start your coffee shop on the cheap, keep reading!

How to Start a Coffee Shop on a Budget

How Do You Start a Coffee Shop on a Small Budget?

You Start Small.

I am very aware of the financial barriers that can muddy the path to realizing your dreams.

When it comes to opening your dream coffee shop, we believe you should dream big but start small.

Did you know that many successful coffee shops and corporate chains started small?

Very small.

Even the mega-coffee chain, Starbucks, started modestly. They stuck to their concept, developed vital strategies for growth, and took deliberate steps to move forward – and scaled up.

By opening a small coffee business first, you can learn the skills and gain the experience you will need to effectively run a larger-scale coffee business – if that is what you choose to do!

You may be content with staying with a small coffee business. And that’s okay too!

How to Start a Coffee Shop on a Budget

 Yes, It Takes Money To Start a Coffee Shop

How to Start Your Coffee Shop on a Budget

It takes money to start a coffee shop. The question is: how much money does it take to start a coffee shop?

The answer depends on your total:

• Startup costs
• Operational costs (fixed and variable costs)

To learn more about startup costs, please read, How Much Does it Cost to Start a Coffee Shop?

A small coffee shop business might cost between $45,000 and $150,000. However, you might be able to take over ownership of a coffee stand for $10,000 or less, for example. Your concept, location, rental situation, and proposed build-out play a role in how much your coffee business will cost. 

Fixed costs and variable costs include your commercial rent, coffee shop equipment, hourly barista labor costs, and inventory expenditures. If you can reduce your fixed and variable costs while serving coffee, you can create a profitable business much cheaper.

Further Reading: Small Coffee Shop Ideas

How to Open a Small Coffee Shop

Steps to Starting a Coffee Shop on a Small Budget

Step 1: Drill Down: Question Everything

If you are setting out to open a coffee shop with a small budget, you have to play defense with your money – right from the start.

And the best way to so:

Question everything.

Absolutely everything.

Question every expense, every traditional method, or every mode of thinking when you start your coffee business. Because you lack money, your job isn't to open up a coffee shop in the traditional way – that would cost way too much.

The traditional way of starting a coffee shop may cost you up to $250,000 to $350,000.

Rather, your job is to open up a coffee business. Period. To do that, you’ll need to rein in your budget.

Therefore, always ask why you need to spend money on anything. And ask yourself how you can do it differently.

Question everything methodically.

By questioning everything – you are defending your money, stretching your resources, and forcing yourself to be creative.

Drill down.

Always ask, how can you do this cheaper without sacrificing quality.

After you arrive at your answer – drill down again!

By doing this exercise with every decision you make, you'll know that you couldn't have done it much cheaper in the end.

How to Start a Coffee Shop on a Small Budget

Step 2: Decide on Your Small Budget Concept

Starting a coffee shop on a budget begins no differently than starting a business with unlimited funds.

It all starts with developing a traditional business concept. However, you have to turn your traditional business concept into a small-budget concept.

What does that mean?

It means scaling your concept down to a more reasonable or obtainable goal. Realize that you can build and scale-up when the time is right. For example, you may want to open a coffee shop bakery but realize that you don’t have the money for a brick-and-mortar location. Instead, you could decide to open a mobile coffee truck and sell your baked goods; from there while you use a local commercial commissary.  This decision alone could save you $150,000 on a build-out, equipment, and additional commercial space. Once you are ready, you may decide to expand your mobile business into the brick-and-mortar place you always wanted.

Here's an average range of costs per coffee shop concept:

Traditional Coffee Shop Business Cost Range:

• Small coffee shop with seating:  $40,000 to $200,000
• Large coffee shop with seating:  $75,000 to $350,000
• Franchise coffee shop:               $100,00 to $350,000
• Café & Bakery:                           $120,000 to $350,000
• Coffee Shop Bookstore:             $80,000 to $250,00

Low-Cost Coffee Shop Business Cost Range:

• A piggyback coffee business:         $3,500 – $15,000 
• Drive-thru coffee stand business:   $10,00 – $90,000
• Espresso catering business:          $4,500 – $15,000
• Mobile coffee business:                 $10,000 – $95,000
• Online coffee business:                 $400 – $10,000

As you can see, every coffee shop idea and concept comes with its own opportunities and repercussions on your startup budget. If you have the funds for a larger concept, then great. If not, it might be more suitable to start a smaller coffee business and grow out of there.

