• Business Growth & Optimisation

How to Write a Simple Coffee Shop Business Plan

9 min. read20.10.2021
By Team Zeller

A strong business plan is the first step in turning your café dreams into a reality.

There’s nothing better in the morning than the aroma of freshly brewed coffee. The first sip of a good blend, and the friendly banter between coffee shop owners and their customers. Coffee brings people together — it’s the morning and mid-afternoon ritual that inspires ideas and conversations. Opening a coffee shop business is a rewarding venture, however to give your coffee shop business the best chance of success you’ll need more than the right blend.

So, what does it take to open a coffee shop? It all starts with a business plan.

Preparing to write your coffee shop’s first business plan

Business plans may be one of the most tedious tasks you’ll need to understand when starting your coffee shop business. However, the steps involved in developing your business plan are key stepping stones to running a profitable coffee shop.

When writing your plan, consider the following:

  • How much will it cost to open a coffee shop?

  • What requirements will you need to fulfill in order to open your coffee shop?

  • Where will your customers come from?

  • What will your projected profit and loss be for your first three years?

With so many technical business plans out there, it’s easy to get overwhelmed by the specifics. Keep reading to discover a simple and practical way to develop your coffee shop’s first business plan.

The essential parts of your simple business plan

A good business plan sets out your objectives and illustrates what strategies you’re going to use to achieve them. To create a sound business plan, there are a few key areas that you’ll need to focus on.

Executive summary

This is an outline of the fundamentals of your business — think of it as an overview of the business, including its structure, size, location, as well as objectives and financial highlights.

If you’re planning on seeking financial investment or a loan from the bank, your executive summary will likely take some time to get just right. Your executive summary will need to capture a reader’s attention; it’s not unusual for investors to make an initial decision based on the summary alone.

Market Analysis

Your market analysis should include a description of your target market, as well as the segments within that market. This will allow you to dig into the specifics of your consumers’ purchasing patterns and identify any factors that may affect coffee consumption (both positive and negative), as well as any gaps in the industry that you can capitalise on.

Current market analysis shows that the Australian coffee market is comprised of independent coffee shops, which make up 95 percent of the market — meaning larger chains like Starbucks and Gloria Jeans account for just five percent of the market. Its a highly competitive industry, so tailoring your marketing strategy to best position your offering is a fundamental aspect of your coffee shop’s business plan.

Another factor to consider is that the type of coffee your customers will consume differs, depending on your specific market and location — and, over time, tastes change as new trends emerge. (Think of the unicorn latte art of late, or the coffee/doughnut hybrid trend.) As Bill and Chris Spathis, owners of Melbourne’s Decoy Café  stated: “Back in the 70s, people ordered their coffee so hot it was sacrilegious — but that’s the way most people liked it. There was also far less diversity. At one stage, most people were buying coffee from the supermarket. People are more discerning now. Most are buying their coffees from local roasters.”

coffee-bean-bags-in-coffee-shop

Ensuring your market analysis is up-to-date will help your coffee shop tap into current trends and stay on top of the coffee business.

Competitive Analysis

This section should hone in on your locality and highlight all current competitors, as well as any potential future competitors that might enter the market. If you determine your competitor’s strengths and weaknesses, you will be able to discover opportunities that are present and give your coffee shop an advantage.

Product line

If you plan on selling specialty coffee, this should be outlined in your business plan — including information about where the coffee beans are sourced, which vendors or partners you will be using for materials, and what your menu will look like. Do you want your business to become known for its affogatos? Or range of milks (and milk alternatives)?

The products you choose to sell will have a big impact on your profit margins, so choose wisely.

Marketing Strategy

Now that you’ve done your analysis and know the intricacies of your local market’s coffee scene, it’s time to put the data and insights you have discovered to work and develop your marketing strategy. The strategy you develop will be used for promoting your coffee shop, products, and your business.

Consider which social media platforms will be best suited to the promotion of your coffee shop and how you will promote your business to foot traffic, as well as which sales data you’ll be tracking and reviewing to determine how well your business is performing.

