Does it make a profit? I looked into it but the startup and running costs means I would have to sell more than 100 pretty expensive coffees per day just to break even.
Yes. Margins are high in coffee. We serve a high quality product that customers feel is priced in the value range and we are at like 70-80% blended gross margin. There are plenty of busy shops at >80%.
It takes time to ramp up, but 100 orders a day is nothing. We do more than that in an inexpensive suburban strip mall. You can easily get into the hundreds in a high traffic location.
The key is to develop a base of regulars. Even a couple hundred of them is enough to keep the lights on.
We are open from 7:30-3 and do about $50k/mo. Work is like being at a party all day and cleaning up at the end. It’s the same people all the time so you’re basically hanging out and chatting with them all day.
I have so many questions. What was your initial startup investment? How did you pick the location to set this up in? What did your business plan look like? How many employees did you start with? How long did it take you to make a profit? Were you a coffee connoisseur before you got into the business? How do you select your beans? How did you do your marketing? I would love if you would answer these questions.
Alternatively, how did you figure all of this out when you first started out? Who did you go to so I can find a local analog here.
I didn't know anything about coffee, but I do have an MBA and held leadership positions before this so I wasn't completely clueless.
It took between $150k and $200k to start up. We had to demolish and rebuild an existing retail space. We also spent a lot on our equipment. You can definitely do it for less.
We picked a location near our house because we were tired of leaving our city to get good coffee. It's in a fairly busy shopping center with a supermarket.
We did the best we could with our business plan. It was wrong though - both good and bad.
We were pretty much cash flow positive by the second or third month. There were a few occasions where we had to put in a little extra cash during the first several months though. We were maybe 7 months in the last time we did. We turned a profit our second year. It's not easy though. You struggle to survive for at least 12-18 months.
We started with 3 employees. We still have 2 of them and the other went off to college. We have more now, but it's mostly part timers with the original 2 picking up most of the hours. We extended our hours since we first opened and we were open 360 days last year.
We selected our beans like idiots because we didn't know any better, but it turned out to be awesome. Normal people hook up with a local roaster. We went to Costa Rica to meet farmers. We visited a bunch of places and ended up with a direct trade agreement. We started importing green coffee in bulk and roasting it locally in small batches.
For marketing, we make silly social media videos and run ads on Google and Meta. We also did some local news stuff in the beginning. We do the typical local SEO stuff, get great reviews, etc. We are the highest rated shop in the area so a lot of people find us that way. We do some influencer marketing - a lot of bang for your buck there. We also offer a great loyalty program - nearly 60% of our revenue goes through that.
We have SMS opt-in from thousands of customers so it's easy to blast out a quick promo and shake the money tree on a slow day. Offering double points can turn things around quickly.
A surprising number of people will provide an email address or phone number on their first visit. I'll keep track of those first timers and load them into a retargeting campaign on Meta if they go a few weeks without coming back. I spent $16 doing that this month and got $940 in revenue from those customers.
Ultimately, the most important thing is to make sure everyone leaves happy. We work hard so that people leave happier than when they came in. Mistakes are made too. When you're making a couple hundred drinks a day and doing food orders, you're bound to screw something up. All our employees have the authority to give discounts, refunds or comp items. They keep an eye on people when they get their order. If it looks like they don't like it, our staff will be proactive about it. It was hard in the beginning when we were scraping by and giving away a drink because somebody didn't like what they ordered, but it pays off in the long run. You must have solid repeat customers to stay in business.
You can usually find a local roaster who will help show you the ropes. Often, they are the local channel partners you go through to buy your espresso equipment anyway. If you call up La Marzocco, Sanremo or Simonelli, they will put you in touch with some people. Local chamber of commerce meetings are good too. You can also meet other coffee shop owners in the area. I'm friendly with a couple owners of places that are far enough away that we don't compete with each other.
