So you’re looking to open a small town coffee shop. Congratulations! Opening a small town coffee shop may end up being one of the most rewarding experiences of your life. Before you do so however, it’s important to know the steps involved:
Here are the steps to opening a small town coffee shop:
- Design a business plan: Detail how you are going to make money when you open.
- Gather funding: Ensure that you have a solid source of funds to get started on. This often will include a business loan, but it can also be from your own pocket or possibly from local investors.
- Research: Learn about the area you are planning to introduce yourself to, find a location that will work for you, learn the laws concerning your shop, and understand what you need to offer.
- Advertise your heart out: Make sure everyone knows about your shop. The more people that know about you the more money that will be brought in.
- Stay optimistic: Keeping your head up when the times get rough puts you one step closer to success
Prepare a solid business plan
Starting a small business without a plan is like starting a coffee shop without coffee. While it may be possible, you probably aren’t going to get far this way.
What should your plan entail?
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- Who is your business going to serve
Understanding who you’re going to serve is crucial to any business plan. It will help you decide who you’re marketing to and how you wish to do so.
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- How you plan to be profitable
Write out all your costs, including who or where you’re going to purchase all of your supplies from as well as how much you’re going to sell your products for. This will help you decide howmuch you’re going to sell your products for and how wide your margins will be.
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- A list of your competitors
Keeping a list of your competitors can be crucial to the success of your business, especially when entering into a small town market.
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- Your milestones and goals
Creating a list of your milestones and goals will not only help keep you on track, but it will also remind you as to why you’re doing what you’re doing in the first place.
Don’t forget about your mission and vision! Check out our blog article that tells you all about it.
Creating a pitch
Before you lock up your business plan as the end all be all for your shop, you first should create a pitch to give to a group of locals.
Your pitch should be a fairly quick presentation of your business plan consisting of what you’re planning to serve, the style of your shop, and all other aspects of your shop that will affect your customer base.
This will allow you to gauge how valid your business idea is and how you will plan to reach your customer base. It will also allow you to separate yourself from the competition by showing that you care about the feedback of your customers.
Securing funding
Starting any business can be an expensive endeavor, with a start-up cost ranging from $200,000 to $375,000! The fact is, most people looking to open a local coffee shop aren’t going to have this much money on hand. Instead, you must secure funding from a different source.
Sources to secure funding:
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- Local investors
Local investors should be the first source that you look into. These investors not only have the money that you’re looking for, but they also have a reason to invest in you other than making money.
Local investors are often looking to invest to benefit their community more than anything. By investing in local businesses, they are using their money to improve their community without having the responsibility of running the business themselves.
Unlike banks, local investors are people. They are cheering on your success more than anything and can even offer advice to your business if they have experience in that field.
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- Local bank loans
If you are unable to secure funding from local investors, or if the money you have secured from them isn’t enough to get you started, you can always look into local bank loans.
The ideal type of loan for starting your coffee shop would be what’s known as an SBA-backed loan. These loans, also known as small business association loans, are loans backed by the small business association and are given for the exact purpose of starting a small business.
On an SBA-backed loan, the average interest rate on a loan over $50,000 is 5.5% – 6%. A loan with a rate of over 6% is not recommended for starting a small business as it may make it difficult to succeed while you’re spending so much paying the bank back.
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- Family and Friends
Although unconventional, there is always the possibility of starting your small business with loan funding from friends and family.
It is not recommended that you secure all of your funding from family and friends. Instead, if you were to secure funding from friends and family, it should only be enough to cover what the bank or local investors won’t or are unable to cover.
The main issue with securing funds from family and friends is that it may strain your relationship with that person. If that relationship is strained, your funds may be in danger, especially if no formal contract was signed.
Do your research
Before you open your small town coffee shop, you should know everything there is to know. You should know the local area, the laws and regulations concerning your shop, and everything there is to know about coffee as what you plan to offer.
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- Know the local area
Understand the area that you’re trying to implement yourself into. While you may already know many of the local people. learn about the other local shops. In many cases, small town businesses often network and work together as a community to allow themselves to thrive.