One of the most important metrics to keep a close eye on will be your total sales transactions. It’s imperative that you have visibility over not only your daily sales, but also your expenses. A tool such as Zeller Dashboard will show you a real-time comparison of the day’s sales versus sales made on the same day last week, as well as month-on-month comparisons. Having this information handy will prove invaluable when you are revenue forecasting, and developing marketing strategies to meet sales targets.

Management plan

Creating and sticking to a management plan is a necessary part of growing your coffee shop business. It should include the tools and systems you are going to use to manage your employees, the layout of your team and their responsibilities, as well as staffing costs — including wages, training, and items such as uniforms.

Financial considerations

Business finances are complex. Outlining your anticipated costs and how you plan to finance your coffee shop will help you in determining the profits you could hope to achieve through your coffee shop.

Once you have outlined your costs, you can calculate what your projected cash flow will be and work out your business’s break-even point. By calculating your business’s break-even point, you’ll be in a better position to understand the timing between getting paid and paying the business’s bills — helping to keep your business in the black.

When considering your finances, it is also important to look ahead and include the business’s projected profit and loss for a three-year period.  This will indicate your business’s net profitability as it establishes itself in the market.

Your legal obligations

There are a few things to consider here. Depending on the type of coffee business you plan on opening — whether it be a coffee cart or shop front — there will be legal obligations you need to meet.  It’s essential that you are clear on these legal obligations from the beginning, otherwise you will hinder your business’s opening and put yourself at risk of financial penalty.

You’ll need to ensure you obtain the correct industry-specific licences and permits for your coffee shop. Consult a legal expert on these matters, as each licence and the steps towards compliance is specific to your location and business. For instance, a specific licence may be required for the preparation and handling of food and beverages. There are also licences that certify compliance with the appropriate health and safety guidelines, and your business could also have to pass health and safety inspections before it is allowed to open.

You’ll also need to ensure your coffee shop has the proper insurance coverage, in case of any unforeseen accidents. There are various types of insurance that you should consider, such as:

  • General insurance

  • Health insurance

  • Public Liability insurance

  • Kitchen insurance

  • Workers’ compensation

Start-up costs

The cost of opening a coffee shop can be a major hurdle. However, if you work out what costs are associated with establishing the business — that is, what is a necessary cost and what is not — it is an achievable venture. There are five cost factors to take into consideration when planning your business.

1. Physical space

The location of your coffee shop will be crucial to its success. As a new business, you want to find a location that has a decent amount of foot traffic and visibility from the street — otherwise, you’ll need to invest significantly more money in advertising and signage to attract customers. Consider whether your coffee shop will be a coffee kiosk, a coffee truck, a coffee shop with standing room only, or a sit-down coffee shop.

When considering the location of your coffee shop, keep social distancing in mind. Once the current measures have been eased, many people will still be weary and likely won’t want to be constricted in tight spaces. Businesses with an outdoor area will be able to swell with demand.

2. Equipment

The equipment you choose to purchase will impact the quality of the coffee you’ll be serving, and the overall experience of your customers. Research the type of equipment that will suit your business’s purposes and determine what you must absolutely have, and what is unnecessary and can wait to be purchased later.

coffee-machine-making-cappucino

3. Your Menu

Your menu is another major cost to consider. Will you be offering a selection of gourmet coffee, and will you include sweet and savoury treats? The larger your menu selection is, the more you’ll need to invest in materials and produce. You’ll also need to ensure that you have stock on hand to meet demand, otherwise it could impact your customer service if you are underprepared.

Your market analysis research will come in handy in determining which items to add to your menu, as well as ensuring you are up-to-date with market trends and providing your customers what they want.

4. Staffing

Staffing costs need to be worked out from the get-go, and should form part of your business plan. Consider the technology needed to assist with employee management and payroll, training costs, penalty and overtime rates, as well as any benefits and superannuation contributions.

You’ll want to ensure you hire trained baristas, who know how to pour the perfect cup.

5. Marketing

How will you get the word out about your newly-opened coffee shop? As with any new business, there will be marketing costs associated with opening up; flyers, social media ads, and signage are all worth considering.

