Best Practices So Your Coffee Shop Dream Does Not Become a Nightmare
Every year, hundreds of motivated entrepreneurs make their coffee shop dream a reality. Since the late 1960s, the number of coffee shops and stands opening each year has steadily increased. Along with it, the quality of the coffee and the customer expectations have risen. Unfortunately, nearly as many coffee companies close their doors each year, especially during hard times like the Great Recession of 2008/2009 and the more recent COVID-19 Pandemic.
There is a mass of information available that everyone has access to and much of it contains sound advice. However, there are a few things that consistently get missed in the average business plan template. Here are 10 things to know before you open your doors so your coffee shop dream does not become a nightmare.
1. Know Your Why
“People do not buy WHAT you do, they buy WHY you do it.”
In one week, two aspiring coffee entrepreneurs told us they wanted to open a shop in their neighborhood. When asked “why?” the first simply said, “I don’t know, it seems like it would be easy. I mean it’s just coffee, how hard could it be?”
The second lit up at the question and excitedly explained, “I’ve been living in my neighborhood for 10 years, and there’s just nothing for the people there. Not only is there no coffee, there’s no place to gather that’s not a dive-bar or fast food chain. I want to create a space where small business owners can have meetings with their clients and the locals from the community can gather to connect face to face.”
When compared side by side, it is easy to guess who is more likely to attract investors, customers, and top talent. Friedrich Nietzsche famously said, “he who has a why to live can bear almost any how.” When it comes to weathering the storms of business, having a compelling answer to the question “why?” is often the difference between survival and shutting down.
More than that, having a compelling purpose attracts and retains top talent. People want to work for something bigger than themselves and the almighty dollar. The same goes for customers. If they have the option between to equally delicious cups of coffee, they will tend to choose the one the believe is making a positive impact in their community.
Want more?
We recommend Simon Sinek’s best-selling book, Start With Why, or if you are pressed for time, the TEDx talk is a great summary. In it, Sinek sums up the discussion by simply stating: “People don’t buy what you do, they buy why you do it.”
We also wrote a blog post called “The Power of Purpose: 3 Reasons to Cast Better Vision” that dives deeper into this topic.
2. Clarify Your Message
When learning to articulate your “why” it will be of paramount importance to make sure your message is clear. The human brain takes up 20-30% of the oxygen we breathe each day and burns about the same percentage of our total calories. Dr. Daniel Amen, neuroscientists and psychiatrist, has called the brain “the most power-hungry machine in the universe.”
An unclear message forces people to burn more calories and use more oxygen just to figure out what you are talking about. If we go on and on about our company, eventually the human brain will go into survival mode, kicking in the “fight, flight, freeze, fawn” response. Watch closely next time someone is going on without clearly illustrating their point and you will see the shift from engaged and listening to survival mode.
It is often the case that entrepreneurs have an exciting vision and a powerful purpose for their business, but to their customers and their staff it is foggy at best. Doing the work to clarify your message ensures that everyone who comes in contact with your coffee company immediately “gets it” and is excited as you are to spread the message.
Want more?
We recommend checking out Donald Miller’s New York Times best-selling book Building a StoryBrand: Clarify Your Message so Customers Will Listen. In that book, Miller explains why it is so important to be clear and gives a helpful framework for arriving at a “why” that is both compelling and crystal clear. In his words: “If you confuse, you lose.”
3. Learn Your Lines
In Hollywood, movies live or die by their “lead line,” a short, often a one-sentence version of their pitch to win over producers, studios, and the like in hopes of securing the funding, facilities, and talent. Screenwriters and directors know how crucial these lead lines are so, as you can imagine, they leave nothing to chance. They write, rewrite, edit, and distill the idea until they can say it the same way every time they pitch the movie. This was the case in the making of the movie Alien in 1979, when screenwriter Dan O’Bannon famously walked into the offices at 20th Century Fox and said simply, “Jaws in space.” The studio immediately “got it” and O’Bannon got his funding.
Imagine a movie where the director pitches the story idea a different way every time; one version to the studio, another to the cast, and still another to the producers. What would be the result? Chaos and a box office failure. Why? Nobody knows what movie their making or watching. Yet so many coffee shop dreamers do just that when casting the vision for their company and, naturally, confusion reigns.
Write out your “lead line” for your business, memorize your main talking points, pretend you are a director and learn your lines. It isn’t as robotic as it sounds and you’ll be pleasantly surprised at how excited people are to join you in making “Jaws in space” come together.
4. Figure Out Your Financing
We have only met a few owners who can quickly explain why their company exists in a concise, compelling fashion. Even more rare are those who can do that and have figured out their financing. If you have done the hard work on these two fronts, you are already ahead of the game. In many ways, your business is like an airplane and any pilot will tell you: no matter how sound the design or how well the pre-flight check went, if the plane runs out of fuel it will crash. Period.
Overly simple as it sounds, we need to have an idea of how we are going to pay for everything to get the business off the ground. So often, when meeting with entrepreneurs who have big dreams, they cannot answer the question “where is the money going to come from?”
There are three major sources of funding for a fledgling coffee company you will want to know:
1. Personal Finances: You are saving up your own cash and investing it in the business. The positive is that you do not have to ask people for money. The negative is that you need your shop to turn a profit soon after opening since you have likely sunk so much cash into getting it started.
2. Loans: Small Business Alliance (SBA) loans and others are another common option. The positive is that you are usually working with one entity that does this sort of thing all the time. The negative is that you are paying interest to a bank that does not care about your vision for the community, they just want their payments on time.
3. Investors: This can take many forms from soliciting your sister to courting venture capital to interacting with informal investors who work in the community and want to see the area flourish. The positive is that, because you are often working with several people, it is possible to raise more funds than if you apply for one loan. The negatives depend on the arrangement, but it is safe to say that utilizing someone as an investor often puts strain on the personal relationship, especially if they are family.