Still unsure what type of coffee concept you want? Begin by exploring the various coffee shop concepts we've written about previously.

A great idea for starting small is opening a coffee kiosk or a coffee cart. This will significantly reduce startup costs and ongoing operational costs, such as labor and rent.

Another option can be launching a mobile coffee trailer or truck. Whether you purchase or make it from scratch, it will cost you much less than opening a café with indoor seating. Plus, it will give you the mobility you need to cater to different customer bases.

Take a moment to daydream.

Picture yourself as the future owner of any one of the coffee business options out there!

One rule, though: Make sure you love it.

If you go down the path of opening a coffee concept that you are not thrilled about or don't have any passion for, it's probably going to end badly.

In other words, choose a concept you can get excited about. Invest in that concept – however small it is – and grow it into something you can be proud of.

How to Start a Coffee Shop on a Budget

How to Open a Small Coffee Shop

Step 3: Develop Your Coffee Shop Brand

What you lack in size, you can make up for in branding. Branding can magnify the efforts of even the smallest coffee businesses.

Your branding includes:

• particular experience you want your customers to have,
• unique product offering,
• logo, slogan and color scheme,
• the emotional connection your customers have with your business.

Advertising can cost a fortune if you advertise traditionally. However, if you start early and develop your social media accounts, you can gain a steady following, who will wait for you to open. I know one coffee shop that captured and posted every step of opening up its business. On the first day, there was a line of people waiting outside to try their coffee.

So, working with local communities and organizations via Instagram or face-to-face communication will be important. Additionally, the right effort in branding – and promoting your coffee brand – can make you seem larger than you are. Therefore, always take advantage of the priorities to build your coffee brand.

Step 4: Reduce Startup Costs at Every Turn

If you want to start a traditional coffee shop, you will pay the traditional costs, which can be anywhere from $100,000 to $350,000 for a brick-and-mortar coffee business.

You got to do it differently. You have to throw everything you might think you know about starting a coffee shop – out the window.

When starting a coffee shop on a small budget, you can't afford to be the same as everyone else.

You have to be different.

You have to think differently. Plan differently. Execute differently. You don't have the time or the money to waste.

From the start, reduce the traditional coffee shop startup costs and operational costs you'll likely encounter.

Traditional coffee startup costs would include:

• Real-estate costs

• Your coffee bar build-out

• Сoffee equipment cost

Make it a priority to reduce these costs right from the get-go. By starting with this priority in mind, you'll be far more likely to open your coffee shop with a lower budget.

Your coffee shop concept has to avoid these traditional costs. This may mean that you decide to piggyback your coffee business on an already existing business. Piggybacking on an existing company may allow you to skip out on the bulk of your rental payments, build-out costs, or furniture expenses. Or this may mean that you decide to set up a mobile coffee truck or an espresso catering business.

Step 5: Write a Business Plan Focused on a Small Budget

What you don't have in finances, you have to make up for in planning.

Developing a thorough plan is essential when funds are limited. Make a business plan that has cost-savings embedded in its framework.

Everything in your plan must lean towards saving money, avoiding costs, and starting small.

Your coffee shop business plan should

• Define your low-budget coffee shop concept
• Analysis of your target market
• Specify your menu
• Determine what coffee equipment you need
• Focus on your location
• Establish your budget
• Detail your anticipated sales
• Detail your coffee branding
• Determine your USP (Unique Sales Proposition)

Your budget, your menu, your location, and your concept are significantly linked. They will determine your real-estate costs, equipment costs, and build-out costs.

Your plan should thoroughly discuss each area of your business development. The more you plan for now, the less you'll pay later.

For more information on how to write your coffee shop business plan, read our article, How to Write a Coffee Shop Business Plan.

How to Open a Small Coffee Shop

Traditional Coffee Shop Budget Elements

Continued:

How to Start a Coffee Shop on a Small Budget

Step 6: Develop a Low-Cost Budget

Every business requires money to launch, including a coffee business. I hate to break it to you, but there's just no getting around starting a coffee shop without any money.

Every coffee shop will require a budget. Your coffee shop budget should tell you:

• How much will it cost to establish your coffee business?
• How will we be able to bring those costs down?