What out-of-the-box ideas do you have for attracting new customers? Will you be offering a discount to people who check in and share your social media post on their own feed, for example? This will cost money, as it eats into your projected profits, so you’ll need to factor in a limit. Will it be for the first 50 customers, or for the first day only?

Whatever marketing you decide to go with, you’ll need to budget it into your costs. Adopting a ‘test and learn’ approach will help you measure the impact different types of marketing has on your sales and investment, and understand what works (and what doesn’t) with your local customers.

How will you take payments at your coffee shop?

People are generally in a hurry when getting their morning and afternoon caffeine fix, and don’t like waiting too long. Your coffee shop needs to offer fast and efficient service and be able to deal with the busy periods as efficiently as possible.

Taking payments quickly and managing customer flow is crucial to the overall customer experience. Long lines due to a slow payment system can impact customers’ perception and lead to a loss of business if people are inconvenienced with the payment process.

What your business needs is to ensure fast and convenient service with A payment terminal such as Zeller Terminal, which offers tap and go payments, ensures fast and convenient service. Your customers can tap their watch or smartphone to the terminal, with no need to pull out their wallet. Zeller Terminal is also fully mobile, and can be taken anywhere — making it handy for all types of coffee shop businesses.

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Ensuring your coffee shop is a financial success

Opening a coffee shop can be a profitable venture, with the right planning and equipment. Walk past any busy coffee shop, and you’ll see it buzzing with customers enjoying their coffee, sipping on tea, and nibbling on pastries and other treats.

The success of your business will be dependent on how closely you watch over your operations, track profits and keep on top of businesses expenses. The average coffee shop’s profit margin is around five to eight percent, similar to casual food establishments. This means that it’s likely you’ll only keep five to eight cents of every dollar you make once, you’ve factored in all your business expenses.

It’s important to note that most coffee shop businesses that fail do so due to financial issues caused by a lack of planning — not bad coffee. Choosing the right payments provider is one of the most crucial decisions you’ll make. Zeller Terminal accepts every tapped, dipped, or swiped payment for just 1.4% — which can easily be passed to the customer, with the flick of a switch. By minimising your transaction costs, you’ll ensure more money stays in your business.

