Consider the Following Questions Before Starting Your Coffee Business
If you are considering starting a coffee shop or café, there are certainly plenty of things you'll want to consider before jumping in with both feet.
There is no doubt, that a coffee business can be an exciting venture, but without the in-depth planning and knowledge of understanding where and how to begin your business, you can easily venture down a rocky road.
If you plan to invest any money in a coffee business, you will want to start your research early. For starters, I recommend reaching out to coffee business veterans and gain from their experience. Learning from those who have already started their coffee shop is one of the best ways to get your business off the ground.
Certainly obtaining as much information you can about running a coffee business will be essential to your success.
Since our inception, our goal here at Coffee Shop Startups is to help you start your business off right – with free resources and our very affordable Coffee Shop Startup Kit – which comes with exclusive audio interviews that you don't want to miss.
Many coffee shops unfortunately fail because their business owners didn't invest in the time to learn from other coffee business owners.
By learning from other coffee businesses, coffee shop owners will be better prepared, save money, and increase their profits… all while enjoying their coffee business that much more – and isn't that the point?
I feel that if you're thinking about setting up your own coffee shop, you'll find the following questions discussed in this post will be a good starting point to setting up your own coffee shop business.
They are certainly not the only questions that you need answers to, but they make for a great start. Additionally, these questions are intended to get you thinking about some of the many areas you will need to pay attention as you begin your planning, developing, and finally execute your plan for setting up your coffee shop business.
14 Questions that You’ll Need to Ask Before Starting Your Coffee Business:
1. What kind of coffee shop would you like?
When you are thinking about how to open a coffee shop, you will need to determine exactly what kind of coffee business you will want.
To many the question might seem like ‘no brainer'. After all, you know you want to serve coffee, but how would you like to do it? Would you like to have a coffee kiosk? A coffee cart? A brick and mortar café? Or perhaps an espresso drive-thru stand?
Each of these are feasible coffee business options but require various degrees of investment, equipment, know-how, licenses, and possibly outside help.
Additionally, this seemingly simple question frames everything you want to do and impacts the food you wish to serve, and where to look for your physical location. Determining what type of coffee shop you would like to have will ultimately play a major role in your coffee shop startup costs.
Starting your coffee business can be a worthwhile and profitable venture, but only if you begin with knowing what you want to achieve. Start small. Be deliberate. Learn as much as you can.
With careful planning, the right consultation, and execution, your coffee shop business can be a life-changing profit center that will afford you a completely different lifestyle. Not to mention catering to your passion for great tasting coffee.
The ability to start a successful coffee shop can be life changing. But failure to plan could cause financial ruin. So, start day-dreaming and consider what type of coffee shop you would like to open! Perhaps, you're thinking about a bookstore-cafe, but maybe opening a coffee drive-thru espresso stand would make better sense?
Mixing your concept with the realities of your local market and your budget is important. Considering the local market, competition, real-estate, and other unique factors that may an important role.
If you are just starting out and don’t know where to begin, there are a few important things that are essential for your success in starting your coffee business:
Planning is Everything – Planning may not be the most interesting thing about opening a coffee shop, but it is the most important. Your planning will begin and end with your coffee shop business plan. Your coffee shop business plan will help you figure out everything from your concept details, branding, marketing, budget, and cost estimates.
- Your Menu is Everything – What will you serve in addition to your coffee? We know that your coffee business will require an espresso machine, perhaps a few coffee “pour over” options, and at least two grinders. If you are planning to serve cooked items or use vendors to search pastries or cookies, you will need to decide beforehand. Why? Because what you’re serving will determine your space and design – and of course your coffee equipment needs. All this, in turn, impacts your entire coffee shop budget.
- Location is Everything – It's definitely not a secret that your coffee shop location is critical to your profitability. Choosing an ideal spot and signing an ideal lease for your location should not be taken lightly. Fortunately, we offer a great audio interview (in our coffee shop startup kit) that discusses your coffee shop business lease. We'll talk more about your coffee shop location below.
- Knowing Your Customer is Everything – Knowing and understanding your customer base is essential. Who will your customers be? What will their needs be? What will be the busiest times and days for you during the week? Knowing your customers will determine your menu, your scheduling, and price points. We recommend getting to know who your customers will be before you sign your lease.
