Writing a business plan is no fly-by-night task. It takes many weeks, maybe even months or years to complete a thoroughly detailed business plan.
To write a coffee shop business plan:
Conduct the research needed to write the coffee shop business plan.
Analyze the local and national coffee industry.
Start hosting coffee-related surveys on social media groups affiliated with the area in which you will open your coffee shop.
Forecast your first 3 years’ sales.
Write the business plan section by section.
It may seem daunting to undertake these steps, but as you get into the groove of it, you’ll never go back kind of like when you find your favorite coffee that you may never go back to other brews!
1. Conduct the Research
You will be devoting many hours to thoroughly research to write a thorough coffee shop business plan. Keep a detailed notebook of the research that you find and what date you found it. List the source information into your notebook whether it is from online, a periodical, or a textbook so that you can reference it again if needed.
So that you do not lose the information in your written notebook, be sure to have a typed-out file with this information. Save it to your chosen word processor on your computer, a couple of USBs, and even a copy of it on your Google Drive just to be sure that you have backup copies if some were to get lost.
Coffee Shop Industry Problems
What problems are occurring in the coffee shop industry that hasn’t been solved by any local or chain location yet? Keep a list of them in a special section of your notebook to keep track of your findings. Once you have come up with a list of 5-10 problems, choose the problem that you think your coffee shop could be able to solve the best.
Figure out your startup costs. Find out how long it will take to break even to earn back your startup costs before you can start making a profit on your coffee shop investment.
- Cost of goods sold per month for your best-selling coffee products and the profit on each of them.
- Total yearly revenue.
- Total yearly expenses for equipment, maintenance, bills, etcetera.
- Profit for the first year after expenses.
Look up articles to find the group of people who drink the most coffee throughout the country. More than likely, this will be true for your local area, too. Form your target market around not only the conclusions you draw from who drink the coffee, but also from the group that dominates your local area that is dedicated, coffee drinkers.
Refer to step 3 on how to conduct observations at small business coffee shops and national coffee chains to use as part of your market research.
2. Analyze the Local and National Coffee Industry
Analyzing the local and national coffee industry will help you to decide who will be your target market, how to market your coffee products, and what promotions you will spotlight once your coffee shop is open.
Researching these industries does not have to be limited to online search engine research and reading in periodicals, newspapers, and recent books about the industry from your local library. You can:
- Speak with notable figures in the local and national industry for their input about the trends and reasoning for their outlook.
- Watch videos on YouTube or other video streaming services that outline current jobs in the industry.
- Read press releases from the top coffee chains in the country to see their views on the industry trends.
The Local Coffee Industry
Take your time to analyze the local coffee shop industry. While this may seem laborious, consider ordering at least a coffee and sitting at a local coffee shop that will be your future competition once your doors open. You may want to repeat this process for all the coffee shops that are within a 15-20 mile radius of the local area in which you want to open up your business.
Whenever you sit in a coffee shop and observe the activity, you should:
- Have a copy of the menu pulled up on your laptop or a paper copy in front of you to familiarize yourself with the menu.
- Listen out for what the customers order in the dine-in area. If the coffee shop has a drive-thru, it could be difficult to listen to these orders and the dine-in orders simultaneously. Just focus on dine-in orders for more appropriate results.
- Write down everything you hear in each order.
- At the end of your observation period, tally up any repeat orders. Observe for 1-2 hours for the best results. Note in your entry the time frame of your observation and the name of the coffee shop in which you observed.
- Have a pen and pad (or a laptop connected to Wifi with a Word Processor or using Google Docs) to record your observations.
- Repeat this process for the other coffee shops you visit.
- Cross-reference any patterns you see amongst the coffee shops to see what items are ordered the most and at what times in which they are ordered the most.
To reduce the amount of work you have to do, you could have your co-owner observe one shop as you observe another one day. Be sure that you observe the coffee shop at different peak times of the day. For example, take one day to observe Jamie’s Java Junction from 7 am to 9 am (peak breakfast hours) and then take another day later that week to observe from 11 am to 1 pm (peak lunch hours). If the coffee shop is open during evening hours, consider an observation period of 5 pm to 7 pm for the dinner rush.
The National Coffee Industry
Do not forget to put aside some time to do observation hours at your local coffee shop chains, too. Not that you want your coffee shop to exactly be like Starbucks or Dunkin Donuts, but learn from the greats in the national industry, so you can take their practices and make them your own!
Follow the same process as described in the local industry section to observe what people are ordering in your local coffee shop chains. Frequent Starbucks, Dunkin Donuts, Tim Hortons, Dutch Bros. Coffee, Peet’s Coffee, and wherever else you can visit within a 15-20 mile radius of where you are going to place your coffee shop. Coffee shop chains will be considered your competition, too!
Besides observing coffee shop chains to analyze the national coffee industry, you can:
- Interview the franchise manager of a national coffee chain for input about the industry.
- Connect with national figures in the coffee shop industry on LinkedIn, so you can introduce yourself as a future coffee shop small business owner and discuss the industry together.
- Look up coffee shop national statistics to include in your business plan.
3. Start Hosting Coffee Related Surveys on Social Media Groups
Take to social media and join groups that are for the local people in your area. You will have access to thousands of people that will be happy to share their input into surveys that share on these group pages.
The best place to post these surveys is Facebook where social media groups like that are more popular. So that you do not seem spammy to the moderators, post one new survey per week and how many respondents you receive. Try to join as many local groups as possible and post different surveys in each group each week.
