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Coffee Shop Venture: "Startup Costs and Earning Potential"

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Starting a coffee shop might be the first thing that comes to your mind when you're thinking of starting a business. Yes, it is one of the most common business ideas for most people. No wonder, with over 100 million coffee drinkers in the U.S. alone, the opportunity is there, the entry barrier is not that high, and the market keeps growing with each passing year.

From 2013 to 2015, the number of coffee shops in the U.S. rise from 52,684 to 53,987, and in 2016 it is projected to reach more than 55,200 coffee shops. With great opportunity, comes a stiff competition. But there's no doubt about it, coffee shops has been a good business for a long time, and there's no sign of slowing down.

Calculating Your Coffee Shop Startup Cost

The cost of starting will vary depending on many variables. If you want to start small with a coffee cart or kiosk, it might only cost you $25,000 to $75,000. A standalone shop, up to $250,000, depending on location and the need of parking/drive-thru area. Getting a franchise license from an established franchise can increase your initial cost to as high as $500,000.

Some costs that will need to be considered for your coffee shop planning purpose:

1. Rent
The rule of thumb for a healthy F&B business is to maintain rent in 15 percent or below of the projected sales. You need to also consider the build-up cost of your location.

2. Equipment
A high-end espresso machine, coffee grinders, blenders, brewers, gourmet drip, etc. will cost you a lot, and yet it might be a necessity if you're planning to start a specialty coffee shop. Don't forget you'll also need refrigerators, ice makers, and other equipment depending on your specific needs.

3. COGS (Costs of Goods Sold)
For a typical coffee shop goods sold will include the coffee itself, milk, syrups, chocolate, among other drink ingredients. This may extend to muffins and other baked goods depending on your plan. Ideal COGS should be as low as 20-30%, with the maximum being 40% of your sales.

4. Payroll
Your total wages, benefits, compensations, payroll taxes and processing costs should be 35% or less.

5. Others
- professional Fees including but not limited to legal attorneys, architects, interior designer, accountants, and other consultants
- principal and interests
- insurance-supplies (cups, straws/sticks, napkins)
- licenses and permits
- utilities
- advertising and marketing cost
- maintenance and repair
- office supplies-income taxes (roughly 35% of profit)

How Much Can You Earn From Your Coffee Shop?

Your potential earning will also depend on some variables, yet a rough estimation to help your starting point should be like this.

A new small coffee shop of 20-30 pax capacity can have a 100 customers a day average, with $3 being the average price for coffee product (might be higher for gourmet coffees in a specialty shop) then a new shop can make a $3 x 100 x 30 days = 9k monthly revenue!

Your profits will depend a lot on efficiency, with the costs described in the previous section should be maintained as well as possible.

If your calculations of the costs described exceed $9k, few options are availabe as consideration such as increasing price, increasing capacity, increasing turnover, lower rental costs, lower COGS, etc.

With every businesses, creativity, instincts,tactical and strategic advantage, efficiency, and in the end, luck, among many other qualities, will make or break your business venture.