Is Starting a Coffee Shop Expensive?

Is starting a coffee shop expensive?

Coffee Shop Startup Costs

Is Starting a Coffee Shop Expensive?

Is starting a coffee shop expensive?

The honest answer is…maybe.

Someone can ask the same question about the cost of a car, wedding, or traveling. Of course, all of these can be expensive, but the total expense is really up to each shopper.

Now, what's important to realize is that the cost of all these spending options often goes up when the shopper does little or no research, doesn't understand exactly what they want, or doesn't create a budget.

In this post, we'll dive further into whether or not a coffee shop is expensive to start.

We've previously written about the costs of starting a coffee shop, but we want to look at some general topics surrounding this question further.

Specifically, we're going to ask:

• Is a coffee shop expensive?
• Is a coffee shop business worth starting?
• Are coffee shops profitable?
• How much money can you make with a coffee shop?
• What do you need to start a coffee shop?
• Are there low-cost coffee business options available?

These questions are essential for an aspiring coffee shop owner to ask – and get honest answers – before starting your coffee business.

Our goal is to provide you with the knowledge you need to move forward with your coffee startup with confidence and fiscal intelligence.

Is Starting a Coffee Shop Expensive?

Is a Coffee Shop Expensive?

Yes, starting a coffee can be expensive.

Yet, the ultimate cost of starting a coffee shop depends on the type of coffee business you're starting. The coffee shop concept, menu, and location are significant cost factors that play a crucial role in your coffee shop budget.

As we've previously written, I can give you the costs for a coffee shop, depending on the type of business. But your focus should first be on determining your concept and creating an adequate budget.

Elements of your total budget include:

• Your business concept
• Your coffee shop menu
• Coffee bar buildout
• Equipment needed
• Space requirements
• Location
• Labor costs
• Legal and administrative costs
• Insurance
• Inventory
• Marketing

Some are one-time coffee shop startup costs, and others are operational costs. You'll want to be able to budget for each item appropriately.

It would be best if you were honest about the costs of each element of your coffee business idea. It's easy to sluff off costs as minimal and insignificant, but these costs can add up. So don't avoid knowing for yourself – just how much your coffee shop will cost.

For more information, read our post, How Much Does a Coffee Shop Cost?

Your Coffee Shop Doesn't Need to Be Expensive

If you've ever been in the market for a car, you know that the cost range varies widely. Whether you want a new car, a used car, hybrid, diesel, 4×4, V8, a particular luxury brand, foreign, or any other variables impact the total cost.

If you purchase a car in one state, like Texas, it may be less expensive than in a neighboring state due to taxes, license fees, and scarcity.

Similarly, depending on these factors, your coffee business costs can be lower or higher than expected.

Here's the thing – and never forget this – You are in control of the costs of your coffee business.

How expensive your coffee shop will ultimately depend on you.

If funding a coffee shop is a concern for you, many low-cost coffee business options are available.

However, you'll find that lower-cost options aren't necessarily low-profit options. Pound for pound, they can generate healthy profits too. For example, some aspiring coffee business owners may have considerable startup money instead of starting a low-cost coffee business because it works best for them in their regional market due to existing factors.

So, you'll want to consider your market, develop your vision and concept, set a realistic budget, and develop your funding mix.

Next, you'll want to reassess whether your idea, budget, and funding can align to have adequate funding and market appeal.

My Recommendation:

• Start with your Vision
• Develop Your Concept
• Consider the Existing Market
• Create Your Budget
• Develop Your Funding Mix
• Always Assess

We've written some in-depth articles on developing your coffee shop budget and creating a coffee shop funding mix that you'll want to check out.

Is a Coffee Shop Expensive to Start?

Evaluating the Expense of Coffee Business

Is starting a coffee shop expensive?

Sample Coffee Shop Startup Costs:

The startup costs of a coffee shop can be intimidating at first. But, push through this intimidation and write everything down anyway.

