Calculating the cost of your coffee business: how much will your coffee shop or cafe cost, exactly? Well, it depends on a few important variables. This article discusses some of those variables.
If you are beginning to think about starting your coffee shop business – whether it is a full fledged cafe, restaurant, or if you want to start with a kiosk, cart, or coffee drive-thru stand, you will need to figure it out the cost before hand.
You would think that figuring out the estimated costs before starting your business is a simple and easy thing to do – and that everyone who actually starts a coffee business tries to figure it out, right? Wrong!
Unfortunately, many people start their coffee shop business without working out the costs and their operating budget accurately enough. The result is that they quickly figure it out that they are in over their head and have to either desperately borrow or lose their investment.
There is a better way. Start early. Start now.
Without the most basic concept development or budgetary planning, even a small “coffee stand” can bankrupt many unprepared coffee shop business owners.
We, here at Coffee Shop Start Ups, simply don't want you to fail at your coffee business! Whether you want to open a small cart or kiosk or a full bakery or bookstore, we want you to know the basics before you jump right into to starting your business.
Investing in your knowledge is a well-earned expense in time. Give yourself the opportunity to success by learning from other real-world coffee business owners.
In fact, real world business owners can actually provide more information than a book or a consultant could provide. That's why our coffee business guide is so unique: We harness the expertise – learned over years of trial and error – to help give you the edge as you move your coffee business forward.
1: Determining Your Coffee Shop Start Up Costs From The “Concept”
Figuring just how much money you will need to invest, will be based on your ultimate vision for your coffee business. The short answer is: Your coffee shop business costs will entirely depend on what kind of coffee business it will be, what your menu will contain, and where your business is located.
Of course, there are many other mitigating factors to determining your coffee start up costs, but those three are the basic elements to your start up costs: Your vision, your menu, and your location.
The Vision of Your Coffee Shop
If you want a kiosk or a highway coffee stand, your costs might be lower than a full cafe – or brick and mortar store front. You may want to offer your customers with books or other items that require space. The cost of your coffee business will ultimately be determined by what you dream your business to be. The vision = concept.
You Coffee Shop Design –The space must be able to accommodate features that are really important to your concept. Certainly, good concepts can always be tweaked to adjust to your space limitations – though it might not be very affordable to find the “perfect” space which sits in the “perfect” location – there will have to be adjustments made. Of course, you will need to ask yourself, “can my business work in this space?”
If not, you will have to keep on looking! Remember that spending a lot of money on your coffee shop's design will not make your coffee business successful!
Certainly, there are many coffee shop businesses that have gone under because their owners spent way to too much on the design – and perhaps ran out of money. Perhaps they failed to get the right equipment, or signed a lease with horrible terms.
2: Your Coffee Business Menu Adds To The Cost
Your menu is the lynch pin to your whole coffee business operation. What will you serve? Of course, you will serve coffee, but will you serve crepes too? Will you serve waffles? Will you serve ice-cream and gelato? Your menu determines nearly everything about your business when it comes to costs – both variable and fixed costs.
For example, your menu will determine how much space you will need, how much equipment you will have (and what kind of equipment you will need). Additionally, your menu will determine the number of employees you will need, the municipal permits you'll have to get, and even determine your vendor costs.
Your menu will impact your weekly or daily scheduling, your training, and your marketing, etc. Unfortunately, many people simply assume that the coffee menu will create itself, when it does not. When you start your business, you will need to know a detailed summary (including ingredients) of your menu offerings. Everyone from your landlord to your local health department will want to know exactly what you plan to serve.
Developing The Depth of Your Coffee Shop Menu
Start a coffee shop with your menu in mind. Sounds easy, right? After all, you're going to serve coffee. But what kind of coffee will you want to serve. Delve deep into your menu by figuring out the details now, rather than later. Many coffee shops offer tea and other beverages as well. Will you make your own product offerings, like bagels, biscuits, or donuts? List out your ingredients for each item.
The reason, you will want to list your ingredients is because many times, your local health department will want to know exactly what you'll be serving. Or will you buy your own scones? Who will you buy them from?
The local health department may often base their level of scrutiny on your ingredients. Of course, if you decide to sell packaged or pre-cooked products, they will look at your business differently as well. Serving pre-packed goods from a third-party vendor may reduce the level of scrutiny the health department places on your coffee business. But, perhaps not. So, you will want to maintain your coffee business in tip-top shape.
3: Your Coffee Business Location Adds To The Cost
Location matters. While this might be considered a no-brainer, many people don't realize that your location impacts your bottom line and your ability to turn a profit.