- Your Vendor Relationships Are Everything – Knowing who your coffee roaster will be and who your suppliers are and what their terms are is absolutely essential before you get started. Knowing your vendors, their prices, and their contract requirements will impact your pro forma balance sheets as well as your overall planning and business strategy.
- Your Cash Flow is Everything – Every small business needs cash flow. Your planning will help keep your cash in your bank account for when it’s really needed the most. Poor planning and failure to provide yourself enough cash flow can severely put the business in jeopardy. Having a reserve fund for rainy days (and droughts) will be an important consideration.
- Your Branding and Marketing will be Essential – Many small and independent coffee shop owners need to focus on their branding and marketing. However, with that said, many people don’t think about making any real branding effort or engage in any marketing. This is all to their financial detriment. Marketing doesn’t have to be expensive but it does require some thought, planning, and research. Most importantly, it requires creativity. Tapping into that creativity can bring you higher margins, new customers, and greater sales.
- Your Passion will Be Everything – Your passion will be immediately noticeable to your customers. Your passion is infectious. Your passion will see you through the “dog days” of planning and executing your actions. Do your best to keep your passion turned on. Protect and feed it by surrounding yourself with positive people, experienced advisers, and attainable benchmarks and goals.
2. How will you evaluate your location?
There is no question that your location will be among the top three things that impact the success of your coffee business. So you'll want a lot of answers before you choose the spot to invest. For example you might wan to ask: Is there a lot of foot traffic? Do your potential customers that frequent the area actually want a coffee shop? How far will your competition and substitutes be located? Demographics, competitors, and a large customer base should figure into your decision on a final location.
Locations matters. It always has, especially for coffee shops and restaurants. Often times, “better” locations will cost more because of the more space, a better view, more parking, and nicer ambiance. However, the most important quality for a coffee shop is foot traffic. Balancing what you’ll pay towards your lease every month, to the amount of foot traffic and sales will require your evaluation of all these essential factors.
Still, many locations may not be so cut and dry. Aside from the aforementioned items you will consider other points as well. The important thing is to take your time in assessing your coffee shop site.
3. How will you define your coffee shop business identity and branding?
Your branding is important, especially if you are in a competitive market in an urban area. Your branding, logo, and customer perception will impact the extent of which your customers will be drawn to you. What kind of branding will you use?
Your brand is the symbolic promise of value that each of your customers expect. Their perception of your brand will determine your ability to charge slightly higher prices, reap higher profits, make new customers, and keep your regulars happy. Your branding and customer’s expectations go hand-in-hand with your overall success. Therefore, figuring out your branding before you launch your coffee shop should be a priority.
So, what should you do first? For starters, start thinking about your coffee shop's business name. Considering adding a local flavor to your business name like the name of the city, street, region, etc. Check to see if any other coffee businesses that exist already have the same name.
Additionally, check to see if a website domain is available for that name. Working on your brand, long before you open can be a fun and yet, important aspect of opening a coffee business. When you choose a name for your coffee business.
4. Do you have a Coffee Shop Business Plan?
Many coffee shop owners start their businesses without any type of business plan in motion. It's my opinion that this is highly irresponsible. A business plan is essential to your startup's success. I believe that your coffee shop business plan is not simply a document that once is completed, gets filed away somewhere in your desk drawer. Rather it should stay with you and grow as your business develops. It should be updated, changed, and re-printed.
There is no question, that a great business plan is something that is organic, adaptive, and evolving. Your business plan changes as circumstances change. Also, having a business plan allows you to open more doors with investors and landlords, which often require to see a business plan before considering you a real prospect for a tenant.
It can be your very best personal resource as you get started on your business. Note: Our Coffee Shop Business Starter Package Offers a Coffee Shop Planning Guide (with an incredible audio series).
5. Have you considered your proposal to the landlord?
Once you found a great location, you next have to negotiate with the owner or management company for your property and lease agreements. Having a business plan and proposal would be a great help here because it would already help you understand exactly what you are looking for when it comes to retail space. The bottom line, before you approach your future landlord you should know a few things that are essential to your long-term success: Having a coffee business plan will do this for you.