Start with the basics – the large and obvious expenses. For starters, it would look something like this:

Sample Rough Draft Expenses

*Please note: This list does not include your coffee shop equipment costs, labor, contract labor costs, and other supplies you will need. We'll list those below.

Remember, this is not an exhaustive list. It's just to point out the apparent startup expenses you'll need before you get into the details. These details will include designing and constructing your coffee bar.

Let's dive into a more detailed budget below:

Your Sample Coffee Shop Startup Budget

This list is not complete. Nevertheless, it gives us an idea of the costs that may vary depending on your unique business concept.

You may want to add items and add them to the total cost. Other costs such as labor costs, materials, fees, permit applications, and inspection costs, can add up.

Is starting a coffee shop expensive?

Your Coffee Shop ROI

You're Investing Money for a Reason: Future Profits

While you may be spending money today, your coffee shop's return on investment or ROI will hopefully surpass even your expectations over the years.

Yes, you'll be spending money starting a coffee shop. But it's all aimed at providing a greater return for your investment. So, even if you may encounter “sticker shock”, continue working through the numbers and maintain your long-term perspective.

To get a better idea of your ROI, develop your coffee shop's break-even point and other financial forecasts, such as your anticipated coffee shop's sales revenue.

Considering that it may take several months to a year to be sustainable, you'll want to determine how many cash reserves you'll need to hold you over.

Further Reading: How to Start a Successful Coffee Shop

Is starting a coffee shop expensive?

Expenses and Revenue

Is a Coffee Shop Business Worth Starting?

Yes! Starting a coffee business is a worthwhile, profitable venture that can deliver much more than just profits. It can create a lavish lifestyle filled with community and life-long friendships.

A coffee shop can be transformative for any neighborhood, offering an injection of life, economic activity, and a space for neighbors to connect.

Coffee shops create opportunities:

• Be your own boss
• Generate profits and a healthy income
• Fulfill your personal vision
• Create a better community
• Be independent and self-sufficient
• Share your passion for coffee

How many people would love to obtain those listed benefits? Each coffee shop, if managed well, has the potential to open up many benefits.

Are coffee shops profitable?

Yes, coffee shops can be profitable. With a steadily growing market, specialty coffee is an incredibly stable business.

But revenue varies from coffee shop to coffee shop. Several factors impact your coffee shop profitability.

Factors of Profitability:

• number of sales,
• average receipt price,
• location,
• fixed and variable costs.

Even small coffee shops can offer you the opportunity to generate consistently significant revenue and subsequent profits.

A small coffee shop in the United States can generate $150,000 to $300,000 per year in revenue. To calculate your profit margin, you need to subtract the fixed and variable costs.

There are a variety of factors that determine coffee shop profitability. Indeed, your coffee shop management will impact the ultimate level of success.

Potentially profitable coffee shops can end up in the red because of poor customer service, mismanagement, poor quality, wrong hiring decisions, employee theft, ineffective marketing, and insufficient cash reserves.

Generating profits isn't automatic. Like anything meaningful, a successful business can't be put on autopilot. A successful business takes work, attention, and action.

It's to be expected that your strategy and actions may change depending on the conditions in the marketplace, including new competition, high costs, scarcity of good employees, and even a global pandemic.

For more information, read our post, How to Increase Coffee Shop Revenue and Sales

How much money can you make with a coffee shop?

Is starting a coffee shop expensive?

While a coffee shop can be profitable, you're probably still trying to determine how much money you can make. It's a fair question. After all, before jumping into this new business, you want to pre-determine how much income you'll make.

In the United States, a small coffee shop owner can make between $50,000 and $200,000 in personal income annually.

Why the big spectrum of income? Ultimately, your coffee shop's revenue determines what you'll make annually. In addition, some years may bring in more significant revenue than others.

Your cost structure (fixed, variable, and outstanding debt) also impacts your profit margins.

Elements that determine your coffee shop income:

• Sales & Revenue
• Costs (fixed and variable)
• Debt
• Shared revenue scenarios

For more information, we've written an in-depth article, How Much Does a Coffee Shop Owner Make?