Surveys can ask:
- Do you prefer hot coffee or iced coffee?
- What is your favorite type of coffee beverage?
- How many cups of coffee do you drink per day?
- What is your favorite brand of coffee? (list some notable name brands, they have an option for “other” where members can comment with a favorite brand that is not listed in the original brands you provided)
- What type of coffee creamer do you use? (make this an open-ended question as there are many dairy and non-dairy creamers on the market that it would be annoying to try to cover them all in a listed multiple choice selection)
- What meal do you drink the most coffee? (list breakfast, lunch, dinner)
- If you went to your local coffee shop, what would be your usual order (make this an open-ended question).
No matter what survey you decide to post on these Facebook groups, you will be collecting valuable market research that you can use in your business plan. For example, say that you got 1,000 responses to a survey about whether people answering preferred hot coffee or iced coffee. If 600 people said that they prefer hot coffee, that means that 60% of respondents in that survey say they prefer hot coffee. That means that 400 people (40%) of respondents prefer iced coffee.
Compare these local survey results to the national trends to see if it corroborates the local information. According to HuffPost, a little over half of Americans prefer hot coffee, which is close to the percentile that you achieved in your local survey.
4. Forecast Your First 3 Years’ Sales
Forecast the first 3 years of your coffee shop’ sales in the main forecast section of your business plan.
Make a revenue goal based on that of other coffee shop’s first-year successes and project a 3% to 5% every year afterward. Your first year’s expenses are going to be a bit higher than the second and third year’s expenses because you will be spending money on equipment and other supplies to get your coffee shop started. Be sure that you project your yearly revenue to be higher than those larger expenses the first year.
You can expect that your revenue will only be a little higher than your expenses for the first year because you are just starting. As you project your revenue for the next couple of years, increase it by 3% to 5% and state the reasoning being that you will increase your prices by this percentage range on your products as well.
You can refer to an example of a bar graph that shows revenue, expenses, and profit over 3 years for a fictitious coffee shop on B Plans in the Executive Summary section.
5. Write the Business Plan Section by Section
Now that you have conducted your research and analyzed the local and national coffee industry, it’s time to write the business plan section by section. Take your time on each section remembering to leave the executive summary to write last.
You will structure your business plan in the order that follows.
- Executive Summary
- Target Market
- Your Competitive Edge
- Your 3 Keys to Success
- Marketing and Sales
- Milestones & Metrics
- Company Overview
- Ownership & Structure
- Management Team
Go here for a mini example of a written business plan in this format on B Plans.
While it is the first section of your coffee shop business plan, you will write this section last. That’s the rule of thumb for any written business plan. Write out the body and conclusion of your plan, and you will have all the information you need to write your executive summary.
You will summarize your information in the following order with these subheaders:
- The Problem (Name of Your Coffee Shop) Wants to Solve
- The Solution We Propose
- Our Competition
- Sales Forecasts and Expectations
- Financing We Need
Describe Your Coffee Shop’s Opportunity
Outline the Problem You See
Take that problem that you chose from your list of 5-10 problems and describe it. How is this problem making it harder for people to enjoy coffee and how are customers overall affected?
State Your Solution
How will you solve this problem you chose for your coffee shop to rectify? Describe 3-5 steps you will take as you open your coffee shop to have that problem solved in your area.
Analyze Your Target Market
Figure out the demographics of the main group of people that will be interested in frequenting your coffee shop. Build a profile based on said demographics and then touch on how you will effectively market to them.
Recognize Your Competition and Outline Your Business’s Advantages
What local coffee shops are in your area? How many of them are there? How about national coffee chains? Name the chains that will also be your rivaling competition. End this section with your coffee shop’s niche and competitive advantage that will set you apart from your competition.
Touch on a Minimum of 3 Keys to Success
Share 3-5 keys to success that will constantly help you to stay in business for many years. It could be marketing-related, niche-related, or something else!
Discuss how you are the owner of the company and what business structure you chose for your company. If you have a co-owner, you will run as a Limited Liability Company (LLC). Since a coffee shop is a larger entity than other independently owned small businesses, consider affiliating as an LLC. Learn more about this business structure at sba.gov.
Touch on who will manage your coffee shop. You could have a Head Manager, Assistant Manager, and as many Baristas as you need to operate your coffee shop based on customer traffic and labor budget. Don’t forget to appoint Shift Leads that will act as one of the Managers should one of them not be present at the shop during business hours.
Check out our guide to profit margins HERE.
While we covered already how to forecast sales, you must include the following financial statements:
- Balance sheet.
- Income statement.
- Net profit by month
- Expenses by the month.
- Revenue by the month.
- Profit and loss statement.
- Projected cash flow.
As for financing, discuss:
- Each resource will fund your startup costs.
- Donations from family and friends
- Personal savings
- How much from each resource you have collected so far.
- How much money you still need to achieve your startup cost goal.
- How much money you want to seek from a bank or creditor to satisfy the rest of said goal.
Frequently Asked Questions
No, there is no alternative to replace how valuable these observations play a role in your research. The best way to analyze the local industry is to observe the local coffee shops. You do not have to do it all day long, but doing the couple hours during peak operation hours as recommended will help give you a snapshot of what your specific local industry wants from your coffee shop.
People and organizations who help to fund your coffee shop want to see that you are thinking ahead into the future to make your business profitable. They want to see that you are projecting constant growth in profit for your coffee shop on a year-by-year basis.
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!