Many people in and outside the coffee industry dream of having a cafe. Often though they will look around and think that it's unattainable for them because of the massive cost. I really believe some of my favourite coffee shops around the world were built on smaller budgets and often by baristas or other people already working in coffee. It doesn't have to be impossible.
I spoke to 6 people who either currently run profitable cafes or have sold their successful shops to share what it took financially to start. I specifically sought out people who didn't come in with massive budgets so if you're not sitting on a big bank account you can see a way that you can have a shop of your own.
How Much Did it Cost?
Less than £50k is what all these folks needed and in most cases less than £20k. This isn’t a small amount of money, but it’s also not the huge figures a lot of people assume. Speaking to folks if you don’t have a massive budget consider some ideas to help it go further:
Open in a low rent area. This can be out of a major city. In my post How to Pick Better Coffee Shop Locations I explain how you can use a technique called the Rent to SOM Ratio to help ensure your early success. This means not needing a wildly busy area but the right area for the right costs.
Try mobile first. Two of the shops who responded made their first cafes doing either pop-ups or selling out the back of a modified truck.
Coffee Equipment
People were really split on this one. There are a few ways you can keep these costs down. The big one is you don’t need the fanciest kit, you need what will allow you to deliver your concept. You can go with used kit or less premium options. This stuff might pack it in one day but if it gets you to breakeven and where you can buy something a bit better, it's worth it. If you do get used gear make sure you have a list of techs who can fix it nearby. And always get a service and boiler inspection for your espresso machine before you open.
Leasing is another way but less available to new businesses. You might not find one in the end but it’s worth asking as many roasters as possible for options. You never know!
Fit Out
Everyone loves a cool looking or beautifully put together shop but try and focus on your goals. Your fit out should reflect your concept. This is an important thing to think about when
developing a concept and looking for a space. Your coffee shop is a holistic system, the concept, location and fit out is are all related.
Think about using cheaper materials or doing a lot of the work yourself. Reach out to independent cafe owners you know about where they sourced material, a lot want to help others out. Just remember you can always improve the shop as you grow, owning a coffee shop is a process not a destination.
Cash Flow to Breakeven
This is a huge one. To have a shop in a few years you need to get over the challenge of breaking even. This is the time where the money coming in covers all your costs going out. To do this you need a healthy cash reserve. A lot of shops take at least 6 months to get there but up to 18 months at the slow end.
Most the people who responded had 10% or less of their budget dedicated to this so it doesn't have to be massive in terms of money but it does have to be realistic in terms of cost. Knowing your costs before starting is key, do lots of research in this area and then anticipate some unknowns because if one thing is true in running cafes its that its hard to anticipate everything.
Opening a coffee shop isn't for everyone but just because you may not be rolling in mountains of money doesn't mean it's not for you. If you can create a concept that resonates with people and manage your costs than you can open something great with just a bit of cash.
-Josh