Do you have a great idea for a coffee shop that you would like to pursue as a business opportunity? Well, after conceptualizing your coffee shop in full, your next step will be to begin writing a business plan that outlines everything from how you will obtain opening capital to how your business will be structured.
The thirteen outline points in writing a thorough and successful coffee shop business plan. These are:
Create a branded cover page
Detailed concept outline
Create a sample menu of offerings
Style of service
Management structure and team introduction
Store design and specialized equipment
Market overview and forecasting
Why Is Writing A Business Plan Important
Before we delve into the meat and potatoes of writing a business plan let’s discuss why a business plan is important in the first place. At the bare minimum, your business plan will help you form an order of operations and clearly define the goals of your business. It’ll serve as an outline for completing important tasks leading up to opening the doors and beyond. By setting these benchmarks and either achieving them or not, you will be able to determine the viability of your concept before getting too deep financially. Proving your concept’s viability is also necessary for convincing investors by showing them that there is demand for your coffee shop. Finally, working through the process of writing the business plan will help you, as an entrepreneur, decide if your concept is truly something that you’d like to take on personally under the parameters that you’d like to move forward within.
Now, let’s get started.
Creating A Branded Cover Page
The creation of your brand starts here and is your coffee shop’s chance at making a strong first impression. Before we go any further, we need to define what constitutes a brand so that you can ultimately decide how to define yours.
A brand, in essence, is the personality of a business created through using specific language and imagery. When you talk about your coffee shop, what words do you use to describe it, and, more importantly, what words do you use to describe the product and service that you intend to deliver. By identifying the clear message you’d like to send with your core values, you can begin to identify who you are as a brand.
After building the framework for your brand identity you may begin to think about the visual aspect of your coffee shop’s brand. Create a color scheme and logo ( a few iterations may be needed) that inspire emotion. Start by asking the question “what does my brand look and feel like to me?” When you begin answering that question keep these five key things in mind to make sure that you are sending a clear message about your brand through its imagery and creating a strong brand identity:
- Distinctive – Your brand and logo need to stand out from your competition while also catching people’s attention.
- Memorable – The logo design must make a visual impact. A successful logo will identify a brand entirely on its own.
- Scalable and Flexible – The imagery can grow and evolve as the brand progresses.
- Cohesive – All components make sense in regards to symbolizing the coffee shop.
- Easy to Apply – Easily utilized across all media platforms.
Now apply what you have instilled as the brand identity of your coffee shop onto the opening pages and we have begun writing the business plan!
Detailed Concept Outline
So, you started simply with the idea to open up a coffee shop, but have now begun developing what will define your coffee shop from the one down the street and how it will ultimately fit into the market overall. This will primarily come from your concept outline. The concept outline for your coffee shop will be a bite-sized explanation of what makes it unique and why it will be in demand. You will be able to build upon this as your business evolves, but this will give investors something tangible in the early stages of business development.
Along with making a statement about the specific idea of your coffee shop, your concept outline will need to include a few other key details. As mentioned before, your concept outline must also include how your shop will fit into the market and why there is a specific need for your brand. Why is your business the one to fill this void in the market and, more importantly, why are you the person to oversee that?
Next, detail how your coffee, style of service, or both are different. How will you structure your business and operations that will show potential investors that you not only know how to make money in the market but that you will make money at the end of the day? Also, completing a market analysis of your prospective competitors will help you support your chosen business structure by outlining what has and hasn’t been working currently in the market.
Finally, briefly summarize your marketing plan that will complement your brand and how you intend to turn a profit.
Though seemingly simple and straightforward, putting an appropriate amount of thought into creating your menu is crucial in determining the kind of coffee shop you are going to end up opening. Do you want to be known for the distinct flavors or varieties of coffee that you serve or the specialized drinks that you make? Espresso forward, drip coffee, or both? Will you serve food and, if so, will it be full service or merely pastries and baked goods? As you create your menu and go about asking these questions (and many others), the answers will shape so many other aspects of your business. After setting the menu you can begin to think through the progression of what equipment you will need, staffing levels, and how much capital you will need to pursue the style of service that you have chosen.
Learn more about what to offer HERE.
Style Of Service
Just as deciding on a sample menu ultimately impacts many aspects of your business down the road, so does select a style of service. Because you are planning on opening a coffee shop this may not have been something that was at the forefront of your mind like it would for someone that was planning on opening say a restaurant or bar, but it is equally as important in the row of dominoes that fall while writing your business plan for your coffee shop. After deciding on your sample menu, the style of service that compliments that menu should be fairly evident in some respects. Keep in mind though that how you choose to serve your guests greatly dictates the perception of hospitality put forth by your business. Use this to your advantage by choosing to go above and beyond. Tying it back into your brand identity.
