Starting a coffee shop?

Can I really consider starting a coffee shop? You've probably seen the coffee shop open down the street or near your place of work. And you are wondering: It doesn't look so hard. And indeed, how hard can it be starting a coffee shop and making it successful, especially if you have a decent coffee shop business plan?

It is exciting to run your own business, be your own boss, and have a successful (and profitable) coffee shop. But before you jump straight into this business, you might be wise to stop and consider carefully how to avoid the pitfalls of starting a coffee shop business.

This article provides some help in identifying three key areas to pay attention to: your clients, your menu, and your cost structure.

Know your clients!

Knowing what kind of customers will pop into your coffee shop every day will help to determine a good location for your business, and ultimately help you in your entrepreneurial goal of starting a coffee shop.

The High Street - This is where you will get a lot of weekend traffic because Saturday (and increasingly Sunday) are popular shopping days for families and young people. If you are located on the High Street, you will also see traffic from other groups, but your busy days will certainly be the weekend daytime hours. Shoppers and tourists will prefer somewhere comfortable and relaxing to spend time enjoying a cup of coffee.

The Business District - Many large cities nowadays have business districts where much of the modern commercial activity takes place. However, they only attract a large volume of customers at certain times of the day: usually the weekday lunch time. So from about 12:00pm ~ 2:00pm is when they are busiest, and that's from Monday to Friday. Only.

Famous Attractions - You could also consider to locate near a famous landmark or tourist attraction. Near Trafalgar square, etc.. for example. Of course, rents will not be cheap, and you are aiming at traffic that may never be repeat customers.

Commuter Hubs- If you are into starting a coffee shop near a railway or bus or subway station, you could find that customers come in regularly if they like your food or coffee. But the location won't be so attractive to other kinds of customers. Commuters generally require a quick take away service so coffee drinks have to be finished quickly and served; and workers will be looking for somewhere fast and friendly.

Ideally, though, a broader mix of customers will be the best for a stable business, especially if you can attract customers from all the main groups. So think about what kind of coffee shop customers you are aiming to attract, and then you will have an idea what kind of model you need to adopt to serve this market. Other key locations include out of town retail centers, service stations on the highway, food courts, and more.

Watch your menu!

Also by considering your demographic, you'll find out what kind of coffee sells more popular. Lattes and milky coffee drinks tend to be more popular with women, as are some of the confection coffee drinks; while espresso straight up is more popular with older men. You may find additional subtleties to these general trends, too.

Whatever demographic you serve, though, you still need to pay attention to both product and cost as important considerations. Customers are often willing and eager to pay for products or services when they perceive value to themselves.

By choosing the best coffee beans you can possibly afford, you are helping ensure that your customers appreciate good coffee. Too often, I see coffee shops that spend a lot on their coffee machines, then skimp on the coffee beans. This is not the way to develop a loyal coffee drinking customer base.

Good quality coffee is a must but also consider the different types of coffee drinks you may like to offer. Coffee menus can be extensive and include the likes of specialty combinations such as lattes, cappuccinos, mochas and espressos. Starbucks claims it has about 87,000 different variations in its menu.

You may also have seasonal variations with more iced coffee sold in the summer months, and more expensive warming coffees in the lead up to Christmas. While customers expect to find a set menu of coffee, you can spice up your menu with seasonal variations, limited period recipes, and the occasional special offer, too.

Also think about catering for customers who may prefer teas or soft drinks and you may equally decide to offer cakes, pastries or light snacks. Doing some good market research will help you judge customer's needs and wants and some investigation into the cost of food and drink in similar establishments will help you pitch your prices at the right level.

By picking your customer and matching your menu to them, you'll find that your dream of starting a coffee shop is one step closer!

Count your beans, carefully!

Having seen many shops and restaurants on my high street go out of business after just a few months, I have to warn that you need to know your money situation BEFORE you consider starting a coffee shop, you need to budget accurately as you can for the start-up period, as well as for a considerable period after opening day.

Start Up Costs

When calculating start up costs, you need to take account of all associated overhead charges such as rent, utilities and fixtures and fittings. If you rent a new location, you will be liable for the rent and deposits, fitting out the store, purchasing all coffee equipment, and supplies. The wages for any staff that will be employed need to be covered and also the initial outlay for coffee making equipment, cups and saucers and of course the coffee itself.

Operational Costs

The cost of starting a coffee shop can be tremendous, but the most important ones are rent and wages. So if you are doing the work yourself, you will be able to mitigate some of the costs. For the entrepreneur, it's important to realize that you cannot control every cost exactly, but you need to be aware of two kinds of costs that can kill your coffee shop business: renovation costs that soar beyond budget, letting small purchasing get out of control.

Too often, entrepreneurs spend lots on decorating and advertising the opening of the business; but when rose-tinted expectations are dimmed, they find their coffers are draining far faster than they originally budgeted for. So plan for an extended period where income is limited, and make sure your financing can cover this. Of course, if this money is borrowed, you are adding risk to the whole venture.

Unexpected Costs

In the post-start up phase of starting a coffee shop, you will still find that you have to make additional costs purchases which can add up quickly. You may find that your original coffee machine didn't do a great job, so you had to replace it; you may decide to add extra tables and chairs, or extend your service hours; or you may even have to hire additional part-time or full-time staff.

The trouble with unexpected costs is exactly that. They are unexpected, unplanned for, and unbudgeted. If you can at all, prepare for the unexpected as best you can. During the initial period, operational costs will rarely come exactly on budget. So you will have to prioritize your spending, for the most part.

Income, income, income

When starting a coffee business, you probably spent a while estimating customer spend, customer rates, an annual budget. But the name of the game is generating interest, incoming customers and purchases.

At the beginning, promotion can help to create interest in your products and services. Having a soft-opening can allow you to test systems, staffing, products and servicing before you open regularly. But you must open regularly to have a chance of generating cash flow.

Take a leaf (or a bean?) out of the playbook of the major coffee chains, by focusing on your customer. It's important to understand what your customer wants as an individual. Of course, if you don't make a popular choice of drink (say: macchiato latte), you need to explain that your coffee shop makes other kinds of drinks.

Ultimately, though setting out your value proposition, and finding your market are the best ways to setting up a regular stream of customers through your door. But there are risks to the entire endeavor of starting a coffee shop.

Franchising as an alternative

One way to mitigate these risks of starting a coffee shop is to buy a coffee shop franchise. Franchises provide a quick and easy way of getting started and for an upfront fee, you can invest in a brand and may get help with kitting out the premises and assistance with a marketing campaign.

Needing a little Dutch courage?

Not surprising, is it? But to see how other coffee entrepreneurs have started out, you need look no further than Egbert Douwes and his wife Akke Thijsses who sold coffee in their local village in 1753! Recognize the name? If you don't, click on the story of Egbert Douwes Coffee and take a trip to the supermarket nearby.

Or how about a coffee shop more familiar to the modern era? Pike Place was the humble beginning of the 21st century's first major coffee company: Starbucks Coffee Company. Read both of these inspiring coffee stories, then come back for more inspiration!

In fact, almost every major coffee brand came from humble beginnings: Lavazza coffee, illy coffee, Millstone coffee, to name a few other brands you may recognize. While you may think they all started big, they didn't. They all started with a simple idea, the idea to make coffee that people liked.

Starting a Coffee Shop

So...however you decide to start owning your coffee shop, invest some time in sourcing your coffee shop supplies from a reputable merchant.

And finally...

Wherever you are, remember enjoy that cup of coffee!

Return from starting a coffee shop to coffee beans.