Is a coffee business profitable?
Profit is one of the major drivers behind starting up any business. So naturally, it is a great perk being your boss and setting your schedule too. As an entrepreneur, the money-making potential will make or break you, especially in the coffee shop industry.
Regarding the investment, people are bound to ask questions concerning the coffee shop income. To clarify things, the money you make as an owner is different from the cafe’s revenue. Due to this, it could take some time before you turn a profit.
Breaking into the coffee industry is easy, but while it is possible to make a good living out of it, you will not likely become wealthy. Therefore, your expectations should always be realistic.
6 main factors that determine coffee business profitability
Coffee business concept
The first thing you need to do before opening your doors to customers is to perform a lot of planning, researching and preparation. Doing this will help you achieve your goals, as the only way of accomplishing a goal is to have a plan of action to guide you. While coming up with your coffee business concept, you will have to do some research to understand the local competition. Understanding how your competitors operate will help you know if there’s a chance of you making any profit in that location.
Physical location
Unquestionably, one of the crucial factors for determining whether a coffee shop succeeds or fails is the location. Looking at any major chains near you or neighboring towns is an easy way to figure this out. It depends on how well you know your market, whether you do a similar or opposite.
Even if the perfect location has outdated office space, you can tweak it and get it modernized. Then, of course, when you are open, you will see that you can figure out the perfect location, but you have to take advantage of it.
Volume of customers and sales
Another factor that will help you determine if your coffee business is profitable is the number of customers you get and how much sales you make. The number of customers you have will determine how much money you will spend on getting an automatic espresso coffee maker and how much you will be willing to set aside for operational costs.
Menu price points
Sales are your business’s sole source of revenue. The engine behind your company’s success is the menu pricing. Pricing for food directly impinges your ability to fund essential aspects of your business, including equipment, utilities, labor, ingredients, and more.
Initial startup costs
Below are few things that will likely give you a tough time with your startup cost:
- Location
- Type of shop
- Scale of operation
- Menu
- Franchise or private
You may be asking, is talking about startup costs that important when looking at how much a coffee shop owner will make? First, keep in mind that before you make any income, you will surely be spending money. This should find its place in your budgeting and calculations for around the first year or more that you have your coffee business; the money you will be making will recoup what you initially spent when you were starting up.
Operational costs
The major focus of retailers when looking for ways to maximize profits is pricing strategies. Although, every business owner ought, to begin with streamlining operations.
First and foremost, try to eliminate overtime and excess staffing, and then focus on waste areas. Of course, it would help if you also minimized your supply.
We know you will need an automatic espresso coffee maker, but you should consider getting only one rather than trying to buy two or more. Although, if you plan on reducing human resources (the number of staff working for you), you can get as much as you deem fit. Ditch the fancy printed shopping bags, tissue fill, and excess packaging wherever possible. This will ensure that you spend less.
You can switch how you run your business from a high-cost to a low-cost system if you are not utilizing an efficient point-of-sale to tie inventory, sales, and marketing under one system. With this, your whole store and staff will run more efficiently.
Automating specific tasks in your business is another great way to streamline your operations. You can reduce the time, human resources, and operating expenses required for running your business by setting up repetitive activities to autopilot.
See if you can automate your business’ system and many of your employees by going through all the tasks you and them complete daily. Are there activities that are taking up a lot of your time? Do you always need to re-enter any data or do specific steps several times? Find solutions to get them sorted out.
While you are thinking of automating everything in your business, you should know that data entry is not the only thing you can automate. These days, there is an app one can use for the majority of tedious administrative tasks.
Your life can drastically change from the money you make from owning your coffee shop. There are coffee shop owners that can buy new houses, cars, and in general, have a better quality of life. From being a coffee shop business owner, you can earn between $60,000 and $160,000. And keep in mind, some people will make more than that; it is just an average range. It all depends on you and your efforts.