Management Structure And Team Introduction
Unless you are starting with several business partners or a large amount of capital to have the ability to bring on executive-level talent then your management structure will be simple and straightforward. In many cases, the owner of a small business spearheads the majority of operations as the general manager of the property as well. It may not be for several years that you will have the luxury of bringing on other upper-management caliber employees to assist in running your coffee shop.
Regardless of that fact, including verbiage about how you intend on structuring your eventual management team and identifying their roles and who it is, that may currently or eventually will fill those roles will show investors that you have some kind of structure in place supporting your business goals and suggesting stability.
Before we discuss the eight types of management structures we should clearly define the idea behind management structures as a whole. Business News Daily explains it best when they say that “An organizational structure is a set of rules, roles, relationships and responsibilities that determine how a company’s activities should be directed to achieve its goals. It also governs the flow of information through levels of the company and outlines the reporting relationship among mid-level staff, senior management, executives, and owners. It is effectively a hierarchy for a company, though some organizational structures emphasize a near-total lack of hierarchy.” The eight management structures are as follows:
- Hierarchical or Line Structure – The most common organizational structure where power flows from top to bottom.
- Functional Structure – Departments are headed by specialized leadership which all report back to a central figure.
- Divisional Structure – This is mainly for larger corporations where each division may operate autonomously under a larger umbrella of leadership.
- Flatarchy Structure – Structure where all employees have the same amount of power and say in day-to-day operations.
- Matrix Structure – A more fluid form of the hierarchical structure where different employees may be chosen to lead different projects at different times based on skillset.
- Team Structure – Groups of teams lead different aspects of the business.
- Network Structure – Organizes relationships amongst departments and separate locations.
- Projectized Structure – Structure that focuses all resources on completing projects in a linear order.
As you set out initially, your small business will most likely take on a hierarchical structure of management with you as the central figure at the top.
Store Design And Specialized Equipment
Unless you are renting or purchasing a pre-existing property that was a similar business before your occupancy then you will need to endure the arduous process of store design. Even if you move into a pre-existing property there will still be some redesign to some extent. To start, you will need to consult the proper contractors and designers to guide you through outlining what your specific needs will entail in regards to a buildout. On top of what you’d like your cafe to look like aesthetically, there are many other key components to take into consideration.
Take HVAC for example. Heating and cooling are not only important for creating a comfortable environment for your guests, but your coffee shop will also be generating ambient heat and smells (especially if you decide to do food preparation on-site) that must be ventilated away. This can quickly turn into one of the more expensive and expansive projects of your buildout, but poorly routed HVAC will cost you more in lost revenue than in upfront costs.
Restrooms are another design piece that is often overlooked at first. The placement and overall build quality can contribute to the ambiance of your cafe either positively or negatively. Perception of cleanliness also hinges greatly on how well maintained the restrooms are so building them with that in mind will do you a favor down the road. After all, an establishment is only as good as its restrooms!
Acoustics and sound distribution are subtle things that play a large role in setting the mood at any establishment. Because you will most likely be wanting to create a relaxed mood consider applying sound dampers on the ceiling and installing recessed speakers to further immerse your guests in the atmosphere.
Lastly, whether you decide to be quick service or sit-down coffee shop your design flow must reflect that. Keep in mind how your guest will make it in the front door, through the line, and then either to a seat or the exit with ease and without confusion or a traffic jam occurring.
As a coffee shop, your overall demographic will be fairly universal purely due to the demand for good coffee, but you will need to identify your specific target audience to improve your chances of success. Doing so may seem like a daunting task at first but the following are a few tips to get you started.
- Start with your current clientele – Connect with your current client base to become more in tune with their needs building a strong base pool.
- Benefits vs. Features – Consider who benefits most from your style of service, your products, and your coffee shop as a whole.
- Gather specific information on your target audience – consider your target audience as a single person. What do they look like, how do they act, and most importantly, what do they want?
- Solicit customer feedback – The easiest way to figure out what people want is simply to ask! Gather their feedback through surveys and questionnaires.
- Look for trends in feedback – What are your guests asking for more of, less of, and what do they want in general from your cafe?
- Own your niche – Know who you are as a business and stick to it. The business will follow.
- Research the competition – What are your competitors having success within the market? Take cues from your surroundings and shape their successes to fit your identity.
- Create a marketing map – Identify gaps in the market and formulate a targeting marketing plan to capture that business potential.
- Don’t overthink it – Discover who is most likely to respond to your marketing push and cater to them directly.
Choosing the location for your coffee shop may be one of the most difficult and make-or-break decisions you make during this process. Your location will determine several factors which ultimately make up your success or failure as a business so making an informed decision on where you open up shop is an absolute must. First, take several locations into careful consideration and narrow down your options to suit your needs. Identify what each location has to offer and what its strengths and weaknesses are about your business structure. Lastly, you will need to determine which few locations offer the highest rate of exposure to your target demographic that also fit into your budget. To further assist you in deciding on a location for your business plan here are a few further points to consider when choosing a location.
