If you’re planning on opening a coffee shop, or have already opened one, the question of ways to increase your profit margins is probably at the forefront of your mind. Fortunately, there are several ways you can increase your profit, starting today.
So how can a coffee shop increase profits?
A coffee shop can increase its profits by knowing its product, having a great location, offering an appealing physical space and excellent customer service. Coffee shops may also increase their profits with efficient marketing, by limiting their loiterers, offering gift cards and point-of-purchase products.
Ways to Increase Profit in Your Coffee Shop
What You Need to Succeed
Know your Product
This may seem obvious, but far too many businesses fail because of a lack of understanding of the product they are selling. If you want to succeed, and make profits doing so, knowing about the type, taste, flavor, and origins of your coffee will be key. Having this knowledge will translate to your employees, and finally, to the customer. Selling the right coffee to the right customer at the right time can increase your profits dramatically.
Having a Great Location
The need for a quality location can’t be stressed enough when it comes to most retail businesses, coffee shops included. The increase of customers you can get from a good location will drive up profits quickly. Even taking into account the time and money needed for a move, if your location is a poor one, it will be worth it.
An Appealing Physical Space
The right location won’t mean a thing if customers don’t want to come into your shop. Creating a space that is appealing to the eye as well as efficient will draw in more customers. Your coffee shop should be clean, comfortable, and inviting, calling to all those potential customers on the street, Hey, this is a nice place to take your mind off things and enjoy a great cup of coffee…or two. If you need to remodel, do it. Just make sure to pick the right design and contractors to limit your costs.
Excellent Customer Service
This is another step that may seem obvious but can fall between the cracks in a real-world business. A coffee shop is a people-centric endeavor. Creating an experience that resonates with a customer is just as important as the taste and quality of your coffees. A positive workplace culture, being available and open to your employees’ needs and concerns, and clearly defined policies and values will all create a better working environment. This provides stability for you and your customers and can keep your repeated hiring costs down as well. Customers will always remember how a coffee shop made them feel, and excellent customer service is a big part of that.
What You Can Do to Increase Success…and Profits!
As well as improving all of the things in the above section, there are several ways you can improve the sales in your coffee shop beyond your location and customer service policies.
Efficient Marketing
Now I know that the marketing budget for a coffee shop can be small, or even non-existent, but successfully marketing your shop can tremendously increase your profits. Luckily there are low-cost and even free ways you can market your business.
Google My Business – Google My Business is a free (that’s right – FREE) tool that the search engine uses to categorize and list businesses in a specific area. When people search for a business through text or on Google Maps, these results often appear at the very top, making them an invaluable marketing tool.
To sign up, simply search in your Google Apps (you may need to click the More from Google tab), and when you find Google My Business, click the Manage Now button and fill in your business information. Google will then send a postcard to your business address with a verification code that you will use to verify yourself as the owner and allow you to fill out the rest of your business information. Remember to fill in as much as you can, as the more information you give, the higher Google will list your business. Add some pictures and your menu, and be sure to keep it updated so your customers know about any changes.
Press Releases – This is another FREE option to provide a marketing boost to your coffee shop. Now while they are free, you should have something written that will catch a reporter’s attention and make them want to print. New openings and remodels are the easiest way to grab press attention. It can be tricky and time-consuming to write, but if done well, all it takes is a single email to the right reporter to boost your sales.
Email Campaigns – Email is one of the fastest and easiest ways to market your business, and is essentially free. You may need to pay for email marketing software, but the returns are worth it if you do it right. You want to create emails that are worthwhile to open, and not easy to be marked as spam and forgotten.
To do that, your email campaign should contain information that people will want to read. New flavors, coffee recipes, the best foods to pair with your coffee; light and informational emails like these will have more people opening them which, in turn, will lead to more people patronizing your business. Don’t send out too many (one per week is the most you should be sending) and keep them on a consistent schedule, and your email campaigns can turn into profits.
Social Media – The modern town square is now digital, and you should be too. Much like email campaigns, your social media accounts should be peppered with informative and catchy facts about your business. Don’t be afraid to show what makes your coffee shop unique. Try to capture the character of your shop and employees, and try to be as authentic as possible. Everyone knows your point is to market your business, so have some fun in the process, and in doing so, your social media and your business will be more appealing to customers.
Local Radio – Getting an ad on-air won’t be free, but it can be a cost-effective way to boost profits. People are often listening to their radio during peak coffee drinking hours, and advertising on a local radio station will ensure that people in your location will be the ones hearing it.
