Is the Coffee Industry Right for You?
Before you get started on the path to opening your business, there are some very important questions you need to ask yourself.
The first question is: Are you interested enough in coffee to open a business based on it?
This may seem simple, but considering the years of effort and amount of money you’re about to invest, you should really be sure you want to make your livelihood by selling coffee, with all the various challenges you’ll face on a daily basis.
Here are some other questions that come from advice given during interviews we had with established coffee entrepreneurs:
- Do you have enough money to open the business?
- Do you have the passion to run a business and deal with its unique and long-term challenges?
- Do you love being around people?
- Are you ok with facing the unknown?
Here are some traits we heard coffee entrepreneurs possess, according to our experts:
- The ability to fall back on everything you’ve done throughout your life in terms of experience you’ve developed, people you’ve met, and your ability to learn.
- Adaptable, ready to change and not cling onto failing, strongly-held ideas.
- Both a perfectionist and willing to do things imperfectly to get it done.
- Seriously community-minded — again, you’re going to be around people a lot!
- Able to multitask the financial, people, product, equipment, vendor relations, and numbers of the business all at once.
How to Plan your Coffee Company
The process of planning a coffee company really looks like a series of questions and the answers you provide to those questions. Some of these questions and answers will get you started on the journey, while others will end up on your business plan and help set the structure for your business.
How to do Research and find Connections to the Coffee Industry
Ok, so you have the interest, and know if you stack up with the traits of a coffee entrepreneur. Now think about if you’ve developed the necessary skills in either business or coffee to get you started. Or, you can partner with someone or a team of people who have the skills you don’t. Not everyone needs to have them all, but be sure that these skills are covered by the founding team.
Some of the coffee and business skills you’ll need to open a coffee company include:
- Customer service and people skills
- Vendor relations
- Managing your numbers
- Equipment purchasing
- Business finances
- People management
- Coffee product manufacturing
- Coffee sourcing
- Coffee roasting
- Operating commercial coffee equipment
- Coffee beverage brewing
- Food safety
This list is not exhaustive, and may grow or shrink depending on how complex your business gets, but it helps to illustrate just how much goes into running a coffee business.
If you have no skills in coffee, the MOST RECOMMENDED ADVICE from our experts is to GET A JOB IN COFFEE, whether it’s for a cafe, a roaster, or anything else.
Recommended: Read some expert Advice to Go From Barista to Coffee Shop Business Owner
And not just clocking in and out — you have to want to excel at it, go above and beyond, work well with the team, and put everything you’ve got into it. This way you’ll either find out you love the coffee industry, or you don’t like it as much as you thought.
Additionally, you’ll learn the actual technical skills that go into running a coffee business. Immersing yourself in coffee culture will also expose you to a network, which we’ll talk about next, that you can build to help with your business later.
Some entrepreneurs spend years learning about the business they want to launch. They’ll work a job in the industry, just to get by, and continue to work that and other jobs while their company grows to a point that it can sustain a salary for themselves, so they can reinvest all the money they’re earning back into the business.
Can You Leverage Your Network?
Now that you’re creating a list of your coffee and business strengths, or a plan of action for how to get them, think about who you know who might have them already. And, keep an eye open for who you meet along the way while you explore the coffee industry.
As one of our experts, Jess Harmon at Cultivate Coffee had this to say:
“At the end of the day, if you don’t know something you can only Google it so far. And you’re probably going to end up spending more time on the internet than you would’ve if you just asked someone you knew had the answer to your question.”
These network connections can teach you how to open a business and inform you of the finer details of running a business — specifically a coffee business. They may even become a valuable business partner, or perhaps just a friend who can offer encouragement and advice, and who understands what you’re going through along the way.
What Type of Coffee Company Do You Want to Open?
Now you have an idea of why you want to open a coffee company, and what skills you and your network possess to pull it off. Now, you have to think about the type of Coffee Company you want to launch.
Here are some questions to get you thinking about what type of coffee company you should start:
- Do you want to source or buy, and then roast your own coffee?
- Do you want to work in a customer-facing role with the general public?
- Do you want one location, many locations, or a mobile location?
- Do you want to sell your products online, on store shelves, or in your own location?
Here are some common businesses in the Coffee Industry:
- Coffee Shop
- Coffee Roaster
- Coffee Franchise Operator
- Mobile Coffee Cafe
- Wholesale Coffee Roaster
- Coffee Importer
- Coffee Cold Brew Brewery
Some entrepreneurs get started small and low-tech, like roasting coffee out of a garage, or even making batches of cold brew coffee, heating it up with inexpensive equipment to save up and be able to upgrade later on.
Knowing what kind of business you want to run will inform many of your decisions moving forward, too. It impacts everything from equipment to the types of employees you’ll need, your product offerings, and many other things that will affect your budget and company structure.
What are the Costs to Start a Coffee Company?
When planning your finances to launch a coffee company, there are many factors to keep in mind while managing money for your business.
As our experts have said if you don’t have an idea of these costs going in, you’ll run out of money sooner than later.
The type of coffee company you’ve chosen to start will influence the costs you’ll have.
For example, a cafe may have the following cost categories:
When going through this part of the guide and eventually putting together your business plan, try to estimate your costs as accurately as possible, then add 20%. This extra padding will help you plan for the unexpected, like construction or other cost overruns.
