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5 Reasons Coffee Shops Lose Money

  1. The assumption that you can wing it. It is vital to do the proper research before opening up your own coffee business. If taking over an existing shop, you have to know the current business’ operations, successes and challenges. Whether starting from scratch or taking over an old shop, you have to know about the retail coffee business, how to open a business in general and how to acquire the necessary skills in accounting and management, the cost elements of your business, and how to brew coffee of course. In addition to researching prior to opening your shop, have a plan for after the opening. Set aside enough personal time for your business venture, sort out your personal and business finances, develop an overall business concept, develop a budget and establish a timeline. Failure to research and plan can result in a waste of time and loss of money. Additionally, not understanding all of the work that plays into owning a coffee business can lead to early burnout, damaging your energy needed to sustain a company.
  2. Failure to start small. Beginwith a narrow menu and add in more products and services as you move forward with your business. You can’t expect to start out making a large profit before your business has really taken off and word of mouth has spread, and putting too much money into products that end up expiring and being thrown away can kill your business early on.
  3. Not understanding your overall coffee shop concept. You can waste a lot of time and money if you don’t have a foundation to base all of your decisions off of. Determine what kind of business you want to be running, your budget, your location, your competition, and stay on track with your central concept as you move forward with decisions and success will follow. Always keep your brand image and company culture in the forefront of your mind so that you don’t put money in the wrong place.
  4. Not listening to your customers and taking their feedback to heart. Building a brand, marketing to your target demographic, building great business relationships, providing outstanding customer service, increasing profits and hiring the right people all start with creating a loyal customer following. Watch how customers respond to your business – how they react to your prices, to your menu items, to your service – and make adjustments accordingly to keep them happy. They will notice you making changes to accommodate them and their appreciation will pay off, literally.
  5. Overspending and overestimating. Commercial coffee equipment can be costly, and overspending on new shiny equipment that you don’t necessarily need can lead to massive debt and/or take away from funds you should be using to start up other aspects of your shop. On a similar note, you have to accurately estimate your cash flow so you know how much spending money you have on hand. Figure out your accounting methods and stay on track with your budget. If you overestimate how much cash you’ll be having flowing in, you’ll end up flowing right out of business.



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