I’ve heard people who are considering opening a coffee shop say things like, “I think it would be fun to own a local hangout,” or “Everyone wants a coffee shop near them, so how can I go wrong?” Or even simply, “I love coffee, so why wouldn’t I love the business?”
While these rationalizations can warm you to the prospect of putting your life savings into a coffeehouse, make sure you have these fundamental characteristics as well:
- You’re passionate about coffee and talented at it. If you’re not, you’ll need to have a local workforce that offers skilled baristas who already have that talent and passion.
- You like people. You’re in the people business as much as anything else. If chatty regulars, needy staff and the milk delivery guy who never gets your order right are bound to drive you crazy, consider a less social endeavor.
- You have your ultimate goals in sight. You should be planning your exit strategy from the business simultaneously with its growth. If you’re passionate about your coffee shop the long hours won’t bother you—at first. After a few years you could start to feel weary. Plan your exit by hiring the best people, planning financially for the best and worst of times, and delegating as many daily tasks as possible.
There is no one secret to a successful coffee shop; in fact, most business acumen comes from hard work, extensive experience, or even luck. You’ll also need substantial resources resources, which you can’t recoup if your shop fails.
Experts estimate $150,000 for initial buildout, plus $50,000 for initial payroll and unexpected expenses. (And there are always unexpected expenses.)
If you’ve got the cash in the proverbial bag, here are some ways to bank on success:
Before you sign a lease, scope out potential locations at several times of day, and days of the week.
Hang out in front of the building on random mornings, afternoons and evenings. Count how many cars or people pass by every hour. Are there a lot of drivers who will want coffee on their way to work? Are people walking by regularly? Are they alone or in groups? Will there be enough parking for your shop to become a destination?
Also, research businesses that used to be in that space. If another coffee shop closed in the same location, find out why.
Note: A high traffic location isn’t do-or-die. In this more mature market, coffee is often a destination, not just an impulse buy. While you want to be located where there are a sufficient number of people, you don’t necessarily need the most high-traffic location (which will come with high rent and competition from franchise chains).
Outsource critical tasks to trusted professionals.
A business lawyer with real estate experience should analyze your contracts and lease agreements. An accountant or bookkeeper can keep your finances in order better than you can while you build your business. Use a good payroll company and/or said bookkeeper to make sure you’re correctly paying and reporting all paychecks and taxes.
Use great coffee.
Palettes vary regionally, so you may want to find a local roaster—if they meet your standards. An out-of-town roaster can also appeal to your market, but will lack fast, personal service. And a local one may even help train baristas before opening day.
Know your product.
Master brewing techniques for coffee and tea in all its forms, and learn how growing conditions and roasting techniques affect the final product, varietal names, etc. And make sure you pass your wisdom on to your staff. Sharing curiosity and diving into the nuance of this business is one reason people stay in it for so long, and why they love geeking out on it with each other. The enthusiasm can be infectious for customers, too.
Price your products right.
Price your offerings according to customer expectations and what the market will bear, not a straight markup percentages. For coffee you’ll need to be right around the average price for your area, for other things you’ll need to be below market price (sodas), and this loss should be made up with high margins on other items that are exclusive to you or in the ‘don’t-care and addictive’ category for customers.
Someone once said: If everyone complains about your prices, they’re too high. If no one complains about your prices, they’re too low.
Hire passionate people to work for you.
Find people who will present your product with a smile and will show pride in your products/services. Model the behavior you want your employees to follow.