Meet Zeller: we’re reimagining banking for Australian businesses

Accepting payments, managing your finances, and paying recipients should be simple. Unfortunately, this isn’t always the case. Our research shows the majority of Australian business owners are dissatisfied with their business banking. The truth is, most merchant services solutions aren’t built to help your business thrive. That’s where Zeller comes in. Today, we’re launching Zeller — giving Australian merchants affordable, accessible, and innovative tools that enable businesses to get paid, access their money, and manage cash flow — without ever having to set foot inside a bank. We’re reimagining business banking through powerful new technology, backed up by local support and personalised service. An innovative SME alternative to business banking “Innovative” isn’t a word usually heard in the context of merchant services. Finding integrated financial solutions to grow and support your business often requires you to weave together multiple products from different providers, which typically means longer processing times, more paperwork, and a more frustrating experience. Large enterprises benefit from financial solutions tailored to their specific needs; traditional banks have shown that they’re more than willing to pour resources into supporting big business. However, this comes at a cost to the everyday Aussies behind our small to medium sized businesses. SME owners are typically forced to fit the traditional banking mold, suffering through archaic onboarding processes only to be hit with high fees, lock-in contracts, and slow processing times when the paperwork is complete. For new business owners, this can present what seems like an insurmountable hurdle to starting and growing a venture. With 67% of businesses stating they would prefer a non-Big 4 bank, it’s clear that Australian business banking is fundamentally broken. A lack of innovation from the incumbents means merchants like you are overlooked and underserved, at a time when they should be thriving. Businesses need new tools, technology, and support to grow. And that’s why we built Zeller. What’s in the box Zeller is all-in-one payments and finance solution for Australian businesses. It helps to accelerate your business cash flow by giving you a next-generation EFTPOS terminal, a free business transaction account, and free business Mastercard, all in one box. 1. Zeller Terminal Our research revealed that 71% of business owners using clunky EFTPOS terminals regularly consider switching providers. High costs and expensive fees, slow deposits that impact cash flow, and a lack of local support are all common reasons for businesses looking to switch. The majority of Australian business owners are dissatisfied with outdated EFTPOS technology currently on the market. Zeller Terminal is an all-in-one card payment and EFTPOS solution. Our next-gen payment terminal allows you to accept every payment from every customer – Zeller Terminal accepts contactless devices, contactless cards, chip cards, magstripe cards, and will soon also accept alternative payment methods such as Alipay and ZipPay. As new payment methods continue to emerge and shape the way Australians pay for products and services, Zeller Terminal will adapt to support Australian businesses to grow. Read more about Zeller Terminal . 2. Zeller Transaction Account We understand that being able to effectively manage and access your cash flow is key to the long-term survival of your business.  That’s why we make sure your funds are available as quickly as possible after taking payment from a customer. Zeller Transaction Account is included free when you sign up for Zeller. Your account is instantly ready to use, giving you real-time visibility over your settlements and spending — no lengthy paperwork required. When you take payment through Zeller Terminal, funds are settled directly into your free Zeller Transaction Account within the day. You also have the option of sweeping your funds into any existing bank account, and they’ll be accessible as soon as your bank allows. Read more about Zeller Transaction Account . 3. Zeller Mastercard By giving you the tools to accept payments, store and settle funds, and spend your money, we're significantly reducing the time it takes for you to get access to your funds. According to the Australian Bureau of Statistics, more than 60% of small businesses close within their first three years — and the most cited cause for business failure is poor cash flow. As a business owner, fast access to your funds to pay your staff, suppliers, or buy product, is imperative. Read more about Zeller Mastercard . By seamlessly combining these services into a fully integrated solution, Zeller significantly reduces the time businesses spend on finding a merchant services provider, completing lengthy applications, getting set up, and connecting disparate payments and financial services solutions — all while speeding up your business’s cash flow. Watch the video to see how Zeller works in more detail. Your business, your way Merchant services should work the way your business needs, allowing you to pick and choose the business banking products you need to sustain and grow a profitable business. With Zeller, you have the option to choose the parts you need – Zeller Terminal, Zeller Transaction Account, and Zeller Mastercard work just as powerfully together as an integrated solution as they do alongside your existing products. Learn more about our EFTPOS machines and how our newly launched products are changing business banking for the better.

