Reuters

(Reuters)

Want to Open a Coffee Shop? Read This

By Small Business AllBusiness.com

When I ask prospective coffee shop owners why they want to open a cafe, they often tell me, “I thought it would be cute.” And my response usually is, “It sure is cute spending your life savings and then spending 80 to 90 hours each week trying to earn enough to make payroll.”

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If you’re considering opening a coffee shop or cafe, consider the following questions: Do you have a great business plan? Do you have about $150,000 for the initial build out? Do you have an additional $50,000 in the bank for payroll and other unexpected expenses? If you were able to answer yes to these questions, read on for the most important actions to take before you open your doors.

1. Find an awesome coffee roaster. 
A great coffee roaster should not only roast coffee to perfection and deliver on time, but will answer your questions by e-mail, social media, phone, and throughout the day. If you find a coffee roaster with those qualities, grow that relationship and then make sure you always pay them on time. It’s also smart to buy your own coffee equipment so if there’s ever a misunderstanding or a need to make a change, you can easily break up with your beverage supplier.

2. Looking for a building for your business? Become a spy. 
Have you properly scoped out your building before you buy or lease? Before you sign a lease, park in the building’s lot or close by. Count how many cars or people pass by every hour. Be there at different times – 2 a.m., 8 p.m., 6:30 a.m. — and on different days to see who your prospective customers will be. Will drivers in the area want to get a quick cup of coffee before work? Is there a stop sign or traffic light near your building? Are teens hanging out on the street corner? Do you have enough parking for your business to become a destination spot?

Research the businesses that used to be in that space. If another coffee shop closed in that exact spot, find out why they failed. Also look for the best rent available otherwise you will be suffering, with a smile, for many months before your customers become enamored with you.

3. Find people you can trust.
First you will need a business lawyer with real estate experience to look over all of your contracts and lease agreements. Next, find an accountant or bookkeeper to keep your finances in order as you build your business. A good commercial insurance agent should also be on your list because buying insurance should not be about price. If someone sues you or there is a calamitous event, all you need to know is that you have the proper coverage. Finally, don’t have Uncle Louie take care of writing checks for payroll. If Uncle Louie’s dog dies and he forgets to withhold the proper taxes, your business will fail. Find a reputable payroll company that will take care of all of your reporting responsibilities. Having lawyers and financial people on your side will help you sleep better at night. Notice that I didn’t say, “sleep well.” That takes a few years of long days of happy, hard work.

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4. Become a coffee geek.
Train yourself first on brewing coffee, tea, or whatever beverage you will serve. Be a geek about everything that you are selling. Learn everything you can about the coffees — the altitude of the coffee plants, the coffee varietal, name of the farm, cupping notes, and recommended brewing styles. Read every book, search the Web, and ask a plethora of questions about your product. You should be “the expert” about your products. Also share your knowledge and passion about coffee and the cafe with your staff. If they’re not passionate about your product or services, they will not help your bottom line.

5. Price your products accordingly.
Pricing is complicated, but it’s not rocket science. Think metrics all of the time. How many cappuccinos, lattes, cups of coffee, or espresso shots do you need to sell in order to break even? How much do you need to sell every day so that you, the owner, also gets paid? What is the replacement cost for your products? Are you delivering coffee to customers? There is a holy business axiom that teaches you how to price your products: If everyone complains about your prices, they’re too high. If no one complains about your prices, they’re too low. If just a few people complain, they’re priced perfectly. This process is not a one-time process — it’s eternal.

As long as you own your business, pricing should always be on your mind as your business grows. If your expenses are growing, your revenue needs to grow. What would happen if you slowly increased your prices by a nickel or quarter? Try it for a few months and see if any customers even realize that it’s happening. If your product and customer service is exceptional, your customers won’t care that you’ve raised your prices. If they love you, they want you to succeed. They own businesses too. Your happiness is connected to theirs.

There is another component to pricing that few people discuss: perceived value. What is the perception of the coffee? If you sell a pricey (to you) Hawaii Kona coffee that can sell for $40-50 per pound, what is the proper price? What kind of information will you provide your customers that will show the proper value of this coffee? Do you have photos of the coffee farmers that picked this coffee? Is it organic, fair trade, and will a portion of the profits help an important organization? Have you been communicating with your customers through social media and e-mail about this coffee? If your answer is yes to all of the above, then you can sell that coffee for $50 a pound.

6. Hire passionate people to work for you.
Don’t hire salespeople — look for people who have smiles in their eyes and smiles on their lips. Hire people who will always present your product with a smile and who are passionate about your products/services and your company. The only reason I ever fire an employee is when they lose their smile. When you first open your cafe, model the behavior and speech that you want your employees to follow. Nurture your employees, pay them well, and find happy employees who have big dreams.

7. Know your competition.
Everyone sells coffee. Thank about the Blue Ocean Strategy – how will you set your cafe apart from the competition? Research the competition that exists within a 50 mile radius and keep an eye on any new businesses. Ask yourself daily, “Who else does this?” If the answer is “no one does this,” then you’re on the right track.

9. Be passionate and full of joy.
Above all, there needs to be great joy in your business. There is a Jewish saying, “You can change the world with a smile.” If you, the owner, are always smiling because you love your business, products, and customers, then you will sell more. Your customers want to buy things from happy people.

10. Be aware of your ultimate goals.
Finally, remember that you open a new business to grow your life. It might seem strange to hear, but you should be planning your exit strategy from the business at the same time that you are planning its growth. If you’re passionate about your business, the long hours won’t bother you. However, if you continue working long hours, after three years you probably will begin to hate your business. Plan your exit strategy by hiring the best people, planning financially for the best and worst of times, and delegating much of the daily tasks. When you can spend more time with friends and family, then you may consider yourself a successful businessperson.

Frank Lanzkron-Tamarazo is the author of “God Cries and an Angel Loses its Wings” about building community in your business, offering great customer service, and educating customers. Frank is the owner of Chazzano Coffee Roasters, a successful coffee roasterie and cafe in Ferndale, Michigan. Chazzano Coffee Roasters has won Best Coffee Shop in Detroit every year from 2010-2013 and Best Tea Shop in Detroit in 2013. Chazzano Coffee ships coffee throughout the world and provides coffee to over 200 restaurants, cafes, specialty markets, and offices. In 2014, Frank started a new company, God and Coffee Consulting, that will teach owners of new restaurants and cafes as well as leaders of houses of worship to grow their organizations with passion, education, and training.

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