If you’re like me, you begin each day with a cup of coffee.
Worldwide, experts estimate that people drink about 2.5 billion cups of coffee a day. Sales in the ready-to-drink market—which includes coffee shops—are forecast to grow by 67 percent between now and 2022. Additionally, coffee and other ready-to-drink shops show incredible resilience in volatile markets, helping to eliminate some of the uncertainty associated with small business ownership. If you’ve been thinking of combining your love of coffee with your entrepreneurial spirit, it may be time to try your hand at opening a coffee shop.
What You Need to Open a Coffee Shop
Aside from a love of that sweet java, you’ll want to get a few things in order to get your shop up and running. To help with this, Jack Wilson, owner of Radio Coffee and Beer in Austin, Texas, and Marc Renson, owner of Ambition Bistro in Schenectady, New York, stepped away from brewing and serving to offer 13 tips to prospective owners. Here’s what they recommend you consider when starting a coffee shop:
- Write a business plan
- Find the right location
- Develop a floor plan
- Hire an accountant
- Find local funding options
- Save money for your personal expenses
- Compare prices and quality on everything
- Network with lenders and other coffee makers
- Develop your marketing plan
- Focus on the Exterior
- Remain positive
- Hire slowly
- Set high standards
1. Write a business plan for your coffee shop
One of the most vital steps you’ll take toward starting your coffee shop is to write a business plan. This document spells out:
- What your business is and who it serves
- How it will be profitable
- Your target market (primary customer demographics)
- Your competitors
- Sales and revenue projections
- Milestones and goals
Keep your business plan lean
Before you dive into creating a traditional, long-form business plan, we recommend creating a one-page pitch. This will allow you to quickly validate your business idea and get a good sense of who your market is, how you’re going to reach them, and find ways to differentiate yourself from your competitors. Will you serve pour-overs exclusively? Will you only use high-end coffee grinders and bean varieties? Will you include baked goods on your menu as well?
Similar to a thorough executive summary, this one-page pitch or Lean Plan is a faster, more efficient way to plan your business.
Browse our free coffee shop sample business plans
Need help getting started? Check out our business plan templates for guidance. They’re free real-world examples for you to work from and are available to download and edit as Word documents. Whether you’re starting a little coffee and internet café or a coffee house bistro, there’s a business plan template—a sample business plan—to suit your coffee shop needs.
Read how The Daily Perc opened drive-thru and mobile coffee stands, serving coffee drinks and other beverages to their target market: daily commuters and captive consumers.
This sample business plan describes how Dark Roast Java attracted a diverse clientele with its Mediterranean art glass decor.
The JavaNet Internet Cafe was a true visionary business sample plan when it was written, and with most coffee houses adopting some form of this plan, it’s obvious that it was an idea ahead of its time.
The Watertower Cafe sample business plan describes how the cafe will establish itself as a “destination” of choice to the many residents of the greater Atlanta metropolitan area, as well as numerous out-of-town visitors by providing affordable high-quality food, coffee-based products, and entertainment.
Beanisimo Coffee is a startup coffee roaster in Salem, Oregon. Founder Frank Jones aims to bring old-world Italian traditions and recipes to meet the market need for premium coffees. His target market is coffee houses, restaurants, and grocery stores.
The key to making a sample business plan useful is to take the time to modify it so it’s right for your business. A lot of the benefit of creating a business plan is in the process of thinking through each part of the plan. Not sure if you need a plan? Check out this article on reasons why having a business plan is important.
2. Find the best location for your coffee shop
To be successful, you need the right location for your coffee shop. You want something that fits the following parameters:
- Centrally located and easy to access
- Highly visible and experiences consistent foot traffic
- A space that fits your vision
Jack Wilson, the owner of Radio Coffee and Beer, warns that finding this dream spot won’t happen overnight.
His team scoured city after city, scouting each location, even going so far as to count pedestrian traffic by hand. He was looking for a former restaurant space, so he didn’t have to remodel everything from scratch. Finally, one day when he dropped his keys on the sidewalk he noticed a tiny “for sale” sign in a former tavern window. After months of searching, he’d found his spot.
Keep in mind that effective restaurant spaces are highly sought after and difficult to find. It may take a while to find just the right spot, but for a business type that benefits from ease of access and casual traffic, it’s worth taking your time to find the right spot.
3. Create a floor plan
A solid and welcoming floor plan is vital for a coffee shop. You want customers to have space to form a line, employees to have the materials they need within reach for quick access and a comfortable seating area. As with finding a location, it will take some time to produce a good floor plan.
According to Wilson you should, “walk yourself through every scenario you can think of,” he says. “If you’re making coffee, what needs to be near you? If you’re a customer, what do you want in a seating area? Visualize everything you can and start putting those ideas down on paper.”
Demo floor plan via RoomSketcher.
Design your cafe floor plan online
Here are a few free websites you can use to kickstart your planning process. Once you’ve drawn up an initial sketch on paper, get online and make it a reality.
Autodesk Homestyler (free): This is probably my favorite option. You can either start designing your floor from scratch or choose from a gallery of designs to personalize with your own look and feel. In fact, there’s even an option to experiment with real-world products and brands. When you’re done, you’ll be able to share the design as part of your planning process. It can even be used as part of your pitch to potential investors.
Floorplanner: This software is clean and simple to use, with plenty of drag-and-drop furniture and other items to fill out your design. It allows for both 2-D and 3-D visualization of your designs and can be easily printed out if needed.