The first step is to understand and learn if there is a need for your business. If the area you are attempting to enter into already has four coffee shops with a population of only about 10,000 people, you maybe want to back out before you join an already over-saturated market.
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- Find a location
Location is incredibly important for any small business. It can decide whether or not you succeed.
You want to find somewhere that sees high foot traffic while also being incredibly visible and easy to locate.
A problem with small towns is a lack of commercial space. It’s important when deciding where to put your shop that you know who your neighbors will be. You don’t want to be facing competition directly from the get go, so try and find somewhere that is a bit isolated from your competitors.
Learn the laws concerning your shop
It doesn’t matter how successful your coffee shop maybe, if it doesn’t follow all of the laws it is expected to, then you are at high risk of closing.
As a small business, you have to comply with not only state and federal laws, but also local ones. It would likely be best to hire someone, whether that person is a lawyer or fellow business owner who is familiar with the area, to ensure that you are following all of the necessary laws.
Small towns often have their own sets of laws that other, more populous regions, don’t. Before you open, make sure you check up on all of your town’s laws.
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- Health code laws
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A health code violation can close you down just as fast as anything else. While most health code laws are fairly obvious, some can be quite obscure.
The best way to ensure that you are meeting all of the health code regulations is to hire an expert to do period checks every couple of months. They can ensure that you are never risk being closed for a health code violation you had no you were breaking.
Advertise your heart out
When starting your local coffee shop, the importance of advertising can not be exaggerated. If you don’t advertise and get the word out about your shop, you’re going to have a hard time staying open.
- Three expert tips to increase advertising traffic
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- Know your audience
Do some research and find out who you should be marketing too. Nationally, millennials spend far more on coffee and coffee products outside of the home compared to the older generations.
You should also however do some local research to find out who in the local area is looking to spend money at a coffee shop. It may turn out that the local older population is far more likely to spend money at your shop. It all depends on the area.
Small town citizens tend to value good deeds more than anything. Find out what is important to them, find a way to help, and in the process, you will likely be gaining both the respect of the locals as well as new customers.
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- Market online
It would be a massive mistake to ignore the possibility of marketing online. Online marketing using social media is often far cheaper than traditional mediums.
It also, if done correctly, can bring in far more traffic than other forms of advertising. Familiarising yourself with online marketing tools can bring a major boost to your business.
Most small towns have groups on sites such as Facebook. Join those groups and advertise there to get the word out effectively and free of cost.
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- Offer a reason for them to be there
Getting someone through your doors is the first step to success. Find a way to give them a reason to be there in the first place, then you can worry about getting them to come back.
One of the best ways to get someone to come to your coffee shop will be to hold a grand opening sale. By offering a sale, you are giving them a reason to go to you over your already established competition.
Often in small towns, there is a lack of local activities. Providing the local community of a small town with somewhere to be and something to do can increase your sales drastically.
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- Keep a positive attitude
While this process will be tough at times, keeping a positive attitude will help you through the tough times and lead you into better ones. Staying optimistic will ensure that you never are at risk for closing just for the sake of it.
A positive attitude is infectious. If you appear happy and optimistic, not only will it rub off on your workers, it will affect your customers as well. They may even return because they enjoy the atmosphere that you provide.
Frequently Asked Questions
Picking your location should depend on two main factors: foot traffic and space.
As a coffee shop, foot traffic is vital to your success. Selecting a location that sees heavy foot traffic can increase your profit margins significantly. It also means you won’t need to advertise as much, as people are constantly passing your shop and seeing it for free.
Space is also incredibly important to any coffee shop. You want to have space for your baristas to efficiently serve your customers while also allowing customers to have a space to sit down and not feel claustrophobic.
While what your serving may depend on what is available in the local area, there are some basics important to any coffee shop besides coffee.
You should always be serving baked goods such as muffins, cookies, and cakes to pair with your coffee. Most coffee shop owners estimate that coffee only makes up about 40% of there sales, so these products are important to have
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