Landlords love stable, long-term scenarios from tenants who pay on time and drive up the value of their property. Often times, a successful café can be a win-win situation for you and your landlord because they get paid on time and a successful business means that the property will be shown to be host to a successful place for future tenants.
Negotiations and approaching landlords takes some experience and preparation, so make sure you get the help and know-how before going in the ring to secure your lease.
Start with providing your property owner (landlord) a well-written business plan. He's going to pay specific attention to your goals and your finances. Naturally, he or she has a stake in the success of your business and wants to see that you have thought through many of the important elements of your coffee business.
6. Do you know the local permit and licensing requirements?
Local permit and licensing is an extremely important part of your business. It may also be the least exciting and most frustrating for potential coffee owners.
Each state, county, city, and business district might have their own permit, licensing, and zoning requirements. It is important that you know all of the different agencies and permits you must get before you pour your first cup of coffee.
Create a list for agencies in your local area and contact each one of them before starting your location search. Find out what each of their requirements are before starting your coffee shop.
7. Have you started your supplier search?
Maintaining quality and affordable supplies for your coffee shop is essential. Who will you use to supply you cups (paper and porcelain), napkins, coffee stirrers, and miscellaneous products that you’ll need? Finding suppliers and figuring out what kind of contracts are suitable to you and your growing business matters.
Finding suppliers and vendors that are in line with your business philosophy and work to make your business flow more smoothly is what you should aim for. If you are just starting out, you may consider experimenting with a variety of suppliers. Testing which suppliers work best and contribute to your bottom line will be essential.
Additionally, you may also experiment with your product line as to provide a unique offering to your customers. However, your vendors need to work within you budget and scheduling. Consider their minimum orders and whether those minimum orders work for you and your business.
Tip: When you look for vendors, have fun discovering what your customers will want to buy. When you figure out what your customers will like, you can then focus on the details of business that are important, such as terms and conditions of working with vendors and suppliers.
8. Do you know which coffee you will serve?
Deciding on which coffee you will serve should not be a light choice to make. If you don’t serve your own roasted coffee, choosing your coffee roaster will be essential to your long-term success. My recommendation is that you “go local” – as many of your customers will like the fact that your coffee beans are roasted locally.
In addition, your local roaster may provide you with a fresh supply of high quality coffee beans at a great cost. Choosing the right contract is important and requires thoughtful consideration and since this is your main profit maker, you should take your time in deciding. Visit several roasters and ask to attend their coffee cuppings. During your time with them, take notes and review them later.
9. Where will you get great staff that will represent you and your brand?
Training baristas to represent your coffee shop and more importantly deliver the quality product that will drive sales is extremely important. After all, without any sales, your business will die!
Will you simply go to an online service like Craigslist.com to randomly get your staff? You may or may not. Finding excellent staff isn’t as easy as you might think.
Whether you hire one, two, or forty staff members consider writing out an employee handbook and training manual.
Publicize that you are hiring on various places – including your own website, social media sites, your location, and other coffee websites and blogs. You should have at least two interviews with your baristas before choosing them. For more information, read this post on hiring baristas for your coffee shop.
10. Have you calculated all the fixed and variable costs to your coffee operation?
There are plenty of costs that are associated with opening a business. What are your fixed and variable costs? You may be able to decrease your fixed and variable costs with much needed planning.
Planning for your fixed and variable cost will be essential to reduce “sticker shock” but to keep you focused on your goal – which is to open and begin delivering sales. Having a pro forma balance sheet is essential to compare what you thought you’d spend to what you actually spend as you move forward.
11. Which accounting system will you incorporate into your business?
Coffee Shop owners need to stay on top of their paper work. Choosing the right kind of accounting software can help. Every successful business is one that is well organized when it comes to their financial paperwork. Independent coffee shop and café businesses need a tool to help make their lives easier. Saves you the hassle and headaches of organizing your records during tax time.
Every year at tax time, you can be spending days, if not weeks, trying to organize and calculate everything. Saving time, money, and headaches is always the direction you want to go. We recommend QuickBooks.
There are some tools you need in life and some that you can do with out – if you’re a busy coffee shop owner with multiple vendors and payments that need to be made, QuickBooks can be a lifesaver
12. What Will Your Coffee Business' Break-Even Analysis Be?
Many business plans (even in the second, third, and fourth drafts) may include startup costs – that have a breakdown of rent, utilities, equipment, and labor costs. Often times, business plans simply end there.