Don’t overthink any potential radio message. Keep it simple, informative, and descriptive. Use words that instill pleasant feelings, such as “warmth”, and “cozy.” Let people know who you are and what your place is like, and let them come to you.
Signage – Probably the most overlooked and undervalued marketing tool is a simple sign. Make it easy to read. Use a large and straightforward font, and be sure to place it in a location near you that gets the most traffic. Keep it on your block so people know that the shop you’re advertising is nearby and convenient.
Check out our advice on advertising HERE.
Limit Your Loiterers
One of the things we’ve grown used to in coffee shops is people on their laptops soaking up the free WiFi, and not soaking up the coffee with it. This can cause problems for the profits of any coffee shop, as many have discovered.
There are ways you can limit this problem. Covering up outlets, cutting off computer users after half an hour, and changing the Wifi password every two hours are just some of the steps coffee shops around the country have taken to deal with loiterers. If these steps seem too drastic for you, perhaps just limiting computer users to certain tables during certain hours will solve the problem. Either way, the more turnover, the more sales, so try to keep the loiterers to a minimum.
Gift Cards
Since 2007, gift cards are the most requested items on holiday gift lists. Gift card sales have hit an all-time peak of nearly $160 billion in sales, so if you haven’t hopped onto the gift card train yet, now is the time. Gift cards are a symbol of the freedom and flexibility shoppers have become accustomed to. Selling gift cards to your shop allows you to expand your sales not just to present customers, but to future ones as well. So get people to share your name and experiences by sharing your gift cards, and catch those increased profits!
Point-of-Purchase Marketing
Have you ever bought a magazine or candy bar while in the check-out line? If so, you know the power of point-of-purchase marketing. A whopping 82% of mass merchant purchase decisions are made in the store, meaning they’re bought on impulse. Impulse buying can be a powerful tool for raising profits.
Consider putting small, affordable items near the cash register, or in displays along the walls. Mugs, cookies, chocolates, and yes, gift cards, can all be items your customers will buy while waiting to pay for their coffee. Be sure to learn what your customers want, and try adding those items to see how they sell. Once you get the right combination, these impulse buys can give your profits a boost.
Looking to learn more about how to start your very own coffee shop? Download our Free eBook here as well as receive our Free newsletter with great tips on how to start your very own coffee shop!
Frequently Asked Questions
Think of foods that are popular at the times of day most people drink coffee: mornings and evenings. Morning foods could consist of bagels, muffins, fresh fruit, or yogurt. Evening foods could be cookies, chocolate, or biscuits.
The number of employees will be affected by budget and the size of the shop. Typically, you’ll want more employees available during busier times of the day. For small shops, 3-5 employees should be available at all times. Larger shops could have anywhere between 8-25 employees available at any given time.
To learn more on how to start your own coffee shop checkout my startup documents here
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Hi! I’m Shawn Chun
My adventure in coffee began when I first launched my first coffee shop back in the early 2000s. I had to figure out so many things on my own and to make it worse within 2 years of opening two large corporate coffee chains moved in just blocks away from me!
As I saw smaller and even some larger coffee shops in the neighborhood slowly lose customers to these giant coffee chains and slowly close up shop, I knew that I had to start getting creative…or go out of business.
I (like you may be) knew the coffee industry well. I could make the best latte art around and the foam on my caps was the fluffiest you have ever seen. I even had the best state-of-the-art 2 group digital Nuova Simonelli machine money could buy. But I knew that these things alone would not be enough to lure customers away from the name brand established coffee shops.
Eventually, through lots of trial and error as well as perseverance and creativity I did find a way to not only survive but also thrive in the coffee/espresso industry even while those corporate coffee chains stayed put. During those years I learned to adapt and always faced new challenges. It was not always easy, however, in the end, I was the sole survivor independent coffee shop within a 10-mile radius of my location. Just two corporate coffee chains and I were left after that year. All told the corporate coffee chains took down over 15 small independent coffee shops and kiosks and I was the last one standing and thriving.
Along the years I meet others with the same passion for coffee and I quickly learned that it is not only “how good a barista is” that makes a coffee shop successful, but the business side of coffee as well.
Hence why I started this website you are on now. To provide the tools and resources for up and coming coffee shop owners to gain that vital insight and knowledge on how to start a coffee shop successfully.
Stick around, browse through my helpful blog and resources and enjoy your stay! With lots of LATTE LOVE!
Shawn