Here are a few expenses that are involved in a typical coffee shop business startup:

• Legal and business registration costs and fees
• Coffee equipment costs
• Power supply
• Water (plumbing)
• Small-wares
• Inventory (coffee)
• Security deposits
• Labor and contractors’ costs
• Rental space
• Furniture and fixtures
• Coffee equipment costs
• Build-out costs

Take a look at the above list of expenses. The last four will take up the bulk of your startup costs. You will need to find ways to reduce or even eliminate these costs within your concept and articulate them within your budget.

Step 7: Create a Coffee Shop Funding Mix

The money to start your coffee shop business may come from various sources. I refer to this as your funding mix. It is the cornerstone of your coffee shop budget.

Your funding mix may consist of your savings, a family loan, a bank or institutional loan, investors, or other sources like crowdfunding.

Once you determine how much money you will need, you should begin to sketch out where the money will come from.

A coffee shop’s funding mix will vary from business to business and may change over time. It will be important for you to grow, adapt, and anticipate the natural changes that will occur with your coffee shop funding mix.

How to Open a Small Coffee Shop

Your Coffee Shop Budget Funding Mix

Step 8: Know Your Requirements

Being efficient will always save you money. When it comes to starting a coffee business, efficiency means knowing your requirements before you get started.

Whether you open up a coffee shop or set up a mobile coffee business, you need to know the agencies involved in signing off on your permits. Starting your build-out or setup before knowing what the codes, zones, or requirements are will most likely lead you to spend more money.

Take the time to figure out which agencies are in charge of your business type and work out from there. This may mean doing research online, calling state and local government offices.

For example, you don’t want to start building out your mobile espresso trailer if you aren’t sure what the building code requirements are. Additionally, you don’t want to sign a lease for your perfect coffee shop location when you haven’t checked the zoning laws.

Step 9: Develop a Vision & Plan for Growth

Starting a coffee shop on a low budget means that you won't likely open a giant coffee enterprise.

That's okay!

Regardless of how small you start, you want to have a vision and plan for your growth. Simply because you start small doesn't mean you have to end up small!

Most businesses, regardless of size, should plan for growth. Your small-budget coffee shop should be no different.

Visualize and plan for growth.

Whether you want to bring in more revenue year-over-year or you want to open a second location, expand into a new, larger location, or add a second coffee trailer – plan for growth.

Your vision for expansion or growth should be embedded in your coffee shop business plan.

Step 10: Hire Sparingly, Hire Thoughtfully

One of the highest ongoing operational costs will be your labor costs – the hourly costs for having baristas.

As a new coffee business owner, you may be excited to hire many baristas and other staff to execute your business plan. But hire sparingly and thoughtfully.

Labor costs can wipe away your profits and drive you to insolvency if you don't schedule your shifts correctly.

While you should assume a little “trial and error” with your scheduling, you want to make sure that you're on top of the amount of help you will need.

Reduce your labor costs whenever possible. Instead, hire reliable baristas that add value to your business with their skills, personality, and maturity.

For more information, read our article, How to Hire Amazing Baristas.

Step 11: Eliminate Waste From Day One

From building out your coffee business to serving espresso to your first customer, try to eliminate waste right from the start.

From my experience, 10% to 15% of expenditures can be eliminated by cutting down on waste.

One of the best ways to eliminate waste is to plan thoroughly – research what you need to know and understand before spending a dime. Invest in your knowledge. Additionally, get the help you need from experienced contractors.

Ongoing training also helps to eliminate waste. Therefore, we recommend that you invest in barista training opportunities and training in other areas, including accounting and inventory management.

While training and planning are important, eliminating waste starts directly from the top. Develop systems, training, and communication with your staff that your goal is to reduce waste right from the beginning.

How to Start a Coffee Shop on a Budget

How to Start a Coffee Shop on a Low Budget

We've covered some basic first steps you will want to take when you need to start a coffee shop on a low budget.

We will summarize these thoughts in the list below:

• Question everything
• Decide on your small budget concept
• Develop Your Coffee Shop Brand
• Write a business plan focused on a small budget
• Develop a low-cost budget
• Create a funding mix
• Know your requirements
• Develop a vision and plan for growth
• Hire sparingly, hire thoughtfully
• Eliminate waste

Taken together, each of these will help you reduce your overall coffee shop startup costs significantly.

How to Start a Coffee Shop on a Budget

Low-Budget Coffee Business Considerations

Additional Questions: 

Can I start a coffee shop with no money?

It takes money to start any business, including a coffee shop. But countless businesses are started every year with other people's money.