Unfortunately, the more challenging work of working to craft important pro forma break even analysis leaves coffee shop owners guessing when they will finally break even.
There is no question that you will to be able to determine what your break-even point is. And when will that point occur? What is the number at which you will break-even? What is the time frame to reach your break-even point? Is it 6 months out or 3 years out?
Know and be aware of the time frame your up against. From there you can determine if your daily, weekly, or monthly income projections are matching your analysis. If they are not, use it to make changes and adjustments to your pricing and other elements.
13. What Espresso Machine Will You Use?
Espresso machines can be very expensive. There will also be costs for installation and maintenance. While the perform the same function, no two espresso machine makers are the same. Many pull shots differently, take up different space, power, etc. So taking the time to review a few of them will be important.
A number of distributors may provide you the opportunity to visit their distribution center and sample their line of espresso machines. You will also need to decide how many “groups” you will need. Some cafes can do well with just two groups or three. Rarely, a coffee shop can get by with just one group head.
Figuring out the “right” espresso machine you will use for your coffee shop or coffee stand will depend on generally a few things: your anticipated volume, your anticipated growth, your space, your power/plumbing supply, and of course your budget.
14. Which Agencies Do You Need To Sign Off Before You Can Open Your Doors?
Starting a coffee shop is definitely a huge undertaking. Each business person and entrepreneur who is interested in starting a coffeehouse or bistro should look into all aspects of the business and spend time figuring what it is you would like to serve and the café ambiance you would like to achieve.
The more elaborate your menu and product offering is, more likely you’ll have many more prerequisites to satisfy before you can officially open. However, because you may only plan to offer coffee and pre-packaged snacks, you may still need to satisfy many requirements that a “normal” restaurant would, because the health department may expect your business to grow.
So putting in a variety of components into your café such as extra sinks and a grease trap may be necessary.
Having satisfied much of the requirements prior to buying a coffee shop is one of the benefits of buying an existing coffee shop – but you still may need to satisfy the requirements in your locale as a change in ownership to be complete.
There are a number of agencies that you will need to speak with prior to your opening. It is highly recommended that you personally speak with someone at each agency and document your conversations. Additionally, ask each agency for a print out (or specific website address), that will have their requirements for their specific department. If you make more changes than simple decorating such as remodeling, you will have to get a variety of city permits, so be sure to check with your city hall for such permits.
You’ll Need to Get a Business License – Check with your city department (or county) and state for an appropriate business license. Usually, it’s relatively straight forward but you will have to get the appropriate paper work and nominal processing fee.
Your EIN number – For Tax purchases you will need to get an Employer Identification Number. There is a nominal fee and can take a few weeks to process.
Health Department – Whether it’s your city or country, you’ll need to check and find out all the requirements for opening up your coffee business. Often times, they will have a check list for a variety of equipment essentials depending on what kind of coffee business you will have.
Local Fire Department – In nearly every city and county in the United States has to get the Fire Department to check off that you are suitable to open. Each region has their own regulation but you’ll have to satisfy a number of different safety inspection requirement – ranging from having enough fire extinguisher, to the correct number of exits, and equipment and building safety requisites.
If you are beginning to formulate your ideas for your starting your coffee business, consider reaching out and talking to as many coffee shop owners (previous and current coffee shop owners and sitting down with them).
Buy them a cup of coffee and pick their brain about their real world experiences about developing, launching, and starting a coffee shop.
Finding out as much as possible, without having to “reinvent the wheel” could save you thousands of dollars, heartaches, and even a failed coffee business. Starting your coffee business takes a lot of work and some investment. Don’t spend your savings on a business without first acquiring as much information as possible. This 14-point list is only the beginning of many questions that you need answered before launching your coffee shop.
Our Coffee Shop Startups Kit is available. The exclusive interview series features real one-of-a-kind interviews from coffee shop owners and business professionals and their exclusive recommendations on how to start a coffee shop, launch your business, be competitive against competitors, deliver excellent service, and increase your profits. It will help get your coffee shop business planning off to the right start!
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