Gliffy: While it may not be the go-to floor plan solution, I’ve included Gliffy on this list anyway, due to it being a well-known diagram and flowchart application. If you’ve used it before, you may want to give it a try to minimize the learning curve and jump right into designing. While you’re at it, you can even plot out your SWOT analysis.
4. Hire an accountant
One of the best pieces of advice Wilson says he can offer a new coffee shop owner is to turn your books over to an accountant. Aside from taking valuable time away from the business, having a numbers expert works in your favor.
“You won’t be as hard on yourself as you sometimes might need to be,” Wilson says. “Plus, you will make assumptions that an accountant wouldn’t make.”
In reality, your accountant is really your small business consultant. Make sure you find someone who believes in you and can help accomplish your business goals. If you’re unable to hire an accountant right away, you can also look to an online option like QuickBooks. The benefit of online accounting software is that you’ll have direct visibility into the day-to-day finances of your business. As an added benefit, it also directly integrates with the LivePlan business planning software, allowing you to actively compare forecasts and actuals on a dime.
Both are great options for managing your finances, and the decision fully depends on your situation and level of expertise.
5. Attain funding from local sources
Finding startup funds for a coffee shop can be difficult. Renson suggests talking with friends and family about investing in your coffee shop first. Present a solid business plan to them and ask them to invest in your business.
If funding via your family isn’t an option, or if you need more cash than your family can provide, Renson suggests looking into local loan options. In some cases, cities offer business assistance programs to offset costs. Consider an SBA-backed loan or see if a local bank or credit union is an option. Keep in mind that any bank loan will require you to show evidence that your business has some traction already. They want to know you’re a reasonable risk. So if you’re not up and running yet, there are other options for bootstrapping your business that you might consider.
6. Save money for your personal expenses
When identifying startup costs, don’t forget that you need to consider your own personal expenses alongside your business. All of your time and energy will be devoted to your new business, which potentially won’t be profitable for around six-months, even if you start bringing in revenue immediately.
So, plan ahead. Renson suggests making sure you set aside enough money to cover your personal expenses for at least six months if not longer. You’ll need to decide whether it’s possible to run your coffee shop while working another job or side gig or if you’ll be able to solely focus on your new business.
You will also want to understand the concept of cash flow. Considering that over half of the businesses that fail are profitable on paper when they fail, you’ll want to be sure you understand how much cash you’ll need on hand.
7. Shop around for everything
Before you buy, try to get at least two price quotes for every item so you’re not losing money on basic necessities or recurring costs. Use the internet to your advantage and look for the best prices on everything from comfy chairs to espresso machines.
8. Network your heart out
Having a hot location and brewing superior coffee will only get you so far. You need to network to maintain a connection to the area and to attract more customers. Look into joining the local chamber of commerce, a business association, or partner with a local charity. Be visible in your local community and get dedicated partners long before you open your doors.
9. Develop your marketing plan — before you open
If you start marketing the day you open, you’re already behind. On opening day, you want people excited to come in. You’ll want to develop your marketing strategy and begin advertising to potential customers several months before opening.
Affordable marketing options to consider:
- Partner with other local businesses by providing free coffee in exchange for on-site advertising.
- Leverage social media as direct communication with your customers.
- Participate in local events, providing free specialty coffee samples leading up to your grand opening.
- Do a small direct mail or email campaign that sends coupons to local residents or businesses.
- Call everyone, including the media, to tell them about your plans to open the shop.
Image via Radio Coffee and Beer.
10. Don’t just focus on the interior of the building
It’s likely that you’ll stress over every little detail of your shop, from what paintings to hang on the wall to the point of sale system (POS System) you’ll use. That being said, it can be very easy to ignore the exterior of your shop or coffee cart which directly contrasts with choosing a location with heavy foot traffic.
According to Wilson, you’ll want to “pay attention to the landscaping, signage, and exterior appearance because that’s the first thing people see.” Some people decide whether or not to come in based on their first impression of the building, so make it count.
By creating a clean and unique exterior, you’ll begin to create a buzz in your community. People will start to wonder, who is setting up shop there? Every little thing you can do to attract attention to your coffee shop can serve as a marketing tool.
11. Have a positive attitude
Like every business, you’ll face challenges to get your shop off the ground. Renson says keeping a positive attitude when things aren’t going your way is a must. Not only does it benefit your outlook, but it showcases strong leadership to your employees and a welcoming presence for customers.
Fake it if you have to. If you get in the habit of keeping an optimistic attitude, even if it’s less than genuine to start, you’ll eventually teach yourself to stay upbeat and will keep those around you optimistic and ready to work.
12. Hire slowly
You need help manning the register, waiting on customers, and making drinks, but don’t hire too many people too fast. Renson suggests hiring a few friends, or neighbors who will volunteer to help you out for the first few weeks. Slowly, bring on staff as needed.
Hiring trusted staff can be tough. No matter how well someone does in an interview, you don’t know how well he or she fits until they’re on the floor. Keep a close eye on the register, Renson suggests, and don’t be afraid to let people go if they are hurting the business.
13. Set high standards
It’s okay to set high standards for your employees and overall business. That’s not to say that you should micromanage your employees. You’ll want to focus on effectively training your staff at the start and building an effective workflow that encourages collaboration and high-quality work. Their ability to make good coffee drinks quickly will have an impact on customer loyalty and satisfaction.
Starting an independent coffee shop is hard work, but that doesn’t mean it has to be a long-term struggle. If you focus on establishing these core pieces while developing your coffee shop business plan, you’ll set yourself up for success early on.
Learn more about running a successful coffee shop:
This article is part of our Cafe Business Startup Guide—a curated list of articles to help you plan, start, and grow your cafe business!