Is there any better start to the day than the aroma of freshly brewed coffee? Our simple cup-of-joe in the morning is one of life’s greatest pleasures.
No wonder it is one of the fastest growing industries in the world!
We’re now consuming over 66 billion cups of coffee every year worldwide!
So, it’s clear that we can’t imagine our life without coffee.
It’s our daily lifeblood and cup of joy and what better passion to combine with your entrepreneurial spirit and create a business that you actually love and enjoy?
Do you want to start a coffee shop?
You’ve done the hard stuff already – quit the job, decide on a business idea and listen to all the business podcasts about why you should work for yourself. But, like anything in life, a little planning goes a long way.
If this is your first step into the coffee industry, feeling overwhelmed is normal. Planning is key and will help take your idea and create a business that’s successful for years to come.
We have put together a simple step-by-step guide below.
It will provide you with the road map that you will need and help you plan and get started in your coffee business journey.
No need to let the noise and overload of information get you confused about what to do first, because we have used this exact planning method to create successful coffee shop businesses.
Step # 1
Familiarise Yourself with the Coffee Industry
This is the fun part!
Coffee grows in over 70 countries worldwide, and the flavour notes from different countries change massively.
Different coffee roasters use different beans, in different combinations with each other. Because of this new flavour profiles are created and this means the possibilities are endless! That’s what makes coffee such an exciting drink.
The better you understand coffee, the better you will be able to decide what to serve your customers and what’s in demand.
So, make sure you spend time getting familiar with your local coffee scene.
Let your imagination run wild and dream up your perfect coffee shop!
Here’s a few ways to familiarise yourself with your local coffee industry:
- Visit different cafes.
Check out the brand of beans they use and note which one’s you enjoyed drinking the most.
- Observe their ambience, menu and layout.
What do you like and dislike as a customer?
- Attend local cupping sessions.
These can teach you so much about what different coffee beans taste like.
- Attend local coffee trade shows, barista competitions, seminars or events.
This can give you a chance to network with local suppliers and also promote your new business.
- Talk to other cafe owners locally.
They may give you some insight into what has worked well for them, while running their own coffee business.
- Visit local coffee roasters and try different blends, which can help you select a high quality bean.This should be one that you would be proud to serve your customers.
This is a good time to check in with yourself and decide whether a coffee business is the right business for you. Being passionate about the industry that you work in, will mean that you can enjoy your business for years to come.
Step # 2
Create an Effective Business Plan
Let’s be honest. Preparing a business plan sounds boring, because it reminds us of those mundane college assignments, which means that most people will not write one!
If you want to be successful, you need to do what most others won’t do.
Putting an effective business plan together will prepare you to cope with the many challenges that will come your way.
It will also give you the confidence that your coffee business concept is feasible and your goals are truly achievable.
Below are 6 key elements that every business plan should cover:
- Business overview:
Introduce your coffee business concept and explain what makes you unique.
- Market analysis & competition:
Identify your target customer and your competitors, in detail.
- Sales & marketing plan:
Detail your pricing strategy and competitive advantage, and include your advertising and promotional plans.
- Ownership & management plan:
An overview of your skill set and your training systems to manage your employees.
- Operating plan:
Explain how you will plan your daily physical and financial requirements, for the smooth running of your coffee business.
- Financial plan:
This is a clear cash-flow projection and income statement, which includes a monthly breakdown of the first year followed by a quarterly projection for year two and three.
It’s not that overwhelming when you break it down into simple steps.
It may take some time to complete your business plan, but it will be worth it.
Step # 3
Select the Right Location
Finding the right location for your dream coffee business comes down to a few things. Like your budget, target market and local competition.
High foot traffic is, of course, the back bone to your success.
Many coffee shops depend on the customer’s impulse and daily walk-in customers allow you to grow, on top of your existing customer base.
Explore the below locations, which generally have high foot traffic:
- Shopping malls
- Central business districts
- University and school campus
- Transit centres (train station, airport, etc)
- Hospital and medical centres
- Gym and fitness centres
- Convention centres and concert halls
Remember that high foot traffic doesn’t always mean higher rent.
With some research, you may be able to find one of these high foot traffic locations, in a cheaper location.
Stay open minded to where you plan to locate your business.
Step # 4
Understand Your Target Market
Targeting everyone is dangerous! Make sure the concept of your coffee shop appeals to a certain group of customers.
For example: if you’re planning a grab-and-go style coffee stand, your ideal customer may be the 9-5 office worker.
But, let’s say your coffee shop offers comfortable seating, wifi and food options. You might attract university students or young adults looking for a place to socialise.
Keep in mind your competition, as well. Why would your target market come to you? Consider the below:
- Who is the existing competition in your location?
- Are there enough customers to sustain all coffee shops?
- See who else is targeting the same customers, other than coffee shops (you may be able to compliment what they offer, or run promotions in partnership. A win-win!)
Your competition will have a reaction to your business opening, so be flexible and plan for change, as other business’ start to change around you.
Step # 5
Check Local Regulations and Licences
There are multiple laws and regulations that you need to comply with when you open a new business, so check these with your local authorities.
Taxation may differ in different cities, so always check for any hidden taxes (for example: sometimes local governments may charge a fee for signage or outdoor seating) that will affect your profitability.
