The biggest hurdle for any new coffee shop: how to make money in coffee.
Once your coffee business is up and running, making a profit doesn’t happen on its own. Yes, your product should be able to speak for itself, but is your potential income fully under your control? To be profitable, you need to understand and execute these ten fundamentals.
Understand Your Product
If you’re going to open up a coffee shop, but have no knowledge of coffee whatsoever, then you’re setting yourself up for failure. This is why you need to have a complete and up-to-date understanding of coffee. When opening a specialty coffee business, you need a very extensive knowledge of how to properly select, prepare, handle, and store the coffee you plan on serving. You’ll ultimately be the one that chooses the coffee that’ll be served in your shop. You don’t want to be serving low-quality coffee. Of course you can always hire experts to help, but it’s your job as the owner to still have a substantial knowledge of the business you’re running and the products you’re selling. Your employees will be looking to you for leadership and understanding. It’s important that you have the smarts about your products to share with them.
Have A Great Location
We can’t stress the importance of a good location enough. A bad location is the number one reason why coffee shops fail. No matter what industry you’re in, they will tell you location is key and in the specialty coffee industry you’ll hear this a lot: “The three most important things to your success are: Location, Location, Location.”
Having a great location can make up for some mistakes you might make or challenges you may face. But finding the perfect location is no easy task; it requires dedication and patience to find “the one.” It’s also important that you know your way around words because it’s up to you to convince the property manager or landlord that your coffee business is the best candidate for that space. Your business plan should help immensely in negotiating a lease for your perfect location
A Well-Designed Physical Space
Once you’ve found the perfect location, you need to make sure the next thing on the docket is making it look nice. This space needs to be appealing to the eye and also efficient to keep your costs low. To be able to remodel, equip, furnish, and decorate, you’ll need to have budgeted ahead of time to do so. Be smart about the contractors you hire, the equipment you buy, and furnishings you choose because these are all choices that can make or break your business from the very beginning.
Whatever coffee operation you decide to run needs to be appealing to your customers. If it’s not, they will decide to spend their time and money elsewhere.
Great Product Quality
One of the best ways to attract customers and keep them coming back is to have a superior quality product. It also keeps you steps ahead of your competitors! But to serve these quality products, you first need to know how and where to source and purchase them on a consistent basis. Without consistency, you’ll lose everything you worked for because your customers won’t know what to expect when they come into your business.
By serving the best quality products, you help protect yourself from losing customers to your competition. If you start your business off with mediocre products, that sets the precedent for the rest of your business’s lifetime. Don’t start yourself off on the wrong foot, do it right from the beginning!
Excellent Customer Service
Another essential is excellent customer service. The coffee business is a social, people oriented operation. Customers come into your business to buy something from people, not a vending machine, so make sure they receive the best human to human interactions as possible. The best way to accomplish this is to hire employees who are dynamic and dedicated to providing friendly customer service every time they work. Find people who are positive, energetic, and willing to learn about your coffee business. Previous experience isn’t necessary, but the right attitude is. Soft skills like being personable and helpful are much harder to teach than coffee skills, so focus on employees who will represent your cafe to customers well.
High Performance Levels
Anyone can have quality products and good customer service, but what makes one coffee business stand out over others is when they are able to produce those two things consistently. You need to maintain those high performance levels each and every day your doors are open. Use an employee handbook to make sure all of your employees are on the same page from the beginning so that you can hold your employees accountable and maintain consistency.
It’s also important to make sure you have consistency in your store’s cleanliness too. The small duties of cleaning fingerprints off the pastry case or wiping down tables need to be on every employee’s to-do list throughout the day. The consistency of your store’s outward appearance is crucial so that customers know to expect a neat and clean environment every time they come in. The best way to keep track of who’s doing these small, but necessary, to-do items is to create an efficient operations manual.
Marketing and Merchandising
If people don’t know about your business, how are you supposed to make money? You need to have a marketing strategy plan in place so that you’re constantly attracting new customers to your coffee business, and continuing to appeal to your existing customers. Marketing isn’t just putting ads in magazines or running social media campaigns though.
Once you’ve got them in the door, you need to present your products in the most appealing and organized way possible. The menu needs to be clear and understandable, the pastries beautifully displayed, your inventory organized. Signs need to be up to direct people so they know where to go to buy your products. This is the best way to entice them to buy more than what they had originally planned.
Once you begin to generate a profit, everything doesn’t just start working for itself. You then need to know how to maximize your profits. This includes coming up with a budget for revenue improvements and cost controls. Estimate your sales and expenditures as accurately as you can. Use past sales figures if you have them, and always estimate low. Nobody can see into the future but you sure can make some accurate predictions. Come up with a way to keep track of your financial performance each day, week, and month to make sure you’re staying within what you had estimated.
Sufficient Operating Capital
Sadly, one of the main reasons we see businesses fail is because they don’t have enough money to stay in business once they’ve opened their doors. It doesn’t occur to some business owners that you still have bills to pay once you’re open; your business won’t start paying for itself immediately. You may do everything right in opening up your coffee business, but then can’t afford to keep the doors open much longer after that without enough operating capital. We’ll say it until our faces turn blue: have enough money (operating capital) in the reserves to pay your bills until you turn a profit. This capital can come from fundraising, investments, or even loans, but you will need a healthy reserve to stay afloat.
To be, and to stay, successful in the specialty coffee industry, you’re going to need a substantial amount of knowledge and expertise. You also can’t become complacent once you’ve done the bulk of your research either! There’s always more to learn about the ever-growing coffee industry: new trends, new brewing methods, new coffees to try. Be in a constant mode of self-development so that you can make your coffee business the best it can possibly be.
There’s an enormous amount of coffee resources available to new, prospective, and existing business owners online for free or for a small amount of money (this is an investment worth making). Go to coffee workshops, coffee trade shows, and watch videos to learn new skills. No matter what you decide to use, any resources you can get your hands on will be helpful in your growth as a business owner and coffee entrepreneur.
Of course this is only a small and brief version of what you need to know to be a successful coffee business owner. By keeping these core principles in mind, you can rest assured that you’re taking the right steps. The rest of it depends on how you apply your own understanding and knowledge to your very own business.