Costs for any particular location will be determined by the local economy and real-estate market. Additionally, your location will also impact your taxes, your utilities cost, your payroll costs, and even your personal mileage or gas costs to get there.
Certainly, you will want to spend a bit of time studying the variety of choices that you have when it comes to the location of your business.
Will you want to be in the center of your town or will you want a highway coffee stand outside the city? In addition to your location – look at specifics that will ultimately impact your bottom line.
To determine the Coffee Shop Start Up costs, consider the following questions: Does the location have adequate foot traffic? Does the location have an “anchor” store or business, such as a movie theater, cinema, or other business? Does the location have adequate parking?
Does the location rest on the “right” side of the road for busy times like rush hour? There is no secret that when we're talking about your coffee shop location, we're also thinking about the price.
In addition to assessing your location from a costs perspective, consider the costs of lost revenue of not getting the “better” location. Let's consider the following example:
John is looking for a location to put a coffee shop in his city. He is aware of his shaky budget and is looking to get the best location for the best price. Here are his options:
Location 1: Near a university. Rent is $2350 per month.
Location 2: Small Neighborhood commercial zone. Rent is $1575 per month.
The first location is nearly $800 more. The first location get thousands of people (students and visitors) walking by per day.
The second location is a charming spot with little to modest foot traffic. Which location do you decide on?
Does it make sense to save $800 a month but leave thousands more on the table? You will need to balance your upfront rental costs for lost potential revenue. Is paying nearly $800 more worth it? ‘It very well could be. You will have to do an analysis of potential sales of existing business nearby or on the actual site. You need to consider the flow of traffic, reasons for traffic, parking accessibility, etc.
While your chosen location adds to the cost of your monthly expenses, it may also significantly add to your profit margin when we look at the sales a particular location can bring.
4: Bring it All Together To Determine Your Cost
If you can answer the above questions with confidence, you can then break down the costs even further. After you determine the above answers, you should start looking at your location and your coffee equipment. Continue breaking the costs down.
Consider all factors including the hours you intend to remain open. Also, remember that you will most likely not make a profit on the first day or month.
So you will need to have established some capital reserves so that you can keep your business going until you are able to make a profit. We certainly recommend taking the time to start and complete a coffee business plan that can help you get organized.
To determine your Coffee Shop Start Up costs you will need the following:
- Your vision (or concept)
- Your Menu
- Your Coffee Equipment Requirements
- Your space/leasing costs
- Insurance/permitting costs
- Furniture/design/concept costs
- Remodeling/plumbing/carpentry work
- 2-3 Months of Leasing Time before you open
- Labor Costs/Training
- Initial Inventory
- Add 20% of all costs for capital reserves
Once you have estimated the Coffee Shop Start Up costs for your business, you will be able to make necessary adjustments to suit your budget. Having 20% for capital cash reserves is essential. Without cash your business will stop. Be prepared that a “profit” won't be obtained in the first few months or even full year of operation.
The more time you spend planning the less cash you will waste, so plan out everything. If possible, negotiate a lease that provides a couple of free months of rent while you set up your business.
We recommend listening to our audio interviews that come in our Complete Coffee Shop Startup Kit. They will provide an excellent background of the topics you need to know and understand before you set out to plan your coffee business.
Included in the kit is a time-saving coffee business plan guide. This will help you develop your business, form your budget, and help you determine your next steps.
Articulate Your Vision: Your Coffee Shop Business Plan
Being able to cohesively work out your vision & concept under the parameters of your resources should be done through a coffee shop business plan.
Writing a business plan for your coffee shop will save you money in the long-run. Having a written business plan will also ensure that you have thought through all of the major (and even minor) things that will have to be taken care of.
Fortunately, we provide you an easy way to get your coffee shop business plan started: Our easy-fill in template allows you to quickly understand each section of the business plan – explaining in detail what each section needs.
Having a proper business plan will help you articulate your vision and communicate your concept to other essential parties, like investors or property managers.
Other CoffeeShopStartUps Resource Articles:
- How To Start A Coffee Stand Business
- How to Market Your Coffee Shop Business
- How to Start a Coffee Drive-Thru Stand
- Calculating Your Break-Even Point for Your Coffee Business
- How to Start Your Coffee Shop from Scratch (Part 2)
- How to Start Your Coffee Shop From Scratch (Part 1)
- Your Coffee Business Success Depends On…
Coffee Shop Business Plan Guide:
Save Time, Save Money, Save Headaches with our easy-to-follow Coffee Shop Business Guide:
Receive Our FREE Guide!
Receive our 30 FREE TIPS on starting your coffee business! (Also get free updates and emails on starting your own coffee business!)