You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your coffee roasting business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a coffee roasting business?
The startup costs associated with opening a coffee roasting business are significant. In addition to commercial space, business owners must also purchase:
- A coffee roaster, which can cost up to $25,000 or more
- Green coffee, which usually costs ~$3.00 to $4.50 per pound but is bought in large bags (e.g. 50-kilogram (110-pound) sacks)
- Packaging supplies (a few cents per bag or box)
- Labels (a few cents each)
- A heat sealer, which may cost anywhere from $30 to $300 or more
- A coffee grinder, which might cost between $500 and $1,000
Businesses will also need a computer and internet access to accept orders, and a vehicle to make deliveries.
There are two ways that business owners who have limited capital can significantly reduce their startup costs.
First, business owners can “contract roast.” In contract roasting, a business pays a rental fee to use a more established roaster’s facilities. The roaster of the established company may also be involved in the roasting process. The roasted coffee is sold under the renting roaster’s brand, regardless of whether another roaster is involved. This solution not only greatly reduces startup expenses, as there’s no need to purchase a roaster, heat sealer or coffee grinder, and it lets inexperienced business owners lean on the expertise of more experienced roasters.
Alternatively, roasters can start with lower-priced equipment. Driftaway Coffee is an established commercial roaster that roasted its first commercial batches with a Behmor 1600 -- a roaster that’s marketed to hobbyists and typically sells for far less than $1,000. Businesses can also purchase less-expensive grinders and heat sealers.
What are the ongoing expenses for a coffee roasting business?
The ongoing expenses for a coffee roasting business include:
- Purchasing green coffee
- Purchasing fuel for the roaster (which may use propane, natural gas, electricity or another fuel source)
- Buying packaging supplies
- Rent and utility costs
- Employees’ wages
- Shipping and delivery costs
- Equipment service calls
Who is the target market?
A coffee roasting business’ ideal customer is a business that sells a lot of specialty coffee. Coffee shops, certain grocery stores and a few boutiques may go through a lot of coffee. While these types of wholesale customers won’t pay as much as individuals who pay retail prices, wholesale customers provide a more stable income stream.
How does a coffee roasting business make money?
A coffee roasting business makes money by selling roasted coffee to individuals (retail) and businesses (wholesale).
How much can you charge customers?
Retail prices for roasted coffee are often between $12 and $20 for 12-ounce bags. Wholesale prices are often $6 to $12 per pound. The quality of coffee is one of the main factors that determine where within these ranges a roaster’s prices fall. (A few roasters have prices outside of these ranges.)
Lots of roasters offer retail bags in sizes other than 12 ounces, but most roasters use 12-ounce bags as their main retail package. They do this because about 25 percent of green coffee’s weight is lost in the roasting process, so 1 pound of green coffee becomes approximately 12 ounces of roasted coffee.
How much profit can a coffee roasting business make?
A coffee roasting business’ profit potential depends on how many outlets into which it can get its coffee. A roaster that has coffee in lots of retail locations may earn hundreds of thousands of dollars, or more, each year. However, many don’t make quite this much, but bring in closer to tens of thousands of dollars annually.
How can you make your business more profitable?
