16 Things to keep in mind to start a successful coffee shop
Opening a coffee shop or running a café business is a big investment. It requires a lot of time, money and hard work. So before you even consider this business idea, it is important that you understand what it takes to start a successful coffee shop.
The revenue in coffee segment is projected $432,600 million in 2021. It is a booming industry and yet to reach its threshold. What’s more? The average per capita consumption will be around 2.2 Pound. Despite this, how many coffee shops due you actually see in your vicinity? It is time to think and start working.
There are a lot of business opportunities for you to grasp, but starting your business without any preparation is not wise. Understanding your financial situation is a fundamental aspect before thinking to enter any business. This also applies to starting your own café business. You need to calculate the fixed and variable expenses along with the ergonomics of the business.
Aside for the love of coffee, there are few important things to keep in mind before planning to start your own coffee shop.
- Is this the correct business for you?
- Startup Cost
- Business Plan
- Target Customers
- Raw Material
- Business Type
- Growth Plan
- Opening Date
Is this the correct business for you?
The very first thing to think about is whether this business idea is right for you.
Only the love for coffee will lead you nowhere, you need to have managerial skill sets, capital to invest, be ready to learn from your mistakes and an innovative thinking capability at the same time. Besides, you have to be community minded and a people person to achieve success.
Never take this decision in an impulse. Take a months’ time to think before deciding to take action. Remember that after entering this business and investing your time and money, there is no coming back.
If you are thinking about running a successful coffee business you have to work hard for it. Do research by having some experience in the same business. Getting a job in a successful café and learn the operations, work with the team, gain knowledge. You will realize either this is a right business for you or not.
You will build connections by working in a café that might help you open your own shop. Doing a research over the internet is good before you start your own coffee shop, but actually getting some insights by working in a shop will prove more beneficial. Networking is important as it gets you answer to the questions that are not readily available over the web.
The number of things that are required to start a coffee shop is huge. The only way to figure out exactly what you need is by actually getting some experience.
This can be done either by having some previous work experience, or by struggling in your own business for few months.
You should have a clear idea about how much budget you have right now and how much are you willing to spend initially. The biggest cost that involves starting a coffee shop business is on renovation or designing. Few lucky ones may save here by purchasing an existing coffee house, but that is not usually the case for everyone. The second biggest cost to consider is the machinery required to make coffee. A good espresso machine setup (coffee maker along with grinder machine) can cost around $25,000!
Tip: Once you have calculated your initial cost, add 20% for unprecedented expenses.
Unless you have a very strong financial support you will need some finance institution to back your business idea. Creating a formal business plan that includes your business model, pricing of the products and financials is the primary step to get your business approved from a bank.
A business plan should also consist of a step by step guide to your business idea. Not only should you plan about its sustainability, a strong business plan requires you to include expansion and your future plans.
You should be confident enough to plan on how to reach from Stage A to Stage B. These are prepared by setting small goals and creating timelines to achieve that.
Tip: It is good to aim high while creating a business plan, but it is also important to be realistic. Always remember that challenges or downsides will impact your business and can come across in any form.
Analysis of your target market is crucial.
You have to understand your target audience, their needs and how to reach out to them with their desired products. You will have a successful business if you segregate your target group and improvise your business as per their needs. For example, students need a place that is more people friendly with a lot of seating space to accommodate a larger group. Corporate or office goers require a relatively quiet place to conduct a business meet. Running a coffee business is not about serving coffee, it is about community service where you will eventually be successful by word of mouth from your existing customers.
So it is important to understand every target customer before implementing your ideas.
A major deciding factor on your business sustainability is the equipment to be used in the coffee house. You can either purchase cheap equipment that needs regular attention or an expensive one that is hassle free yet puts a hole in your pocket. None of the ways are wrong; all you need to do is maneuver your way around purchasing equipment.
Take a lot of time in deciding which equipment is essential to get you started. If you come across an alternative that is cheap, think about the pros and cons before making the decision.
You can also ask your coffee distributor to help you buy equipment, either from someone who was already in the business or through some of their contacts. Buying this equipment through these channels will definitely land you some discounts or deals.
Reach directly to the companies that are roasting coffee in your nearby areas. Inform them about your business and that you are willing to use their product as a raw material. Initially try to source from different companies before sticking to few, this will allow you to collect response from your customers. Also as discussed earlier, every target customer has different requirement. So if you are sticking to one roaster, you miss on the other good tasting coffee.
While creating a brand you should think about its simplicity and try to make it more local. Your target customers should be able to associate the brand name with their culture, values or with their lives.