Your Top Cash Flow Questions Answered

Cash flow is the beating heart of business. A healthy cash flow circulates enough money to pay bills, compensate staff, fulfill invoices, and invest in future growth. Cash flow is critical to business success; lack of cash flow is one of the main reasons 50% of Australian SMEs go out of operation in the first three years. Without it, a business is likely to end up on the wrong side of the statistic. Yet while owners are growing increasingly aware that reliable access to available funds is the key to a successful business, 46% of small businesses remain cash flow negative — meaning more money is flowing out the door than coming in. Keep reading to understand the basics of cash flow, cash flow management and tips to improve your own business’s cash flow. What is cash flow? The term “cash flow” refers to the net money going in and out of your business. Ideally, it should be positive — as this gives you more room to pay bills, staff and invoices without seeking loans, adding further interest to your outflow. For this reason, a business’s ability to manage its cash flow typically determines its likelihood of success. What causes a negative cash flow? A big contributor to poor cash flow is late payments — when customers don’t pay their invoices in time, it inhibits your ability to invest, grow and employ . However, a more unsuspecting contributor to poor cash flow is slow access to the money your customers pay for your products or services. A delay in accessing your funds is usually a result of mixing and matching your EFTPOS provider and bank, creating a costly lag after every purchase. This delay can eventually lead businesses into a debt trap, as they’re forced to take out loans to ensure access to cash. What is sales revenue vs cash flow? Sales revenue is the amount of money earned from the sale of a business's goods or services. For example, when a bookstore sells a book for $45, this entire figure counts towards the store’s sales revenue. It is the total, gross amount of money coming into the business through sales. Cash flow, on the other hand, refers to the money going in and out of a business. It includes money that flows into the business in other ways, beyond sales. For this reason, sales revenue is an indicator of sales and marketing success, while the latter refers to a business's overall health because it indicates liquidity. Sales revenue and cash flow are both important figures to track; without them, it’s impossible to gauge the success of a business and make informed decisions. What is break-even point and how is it calculated? The point where your business breaks even is when your profit is zero and your cash flow is neutral. This means your sales revenue covers all of your outgoing expenses and your business can stay afloat without being propped up by cash loans. It’s from this point that a profit can start being made. There’s a simple formula you can use to calculate your business’ approximate break-even point — this will tell you the minimum number of sales your business needs to make to avoid a negative cash flow. Calculating your break-even point is also a useful way to understand the timing between getting paid and paying your own bills. You don’t want to be taking out a cash loan in order to pay suppliers and staff salaries purely because your funds are yet to be processed. For this reason, quick access to your takings is key. How to improve cash flow from operations? There are a number of ways you can feed your cash flow and maximise your liquidity. Take on-the-spot payments Service businesses often bear the brunt of delayed payments because they don’t have the ability to accept payment upon completion of a job, putting them at the behest of the customer — which automatically delays the inflow of revenue. A mobile EFTPOS terminal that allows you to take payments on the spot will help bridge that gap, meaning you don’t have to return to the office to invoice a customer — then chase up late payments. Add a surcharge Another way you can instantly up your cash flow is to pass your transaction fees to your customers via a surcharge. If you use the Zeller Terminal, this is something you can opt to do with every transaction — giving you access to more funds that you can then invest into advertising, product improvements or lower prices. Offer more ways to pay Something as simple as accepting new payment methods as they grow in popularity can open you up to a wealth of new customers. Plus, you won’t be reliant on a single source of funds throughout the month, minimising the risk of extended cashless periods. The Zeller Terminal allows you to accept payments via contactless devices and cards, chip and magstripe cards, and QR codes. Plus, you only pay a flat, low fee of just 1.4% per tapped, dipped or swiped transaction for every card type. How to manage personal cash flow? A good way of managing your business’s cash flow is by first mastering your personal cash flow . This means understanding your monthly earnings, setting realistic goals, budgeting for adequate spending, setting up auto-payments around payday, having emergency funds in place for unforeseen expenses, and siphoning off your surplus into a savings account. What's the easiest way to speed up cash flow? Achieving a positive cash flow is an integral step on the way to business success. Choosing a comprehensive payments solution like Zeller can help get you there. Access to cash will come sooner thanks to seamless connectivity between your EFTPOS Terminal , merchant account and business Mastercard . Plus, it all comes in the one box. Improving your cash flow couldn’t be more simple.