Recommended: Read our How Much Does it Cost to Open a Coffee Shop guide for a more detailed breakdown of the costs.
Finding the Right Location
The biggest set of expenses for a coffee company is its location. The types of expenses that come up when considering a location include:
- Renovation - The biggest expense when opening a location.
- Sometimes a coffee location can be bought turn-key, with all renovation and equipment included, but this is not usually what people are stepping into when starting.
- Examples of renovation fees for a cafe could be:
- Architect Fees
- Construction Contractors
- City Inspections
- Lease or Mortgage payments
The prices of these will depend on your local area, the size of the place, the amount of renovation you want to do, and a number of other factors. Remember, if you decide what you want now, and find out later that you can’t afford it, you can adjust your planning later.
As an example if you’re opening a cafe, your location could be:
- A stall at a local farmer’s market
- A stall at a mall or other commercial area
- A food truck or cart
- Space within an existing business
- A leased space in a commercial area, like a retail level of a building or strip-mall
- A fully stand-alone building
Selecting the Right Coffee Shop Equipment
The next biggest cost center of a coffee business is its equipment, one of our experts, Jess Harmon from Cultivate, pointed out that in a cafe a water system, grinder, and commercial espresso machine setup can cost up to $20,000 alone.
However, you don’t have to always go high-tech when starting a coffee company if you don’t have the money to do so. You can scale back your expenses to the bare minimum to get yourself started.
Another one of our coffee entrepreneurs Maliesha Pullano, founder of Mamaleelu Cold Brew, had a different approach when opening her business. To make the most of her available capital, she brewed and even made drinks from cold brew coffee, which is inexpensive to make, and even frothed her milk with a $30 frother. She used the money she made to eventually buy a coffee grinder and other equipment for herself, where originally she was using one in a coffee shop attached to the entrepreneurship incubator she was a part of.
Here are some helpful guides to help you Find the Right Equipment for Your Cafe:
- Top 5 Commercial Espresso Machines
- The Best Commercial Coffee Grinders
- The Best POS Systems for Coffee Shops
- Choosing Manual-Brew Methods for Your Specialty Cafe
- Best Practices for Renting an Espresso Machine
- The Best Scales, Tampers, and Kettles for Your Cafe
Hiring for Your Coffee Shop Business
Will you need to have staff when opening, within the first or second year, or will you be able to run everything yourself?
Will you need staff, and what kinds of professionals will you need to hire?
When thinking about hiring staff for a coffee company, especially for a cafe, you’ll need to think about how to hire and train your baristas to make them as effective as they can be on their own.
Read our Coffee Shop Hiring Guide to learn about some of the employees you’ll likely hire, such as:
Beyond hiring staff to operate your business, getting things done in the professional world efficiently and effectively can include the input of many types of professionals, and they’re not cheap.
Expect to think about hiring some of the following to help your business get started and operate over time:
- Attorneys for legal matters
- Accountants for financial matters
- Architects for planning your space
- Contractors to build out your plans
- Realtors to facilitate getting a location
Looking for an idea of how much these professionals cost in your area? Check out Thumbtack to search for local professionals, and how much they’ll cost you.
Creating a Budget and Financial Plan
Now that you have a rough idea of what it will cost to get started, do you have that kind of money, and even if you do, are you willing to bet your life’s savings on your new business venture?
However, with this knowledge, do you need to scale back your ambitions, or do you need some more help?
Help can come in many forms, each with their own pros and cons, some examples include:
- Small Business Loans from the SBA
- Personal Loans
- A Business Bank Loan
Look into the realities of each of these, how possible they are for you to accomplish, and be ready to prepare a business plan, which we go into in the next section.
If you can’t access these, or don’t want the cons that come with taking money from other people what money can you build up over time or what things can you exclude or postpone in your planning process?
How to Create a Coffee Business Plan
Unless you’re independently wealthy, or have family members ready to loan you money no questions asked, you’ll need to come up with a business plan to pursue things like SBA loans, investors, and other types of financing, so they know you understand how to take the business you’re launching from point A to point B.
It also helps to tell the story of your business and what it is you’re doing in detail, such as why you’re doing it, who you are and who you’re doing it for in your target markets and customers, what the impact of the business is, why you’re choosing a location, who your competitors are, and even what can get in your way as risks.
A business plan typically contains:
- A Cover Page
- An Executive Summary
- A Company Description
- Market Research
- Product Line Information
- Products & Services
- Product Lifecycle
- Marketing and Sales Strategy
- Financial Projections for the first three years
This is a living document, and serves as a structure of where you’re going, being updated along the way. Without this structure and the goals it creates, you’re far more likely to fail in the long term.
Recommended: Get started writing a coffee shop business plan using the free Business Plan Tool in the TRUiC Business Center.
When planning a business, you’re going to have to answer a number of questions to determine your interest, ability, skills, current assets, and how to determine if this is a good business for you, and
Big takeaway points:
- To find out if you like the coffee industry, and to learn some of the necessary skills, get a job doing what you want your business to do. Go roast coffee, brew as a barista, or any other job, and do it well.
- Figure out, accurately, how much your business will cost, how much of that you have. This is so you can determine what you’ll need, what can change, or what can come later
- Start your business plan with the information you’re learning, and continue in this course to learn more about what comes next.