Once you have created a brand and designed your logo, the first thing to do is secure your domain name as soon as possible. The second most important thing to do is apply for trademark to avoid any conflict of interests.
Creating a social media page is another major step while you are building a brand. Beautiful pictures of your coffee along with the ambience will definitely help you build your audience quickly.
It is important to understand your niche before building your brand name. You should be clear with your plan and about the service you are going to offer to the community. Remember, if you are only selling coffee it will lead you nowhere. But if you plan to offer a quality service along with coffee, you will achieve your dreams.
Your budget will totally dictate what type of property you can rent or purchase for your coffee shop. The most important thing to keep in mind while choosing a location is its vicinity. A location that is clearly visible from the main street will cost more, but the amount of foot fall you receive in a day will also be huge.
If you are choosing between two locations and not sure which one to consider, always keep these factors in mind:
- The location should be easily accessible.
- Reaching to the place should be more convenient and should have parking space.
- Always choose the better location from your options keeping the cost aside.
Business Type (PVT / LLC)
After finalizing the location and calculating the cost, it is time to decide the business type. We recommend starting your new business as an LLC (limited liability Company). It provides flexibility in management styles and limits the liability to owners at times of crisis.
Besides, the requirement to form an LLC is pretty straight forward. All you need is an Operating Agreement, Business License, Employer’s Identification Number (EIN) and a Statement of Information Form.
Read all about LLC Filing here.
Applying for food license in your early days will help you in a long run. This process takes an unusual amount of time leading to delay in your business plans.
Depending upon the nature of your coffee shop, there can be different types of licenses that you may require to operate. It is better to consult the health department while you are still planning, this way you get a clear picture of operations and avoid any future penalties. Besides, you can get a lot of help and free consultation from health department. You may even use their help at the time of purchasing your raw material or equipment.
There is no such thing in business that is less important than the other, yet when it comes to hiring; it is directly related to your business survival. It would be a travesty if you have recruited wrong staff which can directly affect your brand. Besides, a bad hire not only affects your average daily sale, he can also influence remaining staff to do the same.
Training your staff with day to day activities is a lot easier if you have hired a correct person for this job.
Friendly, outgoing and engaging are the primary qualities you should look into a person when you are hiring them. Hiring someone with these qualities will save you a lot of time and money as compared with training someone to develop these qualities.
Managing your business correctly is important if you want to grow quickly in your niche. Be it neighboring competition, rude customers, unreliable employees, or rise in supply cost all these factors are responsible for a business to decline unless you are managing these challenges well.
Consider management as a daily routine, there will be times when a machine would stop working at peak customer hours. You can get all frustrated when the espresso or ice machine breaks down, you have to be patient and work through it without losing your cool.
You will face challenges every day, things may go south very easily, and you have to be prepared for these types of challenges by staying positive.
Part of growing includes a well performing business, the best way to do it is by slowing down your pace and focus on details. Try to be consistent in what you are doing, if you have a business goal, try and stick to the idea without getting influenced by your competition. You will be growing if you take your customers and your community along the road, all you have to do is work from your heart.
As the business grows, your sales increase as well as your balance sheet. You are making money but your expenses are also growing. What you need at this point is a forecast of your business and how you will be able to manage your business going forward.
Tip: Don’t hire too much staff at an early stage of your business. It is better to keep a short staff that you personally know very well. You should have enough trust to turn to them when in need. Another important point to note, never purchase anything for your café on impulse. Always sleep over any business idea directly related to expense before making a judgement.
There are three things you can do about competition. Be positive and learn from a good competitor, be negative and try to mimic your competitor, or just be neutral and focus on your business.
You don’t have to focus on your competitors that much, yet you need to know what type of strategy or business plan they are following. Building your own path and not following your competitor’s footstep is the best way to manage your competition.
Customers are always looking to try something new, the more you try to imitate someone, fewer footfalls you will receive.
Grand Opening: The first step towards the rest of your life.
Preparing for grand opening is fun and exciting, besides it makes all the difference between a fantastic coffee shop and a boring one!
Distribute pamphlets and brochures to your friends and relatives and ask them to spread the word about your café. This way you will create brand recognition as well as build a relationship with your community.
A soft opening to get yourself prepared can be a good idea if you have no experience in hospitality sector. This will also help your staff to get a prior experience of the working conditions. Train you staff after the soft opening about the do’s and don’ts for the final grand opening.
Tip: Choose a weekend for your grand opening to attract more customers.