Budgeting for Business Owners: 8 Common Mistakes to Avoid

Every successful business needs a budget. Running a small business with great success often hinges on executing a well-curated business plan. One of the most crucial elements of small business finance and an effective business plan is implementing a solid budget. When you take time to create a financial roadmap for your business, it will serve to navigate you through each financial year so you don’t end up in financial stress. A good budget plan will keep you organised and help you make savvy financial decisions that benefit your business. It’s important, however, that you know how to avoid some of the most common budgeting mistakes that land small businesses in hot water. In this article, we will explore what these mistakes are and how you can avoid them. Mistake 1: Reusing last year’s budget plan Many business owners allocate time to review their budget and plan for the year ahead just before the start of the new financial year. While it’s normal to use your existing budget as a guide for establishing the next one, be careful not to cut corners by simply reusing the last plan as your new budget plan. It may seem convenient and time-saving, but in the long run this strategy is unlikely to be advantageous to your business. In the space of an entire year, your business has evolved, for better or worse, and has been exposed to a different financial climate. From pandemics, to recessions and even natural disasters, there are a range of influences that need to be taken into account each financial year. Spending habits shift in this period too. You may have more or fewer expenses, or a larger or smaller income. All these factors need to be considered in your upcoming budget plan in order to maintain an accurate and realistic budget that is relevant to your current situation. Knowing the nuances will help you determine where you can cut the fat to increase your profit margins. When putting together a new budget it’s a must to analyse last year’s plan, but ensure you update it adequately to reflect your current business circumstances, rather than replicate it entirely. Mistake 2: No business strategy A budget is important, but without a solid business plan in place you’re flying blind. A business plan is the path that leads to your growth, where you outline your business goals and map out the steps you need to take to achieve them. You’ll also determine how much money you need to spend to reach your goals. If you want to refresh your business strategy or are just getting your business started and aren’t sure how to create a business plan, read our guide on How to Write a Business Plan . Mistake 3: Low prices Many new business owners are keen to get the edge over their competitors. One way they attempt to attract customers is by beating their local competition on price. If you already have tight profit margins, then this strategy is going to cause your business financial strain. Not only that, but you might find customers avoid you if they view your prices as being indicative of the quality of your products or services. If you’re re-thinking your prices or just getting your business started and aren’t sure how to set your prices, read our blog on Retail Pricing Strategies . Mistake 4: Spending too much, too soon Starting up a new business takes a lot of time and energy. When money does begin to come in, it’s exciting — your hard work is paying off. It can be tempting to start spending money as soon as you start receiving revenue. However, it is often a wise move to spend slowly and focus on building up a financial buffer first. Reinvesting is a good business strategy, but prioritising debts like business loan repayments and establishing an emergency fund will keep your business in a strong position. Mistake 5: Underestimating expenses When it comes to small business finance, expenses can stack up at an alarming rate. Don’t underestimate these costs. Be realistic with your budget forecast and ensure you keep track of all your upcoming expenses and any price changes that could be on the horizon, such as changes to the cost of: materials rent labour travel advertising equipment shipping, and more. If you want to save money, examine all your expenses and look for reasonable ways you can do it for less. For example, a portion of your takings will go to merchant fees. Some merchant services providers charge variable transaction fees, depending on the card used by the customer. That makes it difficult to forecast your transaction fees at any point in time, meaning you’ll probably be paying more than you expect. Zeller Terminal accepts every card payment for one low fee of 1.4%, whether tapped, dipper or swiped. There are no hidden charges or fees, so you won’t find any nasty surprises in your merchant statement . Mistake 6: Slow cash flow Late invoice payments negatively affect your cash flow. It reduces your own ability to pay bills and suppliers, and can leave you in a pile of debt. When you’re creating your budget, keep an eye on the patterns of your cash flow and how they influence your business performance. If you find yourself paying for products well in advance of the date that your customers purchase them or pay your invoices for them, then you will need to plan accordingly to cover yourself for these in-between periods. Struggling with customers that don’t pay on time? Read The True Cost of Late Payments (and How to Reduce it) . Mistake 7: A one-sided plan When creating a business budget, it’s necessary to cover all the angles. To be fully prepared, it’s ideal to create at least three different scenarios in your plan. By doing this you can envision the different financial directions your business could go, and be ready to act should any situation arise. It’s important to have a good understanding of what your key drivers are and how they can influence your business results. These include, but are not limited to, your sales volumes, profit margin variations and pricing changes. When you know your numbers, you can set up different scenarios. For example, you can ask yourself questions such as, “what would happen if my sales went up by 15%?” or, “what if I lost my biggest client?” Cover as many variables as possible to see what outcomes they would lead to so you can be prepared to resolve any problems that come up quickly and easily. Mistake 8: Forgetting to monitor it It’s essential to review your budget frequently. Many businesses create a budget, and then forget about it entirely, wasting their precious time and a golden opportunity in the process. When you regularly monitor your budget, you’ll not only deepen your understanding of what needs to change or be improved upon for future budgets, but you can also track your actuals against your forecasts. This will help you determine whether or not you’re moving closer to your goals, or whether you might need to change tack. Budgeting for business owners can be a time consuming process but the benefits are numerous and will serve to help you reach your business goals. By avoiding the common mistakes many businesses make, you will be well prepared for any situation that may arise. For more tips on how to achieve success in your business, sign up to our Business Blog .

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