What Do You Need to Start a Coffee Shop?

Starting a coffee shop is an incredible opportunity to show your creativity and vision.

Depending on your coffee shop concept, you'll need to have specific elements in place for you to move forward.

First and foremost, you're going to decide on your concept. What type of coffee business do you want? What kind of coffee shop can succeed in your given location? Would you like to open a drive-thru coffee stand or a mobile coffee business?

Next, you'll need a game plan. A game plan will allow you to harness your thoughts into a funnel of action. Therefore it's essential to write a business plan. Your business plan will help you figure out all the details of your coffee shop startup.

Once you write your coffee shop business plan, you'll need to determine your funding options or your funding mix. Securing your funds before you move forward with your business will be critical.

Things you need to start a coffee shop:

• Determine your concept
• Write your business plan
• Figure out your coffee shop funding mix
• Secure your funding
• Get help as needed
• Execute your action plan

Further Reading: Requirements to Start a Coffee Shop

Is starting a coffee shop expensive?

How to avoid high coffee shop startup costs:

We have seen that the most savings occur when the coffee shop owner is adequately aware of what is needed.

We have often seen aspiring coffee shop owners “wing it” or just figure things out as they go. While I believe many of them will eventually find their way to success, the road is much more challenging, and the costs are often much higher.

Therefore, if you want to avoid potentially higher startup costs, doing your research and purposefully planning out your business will help. Always remember to give yourself financial slack. Even with the best planning, you will probably spend 20% more than you initially budgeted. Much of the costs come after the initial startup costs.

We refer to these as operational costs or expenses. These include items such as inventory, labor hours, utilities, paper products, and food items. A significant portion of the operational costs can be trimmed down by reducing waste at every point. Increased productivity, less waste, and turnover can be accomplished by training your baristas. 

How to avoid high startup costs:

• Do your research
• Write a business plan
• Get help when needed
• Develop a budget
• Avoid impulse buying (of equipment)

Is starting a coffee shop expensive?

Additional questions:

Are there low-cost coffee business options?

There are thousands of ways to serve coffee and get paid for it. Therefore that are countless of various options for opening a coffee business. In addition, many of these options provide low-cost coffee business alternatives.

The spectrum of costs can vary even within traditional “brick and mortar” retail coffee locations. For example, you may have a traditional coffee shop, or you can add a larger kitchen for a more bottomless menu, a coffee roastery, or bakery, or a bookstore segment.

Other low-cost options include a drive-thru coffee stand, a mobile coffee truck, and a coffee cart or kiosk.

Additionally, you can also try to set up an online coffee shop that offers coffee beans and other coffee-related items for sale.

What are the major expenses when operating a coffee shop?

When you consider opening a coffee shop, we often focus on the startup costs, the high initial one-time expenses that are significant and could garner the most attention.

However, much of the actual cost comes over time. These long-term fixed and variable costs include:

• Your monthly rent
• Hiring and payroll costs
• Inventory management

Is starting a coffee shop expensive relative to other businesses?

Starting a coffee shop requires money, but what about when compared to other retail businesses?

Coffee shops have the advantage of having a core menu item that many people love: coffee! Additionally, you can operate a coffee shop year-round by serving cold-brew, nitro coffee, and various cold teas, smoothies, and beverages.

So, for example, if you are thinking about starting a retail shop (a souvenir shop) or opening an ice cream shop, you will have similar expenses. But with a souvenir, clothing, or ice cream shop, you're not likely to have repeat business that same day, week, or month.

On the other hand, it is common for people to buy more than one coffee per day at different coffee shops.

In other words, the demand for coffee and the likelihood of repeat business is high.

Additionally, the costs for commercial retail space in a particular area are often similar. For example, coffee shops may require more equipment than other retail businesses but can turn around and make that up with more frequent sales. For further reading, check out our post, How to Start a Coffee Shop with No Money.

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.