How to Start a Coffee Shop with Low Budget
A traditional café requires a minimum investment of $100,000 whereas a café that roasts its own coffee requires an investment of more than $200,000. So how do you start your own café with low investment? Starting your own coffee shop does not necessarily mean that you require huge investments. The key is to think innovatively, keeping your target customers in mind along with a positive mind frame. Remember that all the big coffee houses you see today once started small.
Besides, opening up a coffee shop with low budget has its own advantage. You have a potentially less risk, you are more flexible and you can start without taking much time.
We have listed key points that can assist you in opening a café with low budget.
- Choosing a small place
- Alternative Equipment
- Online Delivery
- Simple Menu
- Coffee Cart
Choosing a small place
Choosing a small place to start your café is a wise decision if you are looking to open a low budget coffee shop. First thing is to decide what kind of coffee shop you are looking to open and what will be your target customers. Another thing to keep in mind is the location. Shops in markets and malls have high footfall, so is their rent. It is better to look for places that have decent crowd yet the rent is not very high. If your target customers are students, look for places that are near colleges and universities. Likewise, look for places near your house if your target customers are moms and kids.
Be a creative thinker while choosing the place, not everybody goes to the market to buy a cup of coffee. A place near to the park or a recreational centre can also attract a lot of customers.
If you or your family member are already running a store, piggybacking on the existing business is a very cost efficient way to start your own café. This business strategy has tremendous benefits: low monthly rent, shared utility bill, and pre-existing customer base.
The best partner to piggyback your cafe is with hair salons. We all have seen customers waiting for their turn sitting on a couch. While waiting they may be delighted to have a cup of coffee, cheering up their mood for their session while giving a business to you as well. The estimated investment required to get started in this type of business is around $2,500.
A café requires a brewing machine, a roaster, water and ice machine as the primary equipment to start with. In order to start a coffee shop with low budget all you need to do is sort out your equipment needs. Think about the necessary equipment to start and its alternative. If you are planning to open a small café, you need not invest on expensive coffee machines and roasters, a basic machine costing around $800 can solve this purpose.
When it comes to designing and furnishing, there are many low cost options to choose from. First off, you can purchase refurbished furniture with a simple or vintage look. The interior can be decorated with old and antique items giving it a retro theme. These ideas are low cost, yet the ambience look wonderful for a small coffee shop.
Starting up your online coffee store is also a very budget friendly idea. This way you can save a lot of money to rent the shop, save on the furniture and decoration, which in turn will give you an upper hand to spend on marketing.
Listing your products on online food chains like UberEats will help you build a brand image. You can offer discounts and coupons for your target customers, a sure way to make your brand a hit among coffee lovers.
There are many advantages to start your business online rather than a real store:
- Order management is easier
- Marketing is cheap
- You have real customer data along with their location
- Expenses are less.
- Requires less staff
Having a simple menu can help you save a lot of money. A simple cappuccino machine will be a lot cheaper than a professional coffee machine that can make mocha or espresso.
Try to create your own menu from the limited resources you have. Include baked food items that can complement your coffee shop. Create a simple breakfast menu that is easy to order and eat while driving. A small store with a small menu will be much easier to operate as compared with a complex menu. Only increase the items in your menu when you have enough funds to expand your seating area to accommodate more customers.
A great advantage of opening up a coffee cart instead of a brick and mortar shop is the setup cost. A mobile coffee shop is the best way to start your business if you are facing challenges in choosing a location. You can also switch your locations as per your desire to cater all the customer segments. Coffee cart near the park in the morning, near to offices and corporate hub in the afternoon and closer to the highways in the evening will attract a lot of customers. The great thing about owning a coffee cart is that it can be run as a part time business as well.
Corporate business meets and events frequently look for catering services. If you are planning to start your own coffee business, there are lots of reasons to include catering in your services.
- You can avoid fixed costs that include rent, utilities, staffing.
- Completely flexible that allows you to pursue other business opportunities.
- Less investment is required as compared with a full time café.
All you need to start your own coffee catering business is a food license and your website that displays your services.
Equipment required to start a coffee shop
Opening a coffee shop is not an easy task, you may end up creating an endless list of equipment required to run a coffee shop. Yet, there are things that you may not require during your first 6 months of operations. The correct way to create a list is by writing down the list of equipment that is required initially rather than making a 5 year plan. This way you will not end up buying things unnecessarily and save a lot of money.
For your ease, we are sharing list of equipment required to start a coffee shop.