Think of all the below regulations or licenses you may require:
- Business registration
- Get a tax ID number
- Food and safety regulations
- Building permits
- Fire regulations
- Signage regulations
- Liquor licences
Step # 6
Find the Funding for Your Coffee Shop
Now, you’ve got your business plan and location sorted. You will have a clear picture of the budget you require to get set up and operate for the first few months.
If you don’t have enough savings, don’t be disheartened. You can get a little creative with finding money.
The first and easiest way might be to talk to family and friends and with a solid business plan you may be surprised how many people will buy into your coffee business concept.
Business loans is also an option to consider. This is where the solid business plan you have created, will really come handy. So be sure to highlight what will make your business stand out from the competition.
Your local community may be able to help find funds for your coffee business too. Crowdfunding is also getting popular because you may find local support for a unique concept.
While your initial instinct may be to ask for as little as possible. Consider the money you will need for:
- Start-up costs: the money you will need to get your business ready for customers.
- Working costs: the money you need to fund the business until you reach your break-even point.
- Home costs: don’t forget this part, because you will need money for personal living costs, while the business is in launch mode.
Hire an accountant:
From experience, doing everything yourself can be a nightmare, so it is important to work on your business for it to grow. Spending this time doing your payroll and taxes, takes you away from the big picture.
Hire an accountant to do your day-to-day finances, saving you valuable time.
Step # 7
Designing Your Coffee Shop Layout
A well designed coffee shop layout will create good vibes and a great ambience, because of this you will have happy employees and customers.
When planning the layout, think about the points below:
- Is there enough space for people to line up to place an order?
- Is the seating area comfortable with enough space to move around?
- Do the employees have enough space to move around in their work area?
- Can the employees reach the equipment they need quickly and easily?
- Are toilets and fire exits easily accessible?
Music and lighting also play a huge part in a store’s ambience, so distribute them evenly and discreetly through the entire coffee shop.
Step # 8
Buying Your Equipment
The initial investment into all your equipment can drain most of your fundsho, so shop around and try to find good deals on the essentials that you can’t go without.
The bare essentials that every coffee shop needs are:
- Commercial espresso machine.
- Commercial coffee grinder.
- Drip coffee maker.
- Commercial dishwasher.
- Water filter system.
- Point of sale system.
Buying brand new is ideal and provides warranties. But, if you have a smaller budget, consider second hand equipment. Especially an espresso machine, because if well maintained they have a long life and can be a bargain.
Some coffee roasters will offer equipment on lease, or for free (if you maintain a high volume of coffee sales).
Don’t buy everything at once, because you might be surprised how far the bare minimum can take you.
Step # 9
Hire your Staff
Usually the key staff of a new coffee shop are the barista and front-of-house.
Your customers will visit regularly and become loyal, so make sure you provide a good experience.
Make sure these key staff members are bubbly, outgoing personalities. Speed is important and so is a cool head under pressure.
When starting a new business, it is difficult to gauge how much staff you will need. So see if you can hire temporary staff (or friends and family who are willing to help).
As you get a feel for the customer’s needs you can hire or cut down on staffing, as required.
Step # 10
Planning your Menu
Planning your menu early will help you decide what you need, in terms of the coffee shop layout and equipment, and it will give you a more accurate financial forecast for the first year.
Of course, most importantly, you will meet the needs of your target customer.
While you may decide to focus primarily on coffee and tea – what else may your customer consider buying at the same time? Expanding menu options allows you to expand revenue streams.
Many coffee shops choose to offer liquor as a great way to expand their menu options, because they tend to provide higher profit margins.
Keep in mind that with a larger menu you may have additional food safety regulations or staff requirements, so research your location and target customer in depth before deciding on a final menu.
Step # 11
Don’t wait until you have opened your doors to start marketing, because you need to create some ‘buzz’ around the new opening and get your potential customers excited to come in.
Spread the word in advance, because you will be able to counter the initial lack of profits and help you reach your break-even point.
Ideally you should start you pre-opening marketing campaign a few months before you open your doors.
Think about these pre-opening promotional ideas:
- As soon as you begin working on the fitout of your business, consider putting up a temporary sign explaining the type of coffee business that is about to open.
- Create social media accounts (Facebook, Instagram, etc.) for your business, well in advance.
- Reach out to social media influencers and food blogs, to promote your menu items.
- Approach local publishers, especially those in the hospitality space and explore the possibility of getting an article published about your new opening.
- A few weeks before opening, consider where you may be able to offer potential customers some samples of your menu items.
- Hand out fliers and promotional material in the local area.
Starting a coffee shop business for the first time can feel a little overwhelming, but this step by step guide simplifies the process towards opening your doors to the customers.
So, if you take one step at a time, you are already on a winning path.
To summarise follow the road map below:
1 – Research, research, research!
2 – A business plan that you will actually use is much simpler to create than you think.
3 – Stay open minded when location scouting.
4 – Be a master at few things, but not a jack of all.
5 – Avoid any tax surprises.
6 – Be creative with your money.
7 – You need to plan for happy vibes in your store.
8 – Spend your money wisely on equipment.
9 – Don’t hire too fast.
10 – Your menu is your money maker.
11 – Make coffee shop irresistible to customers.
Building a business can be challenging, but would be as fun, if it was too easy? So, embrace your entrepreneurial spirit, stay positive, plan ahead and enjoy the process.