Over the past decade, the coffee shop industry is increasing rapidly. The coffee shop actually treated as a third place outside of work and home to relax. The coffee shop business is one of the best ways to turn your love for coffee into a profit-making retail business.
Though seemingly coffee shop business looks easy, it is not practically so. The coffee shop is similar to the restaurant business. You need a lot of dedication and creative planning to make it successful. More so, when you are trying to start with low or no money. However, if are ready to put in hard work, it is possible to make a profitable coffee business. Here below find a stepwise guide on starting a coffee shop business with no or with a low budget.
12 Steps to Start a Coffee Shop Business with Low Budget
1. Research the Local Market
Take some time off and go for market research. Gather as much information as possible for a better understanding of the taste and demand of the customers in the locality. Getting traction in a competitive business like the coffee shop is vital. You will also need to have a clear understanding of how to get customers initially and a plan for keeping them returning and referring you to their friends.
2. Select the Type of Coffee Shop
There are three types of coffee shops one can open based on your investment and resources. The three types are as follows:
- Buy a Franchise of a Coffee Shop Brand
- Purchase an Existing Cafe
- Open a Coffee Shop from Scratch
Every option listed has its own pros and cons. The first two options are easy to start and require reasonable investment. On the other hand, opening a coffee shop from scratch will require more effort but will give you more control.
3. Create a Coffee Shop Business Plan
The first and most serious step that you will need to take is crafting a business plan. The coffee shop is a high-volume and low-transaction business. Crafting the right plan can only move your business towards success. Define your marketing strategy and how you will going to compete with other coffee shops in the locality. Determine your business objective and calculate an expected revenue return.
Developing a detailed business plan will also help you in arranging seed capital. Figure out your establishment cost with interior and equipment. Calculate the working capital cost of raw material, manpower, and miscellaneous expenses.
4. Name Your Coffee Shop
If you look around nearby your locality or online, one thing is for sure, you will find all successful coffee shops have an attractive name. A catchy and unique name for your coffee shop is a must. Check this article to learn more about how to go about naming a business.
Related: Catchy Coffee Shop Name Ideas
5. Location For Coffee Shop
The location of your coffee shop should be in an easily accessible place. Area demographics play an important role in selecting space for the coffee shop. According to your plan consider the Square feet area. You will need to understand that the coffee shop is a business of impulse buying and also it’s treated as a destination.
6. Make Your Coffee Shop Legally Compliant
Choose a business structure that is best suited based on your resources and scale of operation. It is advised to take help from competent people having expertise in company formation. If you are from the United States, for a beginner you can either form a proprietorship or a limited liability partnership. Forming an LLC is a better option if you want to protect your personal assets.
To open a coffee shop, you need to apply and get specific licenses and permits to operate. Contact the local licensing authority and understand the types of licenses required to open a coffee shop in the location you have chosen. Additionally, buy business liability insurance for the protection of your business in case of unforeseen calamities.
7. Calculate the Cost of Starting a Coffee Shop
The cost of starting a coffee shop will largely depend on the business model and scale of operation. There are several aspects that will determine the amount of startup investment. Some of them are the following:
- Type of coffee shop
- Food items you offer
- Type of equipment you purchase
- Cost of the retail location
- Interior and setup cost
- Manpower costs
- Legal expenses
- Marketing and promotional expenses
The cost of opening a traditional brick-and-mortar coffee shop will range from $35,000 to as high as $3,00,000. However, if you are short on budget, you can opt for low-cost business models. It can be a drive-through coffee stand, piggyback coffee business, or online coffee business. You can start this small-budget coffee business with as low as $500.
8. Setting Up Coffee Shop
It is important to create a floor plan prior. Ask an experienced interior for this. You will need to consider places for sitting arrangements, workspace, cash counter, washing sink, and storage. Ensure that your coffee shop workstation layout is such that the barista hardly moves their feet in performing all their coffee-making duties, and they are not competing for space with other staff members.
Place the cash counter on the front counter. Stand out of the crowd. Try to give a comfortable atmosphere with a unique theme. Concentrate on the inside ambiance and take extreme care of it. A good comfortable sitting arrangement with trendy decoration, cool music, and WiFi connection definitely matters in the coffee shop business. Concentrate on operating procedures and maintenance of books of accounts.
9. Buy the Right Accounting & POS Software
Pay attention to the exterior also. For the smooth functioning of a coffee shop, the right application of the software is essential. There is plenty of retail pos management software available in the market. Talk to software vendors and buy the one which is the best fit for your coffee shop.
10. Create Unique Products
It is important to select the right products apart from the coffee that you will be going to offer. You will need to promote multiple products from your coffee shop. Normally you can keep cakes, cookies, muffins, burgers, energy drinks, ice cream, etc. It is advisable to cover the necessary categories, but with limited and strategic offers. Concentrate on pre-make food and leave the custom-made to the coffee.
A successful coffee shop gets a 40% weekly sale from only coffee. Another 60% comes from products other than coffee. Determine the flavors, size, and types of food that you will be selling from your coffee shop. Remember, every item you add to the menu list, creates many multiples of management efforts. Fix pricing. Always be careful about the quality of the food that you are offering.
11. Hire Manpower
While you are opening an independent coffee shop concentrate on fixing vendors. Getting a quality product at a reasonable price is important. Fix a reliable vendor or supplier for getting smooth delivery.
As in any retail service industry, manpower plays a crucial role in the coffee shop business. Hire experience, skilled manpower with a pleasant character. Keep an accountant who is familiar with the point of sale software.
12. Target Takeaway Customers
Concentrate on takeaway customers. Remember that takeaway customers pay the same price as the sit-down customer, but without raising any of the occupancy costs.
- Understanding the needs you are really catering to your customers will help you to craft Your offer that keeps your customers returning.
- Offer loyalty cards to your coffee shop customers. Such as buying five and getting six free.
- Be consistent in serving good quality food to your customers.
- Pay attention to in-shop branding activity.
- Concentrate on the brand building of your coffee shop.
- Go for some co-branding activity with another reputed brand like sports channel etc.
- Concentrate on media coverage
- Use social media platforms carefully.
Frequently Asked Questions on Coffee Shop Business
What are the Best Coffee Shop Business Ideas to Start?
If you have a retail space in a good location and sufficient funds to invest, consider starting a brick-and-mortar coffee shop. However, if you are low in funds, there are several ways you can make money from the coffee selling business.
Some of them are the following:
- Start a coffee shop on a food truck
- Open a roadside mobile coffee shop
- Establish a drive-through coffee shop
- Start an Online Coffee Shop
What are the Types of Equipment Required to Start a Coffee Shop?
The list of equipment for your coffee shop will largely depend on the type of coffee shop you are going to open. Here we list down some of the basic must-have equipment to start a coffee shop.
- An Espresso Machine
- Drip Coffee Makers
- Coffee Grinder
- Milk and Water
- Ovens and Toasters
- Refrigerators and Freezers
Opening a coffee shop from scratch without saying is hard work. Running a profitable coffee shop is much harder than that. The only true passion for coffee can make this business a really successful one.
About the Author: 99businessideas.com led by Rupak Chakrabarty is committed to helping beginners, entrepreneurs, and small business owners in starting, managing, and growing their business. Our aim is to educate the entrepreneur on the various stages of entrepreneurship.