- Style – Your location should be consistent with your business identity.
- Demographics – How close are you to your target audience and how easy is it for them to access you.
- Traffic – Is your building on a busy street with a good amount of foot traffic and parking.
- Competition – What is your proximity to your competition. Similar businesses nearby can boost business for both businesses but too much of the same can be detrimental.
- Complimentary Businesses – What is your proximity to other businesses that compliment your coffee shop. These could include bakeries, bookstores, or schools where you share a common clientele pool.
- Zoning – Knowledge of your proposed locations’ zoning laws is necessary to understand what you are and aren’t allowed to do with the property and what is acceptable within that area of business.
- Infrastructure – Is the building you’re interested in a new build or an existing structure. Regardless, you will need to ensure that everything is up to code and capable of supporting the needs of your cafe.
- Utilities and hidden costs – Do your homework on what it has cost prior tenants to operate out of the location you’re interested in. Utilities and upkeep costs should be overestimated and built into your financial plan.
Market Overview And Forecasting
The market overview is just as its name implies. It involves taking all aspects of your concept, location, competition, and target demographic into consideration to report on the outlook of the coffee shop market as a whole in your area. You will also need to create a forecast of your flow of business, income, and expense projections over five years. This will help investors take confidence in your business model to succeed. You will need to work with an accountant and financial advisor on these to vet them before betting your business on them.
Your marketing plan should be an outline of your strategy and advertising goals over your first year of business. The plan should also include the characteristics of your target audience and key indicators that show you that you have reached specific goals along the course of your marketing plan. As a small business and brand new coffee shop, the majority of your advertising will be focused on social media which is both convenient and cost-effective. That being the case, the majority of your year one marketing strategy should reflect how you intend on utilizing your social media channels to reach your intended demographic and build a business that only costs you your own time in the process.
As a small business owner, you will be expected to wear many hats, but that’s not to say that you won’t need help in building your coffee shop business. It is important to retain the services of multiple different professional resources to help you along your journey. These retainers will assist you in completing tasks that you don’t necessarily have the specific knowledge to complete and can save you time, money, and effort by getting the job done quickly and correctly. This is also enticing to potential investors because it shows that you have taken the initiative to get important tasks done by professionals and that they are there to guide you along the way. Some of the services that you should consider having on retainer are:
- Financial Advisor
When starting on building your new coffee shop business you will need to decide which business structure to establish your business as. All have pros and cons and whichever you choose will ultimately determine your tax implications and legal liability. There are four types of business structures to choose from and they are as follows.
- Sole proprietorship – There is no distinction between the business and the individual that owns it meaning that the owner is entitled to all of the profits but is subject to all of the business’s liabilities as well.
- Partnership – There are three types of partnerships where all partners share some degree of liability and profit depending on the degree of their role in owning the business.
- Limited Liability Company – The most common business structure for small businesses. LLC’s have the benefit of being a hybrid legal entity meaning that its members can be taxed as corporations or sole proprietorships but they also do not incur any of the liabilities associated with the business. This is considered the most flexible of all of the business structures.
- Corporation – In this structure, the business is considered as a legal entity of its own and separate from its owner(s). A corporation is also entitled to many of the rights that a person possesses such as the right to free speech, to sue or be sued, or the ability to enter into legal contracts on its behalf.
Entering into an LLC business structure would be your best bet as a small business owner. Allowing you to reap the benefits of your business without any of the liability associated with the risks of opening a new business.
This covers a broad spectrum of analytics that ultimately determine how much capital that you will need to open the doors of your coffee shop. All prior sections of this article culminate in this final section which also includes such things as supplying, stocking, staffing, and furnishing the cafe. All in all, this will serve as your business’s growth plan for years to come and will serve as a reference for investors that can validate your business plan and concept. While going through the process of compiling your financial projections, the most important thing to keep in mind is that it is imperative to be realistic, pragmatic, and even slightly overestimate your financial needs. Listed below is a guideline for gathering your projected financial statements needed to complete your business plan.
- Sales Forecast – Project your sales for the next three to five years month by month. Know where your strong and weak points are to better plan for times of feast and famine.
- Expense Budget – Create a spreadsheet detailing both your fixed costs and variable costs. This will allow you to see what it will ultimately cost you to make a profit.
- Cash-Flow Statement- This is simply the chart of money flowing in and flowing out of the business.
- Income Projections – This is your P&L, or profit and loss statement, for the next three to five years.
- Asset and Liabilities – Create a balance sheet of your net worth versus your running expenses.
- Break-even Analysis – The projection of when your coffee shop sales and revenue equal your expenses. The point where you start making a profit.
As you work through the items in this article you will gain a better understanding of the ins and outs of opening up a new coffee shop. It may take multiple attempts to complete even a single business plan. For further reference materials and business plan templates, refer to the SBA website.
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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!