A coffee roasting business can increase its coffee sales and add additional revenue streams by opening up its own coffee shops.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your coffee roasting business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Establishments that prepare or work with food are randomly inspected by the local health department on a regular basis. These inspections will check for compliance with local health laws, typically related to prevention of contamination. Here are some tips for faring well on a health inspection.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources
Certificate of Occupancy
A coffee roasting business is generally run out of a regulated location (e.g. Any location that passes a local health Inspection). Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location for Coffee Roasting
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a coffee roasting business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
Fair Trade Certification
In order to be qualified under an Fair Trade certification, the company must submit to fair trade supply chain audits as well as paying fair trade price premiums for the quality of bean supplied.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a coffee roasting business
One of the most effective ways of marketing a coffee roasting business is by offering cuppings. Cuppings are professional coffee tastings, and they provide a great opportunity for potential customers to connect with a roaster and learn more about their coffee.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
A coffee roasting business must be able to differentiate itself from other coffee roasters. A business might do this by:
- Specializing in a certain roast level or coffee from a specific region
- Purchasing coffee via direct trade and sharing the stories of farmers who grew the coffee
- Supporting initiatives by providing exclusively Fair Trade, Organic Certified or Rainforest Alliance Certified coffee
In addition to these strategies, coffee roasting businesses should also emphasize providing freshly roasted coffee. Coffee loses aroma and flavor over time, so freshly roasted coffee tastes better than older, stale coffee. Many roasters state the roast date on their bags to show that the coffee inside has been recently roasted.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Coffee Roasting Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
People who are considering opening a coffee roasting business should be creative, and also passionate about coffee. Creativity helps when coming up with new blends, which requires combining different coffees in unique ways and also inventing blend names.
Additionally, roasters should be comfortable with basic scientific concepts. Roasters don’t need a formal degree in science, but they should be comfortable with biology, physics and chemistry because roasting coffee involves each of these fields:
- Choosing good coffees requires a knowledge of growing conditions, cultivars and varieties of coffee beans (biology)
- Selecting and setting up a roaster requires an appreciation for thermodynamics (physics)
- Deciding which roast profiles are suitable for each coffee requires an understanding of how the heat applied in roasting affects the chemical structure of coffee beans (chemistry)
It’s also helpful if roasters are comfortable multitasking. Roasting a single batch of coffee takes between 10 and 15 minutes. In order to maximize efficiency, roasters often complete other tasks while batches are roasting -- but they must still keep an eye on any coffee that’s roasting to ensure it’s roasted properly.
What happens during a typical day at a coffee roasting business?
As a coffee roasting business owner, you’ll spend a lot of time roasting and packaging coffee. In a typical day, you may:
- Sort and weigh green (unroasted) coffee out into batches (often 5 to 20 pounds)
- Roast batches of coffee
- Sort and weigh roasted coffee into retail and wholesale packages (often 12-ounce and 5-pound bags)
- Accept and fulfill orders
- Clean the roastery
Deliveries to wholesale customers are often made weekly.
At least monthly, and perhaps more often, you’ll receive shipments of green coffee and send invoices to wholesale customers.
What are some skills and experiences that will help you build a successful coffee roasting business?
Roasting coffee requires a lot of knowledge about coffee and the roasting process. Roasters should be familiar with everything from the cultivars of coffee and growing regions to how to cup coffee and when to increase heat during roasting.
Business owners who want to learn to roast coffee without paying for formal classes can apply to work as a profile roaster at an area coffee roasting company. Profile roasters don’t come up with new roasts, but they roast coffee according to the parameters set forth by a head roaster. This can be a good introduction to the fundamentals of roasting, especially if the head roaster is willing to teach and answer questions.
Sweet Marias, an online retailer of green coffee, also has a lot of free resources. These are targeted toward home roasters, but can also be beneficial to novice roasters who are exploring opening a commercial roastery.
What is the growth potential for a coffee roasting business?
A coffee roasting business can be a small, local business or it can be a large national company. Two large companies that both started as small roasteries include Starbucks, which sells its roasted coffee through its cafes and retailers, and Green Mountain Coffee, which doesn’t have cafes.
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
How and when to build a team
As a coffee roasting business grows, there are four key positions to hire people for:
- Sales and marketing, which grows a roastery by seeking new customers
- Packaging, which packages up roasted coffee
- Delivery and customer service, which delivers packaged coffee and answers customers’ inquiries
- Profile roasting, which roasts coffee according to set parameters
The first three positions let you focus on finding new coffees, developing new blends and growing the business. Hiring a profile roaster ensures coffee will still be roasted if you become sick and provides you with an opportunity to take a vacation.