It is worthwhile to explore opportunities for mentorship in this arena. Often there are local initiatives in place to pair budding entrepreneurs with experienced businesspeople and mentors. In this case, you are not asking this investor for cash, you are asking them to mentor you in writing a business plan and finding funding.
5. Know Your Numbers
“If you don’t own your numbers, you don’t own your business.”
Figuring out financing helps get the plane in the air and knowing your numbers helps keep it there. Just like flying a plane, keeping your eye on the fuel levels and the information on the control panel is necessary for success. Too often, owners say they are too busy to track their metrics, but upon closer inspection, this does not make sense. If the gas light came on in the plane as we are flying, would we ever say we are too busy to stop and address the issue? Likewise, if you do not track your numbers, you will not know something is wrong until the plane is in a tailspin.
Be sure to familiarize yourself with the digital dashboard generated by your system; if you are looking at tools that do not generate helpful data, do not waste your money. In addition to the dashboard automatically created by your POS or other software, we recommend working with data analytics pros like the folks at Perfect Cube to ensure the information is easily digestible so you can make informed decisions for your dream business.
6. Hire Slow, Fire Fast
“The wrong hire isn’t just unfortunate, it’s deadly.”
Being understaffed is brutal, but a quick hire that goes sideways is much worse. Being down a person is better than having even one member of your team that is not a good fit. Why? Because not only are they not pulling their own weight, but they are also likely to take a lot of your time and energy away from you pulling yours.
One of the most important systems a new coffee company can invest in creating is a process for hiring people who are a good fit for your company and giving them a 90-day probation period. You will know for sure within those first three months if you have made a good call and, if not, better to let them go before things get worse.
We have seen the wrong person inside a small company nearly pull the entire entity down. Customer service plummets, employee morale tanks, entrepreneurial zeal fizzles, and the “bad apple” eventually leaves anyway either because they got sick of the culture or because the business folded.
7. Don’t Hire “Fixers”
“If you hire someone to fix a part of your business, you’ll never understand it.”
Along the same lines, it can be tempting to hire people to oversee parts of the business that are broken that you either do not have time to fix or do not know how to fix. This is a bad call for two reasons:
1. Fixers rarely actually solve the issue they were hired to address. In fact, except for qualified consultants or executive coaches, fixers usually create more problems because they feel entitled to special treatment even though they are a normal employee.
2. If a person oversees or fixes a part of the business, it is likely that you as the owner do not and will never fully understand and own that part of the company. We have seen this many times; the social media or branding begins to look like something totally other than what the rest of the company looks like or what the owner wants. It is your company; you should never feel like you cannot fully own a particular part of it because a person is in place who knows more than you.
An experienced consultant or executive coach is the only type of “fixer” you should ever entertain hiring, and even then, they should focus on equipping you so that you eventually do not need them anymore. If they are supporting you in a way the makes you rely too heavily on them, find someone else who will empower you to fully own your business.
8. Create Systems
If you do something more than once, there should be a system for it. The reason is simple: either you will fail not be able to fix it or you will succeed not be able to repeat it.
Business owners often complain they do not have time, however creating a system is like putting your shoes on before going for a walk. Have you ever been so busy you could not put your shoes on first? Maybe, but you would not want to live that way forever. A few barefoot trips outside should convince us that we are better off lacing up before we embark on our journey.
Creating systems can sound intimidating, but it does not have to be. If it sounds like torture to you, collaborate with a friend or mentor who is a bit more concrete sequential and tag team it. Do not outsource it, at least not yet, or you will suffer the same fate as if you had hired a “fixer” unless you are looking at a consultant or a coach. Again, their focus should be helping you create systems that you can execute without them, not doing things for you in a way that makes you dependent in the long-term.
9. Write Down Everything
Similar to creating systems, you need to write down everything. Everything? EVERYTHING! Why? Because if it is not written down it is not real. From systems to job descriptions to how you decide on which product to purchase, write down everything.
There are two main reasons:
1. It forces us to think through things in a more measured, analytical manner. We will often get halfway through writing down a procedure and realize that is not the best way to approach it.
2. It memorializes the business, which is a fancy way of saying it ensures the operations and culture do not live just inside your head but someplace where they will live forever.
Too many business owners have most if not all the company stored in their head. This creates a foggy vision and forces the staff to be dependent on you for everything. Make sure the business lives on paper as well as in the heads and hearts of your staff and customers.
10. Have an Exit Strategy
“If you know where the exits are, you’ll never feel trapped.”
Speaking of writing down everything, documenting your exit strategy before you begin is always a good idea. And if you ever decide to sell your business, guess what the prospective buyer will want? Everything we have discussed in this article!
High level operatives always know where the exits are.
As any seasoned CEO knows, if you know where they exits are, you will never feel trapped inside your business. That may sound macabre, but it is just business sense. No one wants to work for someone who seems stuck in the business that they started. Knowing you can exit and how helps ensure you never feel that way.
We recommend meeting with several people, investors, lawyers, mentors, and the like to craft an exit strategy. Contrary to popular belief, this is unlikely to scare people away. The desire to build your business in a healthy, intentional manner so that you can leave it well someday is more likely to impress these people with your maturity and foresight. Although your current play may be to die on bar with a portafilter in your hand, it is unlikely that that will be your end. Best to have an exit strategy in place even if you never use it.
Opening a coffee company is a lot of work! But we do not have to make it harder than it has to be. There will be plenty of mistakes and missteps along the road so be patient with yourself, your staff, and your small business. We hope these 10 tips will help you along the way; they are not intended to save you completely from making mistakes. Rather we hope they help you avoid potential pitfalls in the process of turning your coffee dream into a reality.