There are two types of Coffee grinders available in the market: Automatic and semi-automatic. The end results are same and you can choose any one depending upon your budget. Although you may feel the need to buy two coffee grinders for espresso and cappuccino, but it is wise to start with a single one.
If you are confused between the brands, Baratza is the best coffee grinder money can buy. The price starts from $200 and delivers high quality grind that is required to prepare a delicious cup of coffee! Another good brand to look for is Bodum Bistro, which is not very expensive, yet delivers what it promises.
Drip Coffee Maker
Purchasing a drip coffee maker can be a tedious job. There are lot of things to consider before you purchase your drip coffee maker. There are expensive ones & cheap ones both promising to do the job, yet it totally depends on you what you go for. There are few things to note before you buy a drip coffee maker:
- Make sure it has thermal (or steel) carafe.
- Look for SCAA Certification
- It should have programming features to turn off automatically.
Espresso machines are very crucial for your café business. You can compromise on drip coffee makers and grinders, but your espresso machine has to be perfect. Brands like La Marzocco and Nuova Simonelli produce thicker, creamier and strong espresso that cannot be made using drip coffee maker.
There are semi-automatic machines as well as fully automatic machines available, it is important to speak to your barista staff before making this decision.
Purchasing an espresso machine is not an expense but an investment.
In order to streamline your delivery, takeaways and kitchen orders, a POS system is the most convenient method. Not only it can help you bill your customers efficiently, with its software you can analyse the real time data that helps to increase your future sales. Few of the advantages of using a POS system are:
- Reduces human error
- Saves time
- Ease of operations
- Transparency between billing and ordering.
You can also build a list of customers and share regular updates about new launches and share promo codes with the help of a good POS system. You can even connect your online orders from third party websites to your POS system. This helps you to maintain the entire customer data on one platform.
A good quality blender is required to make iced lattes, frappes, and macchiato. The only thing to keep in mind is the level of noise it creates while blending. Make sure you purchase a blender that makes really less noise; alternatively you can purchase food processors that will be helpful with other stuffs as well.
You may need 2 or more refrigerators depending upon your size of coffee shop. The first refrigerator needs to be on a display to show varieties of cold beverages. The second refrigerator has to be a deep freeze to store milk and other dairy products.
If you are looking for a third refrigerator, search for under counter refrigerators that can be accessed easily by staff.
Filtering your water is important to standardize the taste of the coffee. This also protects your machines from sediments that can clog and damage inner components.
Coffee Tamper maker
This is a small but very useful tool to make delicious cup of coffee. Loose pile of coffee powder will not have a standard taste and will vary on each cup. Coffee tampers are used to tamp the coffee powder before it is fed to the coffee machine.
Depending upon your budget, you can purchase a dish washer as per your requirements. This is purely dependent on your business size, and you can even you a simple dishwasher that is used in homes.
If you are looking for commercial dishwashers, you can purchase a 3 compartment sink or an under counter dish machine that can process almost 40 racks of dishes per hour.
Ice machines are important if you are serving cold beverages as well. There are mainly three types of ice machines that you can think about installing.
- Modular ice machines: Ideal for large businesses and can produce around 600 lbs. of ice every day.
- Ice dispensers: These are usually found in cafes and bars and are pre fitted in a water dispenser. These are used by small and medium sized cafes.
- Under counter ice machines: If you are thinking about saving some space and yet thinking about placing an ice machine in your café, go for this type. They are commonly used in medium sized coffee shops and can produce around 300 lbs. of ice per day.
Smallwares For Coffee Shop
So we have discussed all the major equipment you need to setup your coffee shop. But what about the smallwares that are required in day to day activities.
Shared below is the list of smallwares for your coffee shop that needs to be stocked right from day one.
- Machine Cloths
- Espresso Shots
- Coffee Waste Bin
- Milk Frothing Jug
- Milk Frothing Thermometer
- Bar Matt
- Coffee Machine Cleaning Set
- Orange Juice Machine
- Steel Nitro Whip
- Mixing Shaker
- Cutting Board and Knives
- Serving Tray
- Cup Holder
- Espresso Cups
- Cappuccino Cup
- Plastic Cups
- Fork, Spoon and Knife
- Black Straws
- Wooden Coffee Sticks
- Organizer (To store sugar sachets)
- Paper Bags
We hope this article was insightful and helpful. We tried to include all the important points to analyze before you plan to start your coffee shop business. Opening your café is a profitable business if you plan your things right. Remember one thing on your path to challenges;
Success only comes after failure and it takes courage to continue even after failing