Many coffee shop owners do not realize the importance of having a good coffee shop business plan. A business plan is basically a document that list down your competitive strategy and execution during the operations. Having a compelling strategy will inspire you to great heights in business success and having a good execution business plan will ensure that your castle is not built on clouds. It forces you to dream big and at the same time to come out with operations to make this dream a reality.
Having a well thought out business plan will give you an advantage over your competitors. It give any your potential bankers and investors a big boost in confidence in your vision. They realized that most of the coffee shop owners cannot put down their strategy into paper; mush to execute them well.
In general, the language in the coffee shop business plan should be factual and business like. You can use any prospectus of a listed company as a reference. You may say that you are not going for listing! You must realize that the investors are really looking for good deals and there is no better way to show them you mean business by having a world class business plan. Use graphs and government statistics to back up your research and this will give you instant credibility. A good business plan will basically cover two things, your business strategy and execution.
A strategy is the goal you want to achieve in your business in the short run, which is the first one year and for the long run, which is 5 year. As this is a big topic by itself, I shall cover the few critical components briefly.
i) Target market
The first thing you must cover is your target market. This includes the demographics, where they eat and how affluent they are. Then you need to estimate the market size. This will depend on how big an area you think you can realistically cover.
No business exists by itself. If there really is none, that is a sign of no demand in the market. You must list down your nearest competitor in your chosen niche and their strengths and weaknesses. If you can, list down their revenue per month and estimated market share as well.
iii) Your Unique Selling Proposition (USP)
Your USP is how you position you business differently from other competitors. It answers the question of why your customers must be crazy not to do business with you compared with your competitors. It could be your quality food, your service, your cozy environments or your pricing. Give them a compelling reason why and they will flock to your coffee shop.
iv) Target location and rationale
The location you choose to start your business really depends on your USP. You may choose to do an upscale coffee shop and naturally, a nice and relaxed environment is important. The renovation costs and may skyrocket but you can charge more for your products. You may want to pick a shopping mall to cater for students or workers who wants to relax. If you choose to compete on speed and delivery, you are catering more on the morning crowd who wants a quick sip of coffee and quality food.
v) Management team/investors
In this section, you must list down who is in your management team or investors. An experienced manager or investors with more than twenty years running a coffee shop is more valuable than a new one. So, it makes sense to have someone who knows the operations well.
vi) Risk factors
All business carries some inherent risks. This may be the changing taste and demands, technology changes, legal and regulatory changes and new entrants. You must anticipate them and take the necessary actions to mitigate them.
vii) Exit strategy
You may provide some plan for exiting in two scenarios. First, you made a lot of money and plan to open more chains. Then, you need a lot of investor financing by selling some shares to them. Second, if the business fails, you may want to negotiate to shorten the lease on the shop and find ways to sell off the coffee equipments.
This part covers the detailed aspects of the day to day running of your coffee shop business. This is where the rubber meets the road and you must successfully execute to get your business off the ground.
i) Startup costs
These are the costs to get your business off the ground. These include renovation, coffee shop layout, cost of buying or leasing equipments and legal costs like license and permits. How much you need to spend depends on your USP you have targeted.
ii) Monthly revenue and expenses
After estimating the market size in your niche, you can estimate how many customers you can have as you monthly revenue. You can then estimate the monthly operating costs, which includes leasing, staff salaries and utilities. You must estimate how much cash you need to sustain for the slow months, especially in the early months of operations.
This covers the day to day operations of you coffee shop such as operations hours, how many staffs are in the kitchen and serving customers as well as the type of furniture you need to buy. You may also detail down the types of kitchen utensils to buy and when the equipments need to be serviced.
You marketing methods will depend on your USP and the image you want to portray. If you plan to do an upscale type, you can send postcards or flyers to your local areas. You can also organize special events like birthday parties or meetings. You company logo and staff uniforms also must reflect this upscale image.
If your niche is speed and price, you may advertise in a billboard near any busses or transit railways. You may want to give out special discounts for regular customers.
v) Funding needs and sources of funds
You may start by using your own funds but as your business grows, you will need more financing. If the interest rate is favorable and you have been in business for over a year, you may approach banks for borrowings. If not, look for investors who are wiling to take some risks. Even if all else fails, you can still get your supplier to finance you in the form of discounts or longer repayments. See if you can qualify for any small business grants from the government.
After finishing the first draft, you may want to get someone experienced such as a lawyer or accountant to give a second opinion. It may take you a few more draft before it is ready to be presentable to the investors. You are advised to revise this at least yearly to see if it is still applicable.