Starting a Coffee Shop Business: Part One (Planning)

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- [Marcus] Coffee is an amazing thing.

- [Maliesha] It's first dates.

It's business meetings.

- [John] I mean, some theorists say that,

you know, coffee kind of started the industrial revolution

and took us out of the dark ages.

- [Jess] It's part of the love of coffee,

staying on top of the curve, ahead of the wave.

- [Marcus] I don't know.

There's nothing like it.

(funky music)

- The kind of person that excels at running

or opening a coffee house, I hate to say it,

but, really unusual person.

You have to have every skill set.

- Number one, they have to have enough capital

to open a business.

Number two, they have to have a passion to run a business.

- And you have to be willing to learn.

You have to be wide open to learning at all times

and never say, I got this right.

- I mean, you definitely have to have the quality

of being okay with the unknown.

- You have to be a perfectionist,

but you also have to be half-assed about everything.

- You really need to sort of fall back

on all the things you've ever done in your life.

- If you don't talk, if you're not out there,

you're not gonna get anybody interested

in what you're doing.

- They have to love being around people

because this is really a people business,

from your staff to your guests.

- It also helps to be community-minded,

cause that's really at the end of the day,

what a coffee shop's all about.

- It's an odd skill set.

I don't run across a lot of people that can multitask

that many things, the financial side, the people side,

the product side, the equipment,

relations with vendors, watching numbers.

It's hard.

My name is Marcus Goller, and I run coffee houses.

I've been in coffee 35 years.

I've run, probably, the busiest coffee house in the world.

I've run really slow coffee houses,

so I've done it all, all over the country.

So, I grew up in California, and I went to UC Davis,

studied psychology.

But I got a job at a cafe in Davis, because I begged for it.

I was like, you gotta hire me.

Everywhere I went in the Bay Area coffee scene,

I met wonderful people,

people that were passionate about coffee.

They just made me realize what a fun occupation it could be,

so I just wanted to be part of that.

(funky drum beat)

If you have any thoughts at all about

going into the coffee business, you gotta work it.

So, get a job at a cafe.

Especially try and go to a successful cafe,

to one that's more craft.

So get a job, and then just excel at your job.

Put everything you've got into it.

Do it right.

Work with the team and try and work your way up,

and gain more knowledge.

Cause either you're going to find you don't like it,

or you love it.

- And then also, you can, through that job,

make some connections that might help you open up your shop.

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 had just

asked someone you knew had the answer to your question.

Networking is essential because

we all have answers that we're ready to give.

But you have to be asked the question in order to give it.

And without networking,

I think I would've spent a lot of time

second-guessing myself.

And also looking for answers that were

more readily available if I had just, like,

looked to another coffee professional.

My name is Jess Harmon, and I am the Director of Coffee

for Cultivate Coffee and Taphouse.

Outside of Cultivate, I help other people

who are interested in starting up their own businesses,

and I answer a lot of questions for people

who have general questions about roasting,

questions about machines,

and also just health code questions and concerns.

If you don't have a good idea of what your budget is

going into it, it's more likely

that you're gonna run out of money sooner than later.

In reality, if you're serving coffee,

you're not there to make money.

It's not a business people should go into to make money.

It's a business you should go into

if you want to be a part of your community

and if you want to serve people

and have that type of environment,

and just be that kind of person.

There's not a very high margin on a lot of coffee products,

and it takes a lot to end up turning a profit, you know.

The biggest costs that go into starting a business,

how much you want to renovate, if it's turn-key or not.

You can buy out coffee shops,

and have pretty much all the equipment ready to go.

But that's not usually what people are stepping into

when they buy a coffee shop,

so a build-out can cost a lot of money.

And then also, your espresso machine's gonna cost you

a lot of money as well.

It's probably anywhere between,

if you're gonna get a two group automatic machine,

$8000 to $20,000.

It's like buying a car.


So just your three big main pieces of equipment,

the water system, the grinder and the espresso machine,

can cost you up to $20,000, at least.

- The number of things you need are huge.

The only way to know that is to have worked in the business.

So, then, once you know what all your costs are gonna be,

add 20%.

I'm sorry, you know, as fine as you can get it,

there's always cost overruns in construction,

unforeseen things.

You don't wanna go into the biz underestimating the costs,

but you wanna be as accurate as you can.

Add 20% and then think, okay, what have I got?

How am I gonna finance this?

Can it be done?

Sometimes you have to go back and rework the solution,

cause it just may not work.

Not everybody can pull off, you know,

a half a million dollar coffee house.

In fact, they shouldn't.

It's not smart.

- Well, when I was starting, I had no finances.

I got a scholarship.

My finances were dire.

I know some people cash out 401ks.

Some people start with all kind of stuff.

I had nowhere to go but up.

That's one thing I really appreciate about, like,

the cold brew coffee, is,

it's a way to get into the coffee industry.

I think when you talk to other people,

coffee shops and stuff, espresso machines are like $15,000

or, you know, like, they're really expensive.

And actually, when I opened my shop, my niche was,

everything was made with cold brew coffee,

so I could still make hot drinks,

but I would make them with, like, I had a $30 frother,

and I would froth milk and stuff like that.

I didn't have to buy an expensive espresso machine

because that would've been it.

I would not have been in the business,

just from that piece of equipment alone.

Ultimately, I want the story to resonate with people

that look like me or have the experiences that I've had,

so that they can feel as if they can do it, too.

Like, yeah, I don't have a trust fund.

It's okay.

I can still do this.

- I had read a little story about coffee roasting at home.

So I was roasting some coffee in this garage.

I mean, I did that for four years exactly.

But during that time, I was sort of like, you know,

slowly, methodically, like, learning about

what I'd have to do to open a cafe.

But I also wanted to open a roaster,

so that's what I did, you know.

It started off as just roasting coffee.

I just kept doing it, and I kept, like, just,

kept boot-strapping it and reinvesting and saving

and reinvesting and saving and saving.

You know, just saving.

And, like, I didn't pay myself for probably the first,

you know, I didn't pay myself for the first,

like, eight years of this business.

I mean, I would drink coffee for free,

but, I didn't pay myself, like, any money.

I had another job.

(funky drum beat)

- [Marcus] You know, unless you have a rich uncle

or you're wealthy yourself,

you're probably going to have to go out

and get an SBA loan or some kind of private equity

or a family loan.

But they're gonna wanna know what are you doing,

and what are the chances of success, and is it believable?

Does it pass the smell test?

So, wrote a formal business plan, it was very thorough,

so it included executive summary, products, pricing, costs,

all the financials for three years.

- It's really you saying that you know how to go

from point A to point B

and that you've thought through the entire process.

It's also really important to look at your business plan

to see how well you've thought through the thing.

And to know that you're,

it's not just at the end of the day,

this is how much I spent and this is how much I have,

so that's my profit.

It's like, you really have to plan for the whole picture,

the whole health of the entire business

and its sustainability.

- And then you really have to do a narrative

on what it is you're doing.

So, as best you can, in detail, like,

what is the business, what's it, why, who,

what's the impact, why this location, who's your customer?

You need to know, like, what's gonna bite you.

You need to list those things out, like,

if anything goes wrong, what could they be, most likely?

All that kind of stuff.

- A business plan is meant to be changed and updated,

but also, the business plan is just, like,

the structure of where you're going.

And if you're not willing to adapt that,

then you're probably not going to succeed over time.

It's really about setting small goals and achieving those

one little bit at a time.

(funky drum beat)