If you don't have any money, chances are you will need to develop a funding mix that is primarily comprised of other people's money. When this is the case, you will need to spend time developing a thorough coffee shop business plan.

For more information, please read our article, How to Start a Coffee Shop With No Money.

What are some low-cost coffee shop business options?

There are always opportunities to start a coffee business that costs less than your traditional brick-and-mortar business. From starting an espresso catering business, a drive-thru coffee stand business, or a mobile coffee cart, you'll be able to find various concepts that may work for you.

For more information, read our post, Low-Cost Ideas for Starting a Coffee Shop.

What equipment do I need to open a coffee shop?

To serve coffee, you'll require a variety of equipment and needed accessories. The type of coffee equipment you need entirely depends on your menu. If you want to serve espresso-based drinks, you'll want to have an espresso machine, grinders, and scales. Ice-makers, refrigerators, and ovens may also play an essential role in your business. For more information, read our post, Coffee Shop Equipment You Need to Start a Coffee Shop.

Making Big Profits From a Small Coffee Business

Making healthy profits doesn't have to be created from a large coffee shop. Healthy profits can be generated from a small drive-thru coffee stand, a single counter coffee kiosk, a mobile coffee cart, or a coffee truck.

Of course, many factors may lead to profits, but the biggest is coffee shop startup costs, as well as your ongoing fixed and variable costs. By having a smaller coffee shop business, typically, your fixed costs will also be lower on all fronts, from your rental lease, equipment, etc.

The truth is that you can turn that little coffee business into a wealth of revenue if you plan it out, understand your customer, choose the right location, and manage it well.

For an in-depth look at your potential revenue and income, please read our article, How Much do Coffee Shop Owners Make?

How to Start a Coffee Shop on a Budget

Photo credit: Alfiedude

Embrace Dreaming Big, Starting Small

Coffee Shops Can All Look and Feel Different

Coffee businesses can come in all shapes and sizes.

And they could also be beautiful and interesting too! Consider areas in your town or city.

Many coffee businesses start small but make a big impact on their communities, customers, and employees. We have a feeling that if you start a coffee shop or coffee business in your community, you will be driving up value for you and your neighbors too.  

Consider taking a look at our coffee business blog for more topics on starting a small coffee shop, setting up a drive-thru coffee stand, or online coffee business.

We encourage you to dream big but start small. And start with a specific plan and purpose to scale up your business into something bigger.

Need more help? We've created one of the easiest, most convenient, and most affordable ways to start your coffee business.

Our Complete Coffee Shop Startup Kit contains hours and hours of audio interviews with coffee shop owners and business experts, offering relevant discussions that you will want to hear before starting your coffee business.

Are You Ready To Get Started?

Unlock Your Dream Coffee Shop Business with Our Exclusive Coffee Shop Startups Kit!

Ready to transform your passion for coffee into a thriving business? Look no further! Our Coffee Shop Startups Kit is your key to brewing success. Here's why you can't miss this opportunity:

35-Lecture Coffee Shop Business Course: Our kit provides a comprehensive A-to-Z lecture series that covers what you should know and how to plan your coffee business. No more guesswork – follow our proven roadmap for success.

Comprehensive Coffee Shop Business Guide: Our kit includes a detailed, step-by-step guide that takes you from creating your concept to your grand opening.

Expert Interviews and Insights: Benefit from insider tips and industry secrets that successful coffee shop owners and experts share during one-on-one interviews. Learn from the best to stay ahead of the competition.

 Business Essentials: We provide business plan templates, checklists, and resources to streamline your startup process. From permits to menu planning, we've got you covered.

Cost-effective Solutions: Save time and money with our expert advice and budgeting tips. Maximize your ROI and minimize headaches.

 Adaptable to Any Setting: Our kit is designed to suit various locations and customer demographics, whether you're eyeing a trendy urban spot or a cozy corner in a suburban neighborhood.

Includes Exclusive BONUS Material!

👉 Order Now and Begin Your Journey!

Don't let the complexities of starting a coffee shop overwhelm you. Our Coffee Shop Startups Kit is your ticket to entrepreneurial success. Take the first step towards owning a profitable and fulfilling coffee business today.

Join the thousands of successful coffee entrepreneurs who started with a dream and a great plan. Your journey to coffee shop greatness begins right here!

Comprehensive. Proven. Affordable.

The Complete Coffee Shop Startup Kit

(Instantly Delivered To You)

Complete Coffee Shop Kit Sales Graphic

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.