But all of that opportunity creates a heavily saturated market. Walk around your downtown and you’re likely to come across at least a few potential competitors. Starting a business in such a competitive space only adds to the risks you face by not being prepared.
So where should you begin? Start by creating a business plan. The planning process will ensure you understand the competitive landscape, price your coffee appropriately, and are ready to adapt to changing consumer preferences. This article will cover the steps necessary to write a business plan for your own coffee shop business.
Seeing cafes on every block is not uncommon in a lot of cities, so you will need to invest time in market research to identify your target customers and help your coffee shop business stand out.
You can start simply by walking around your area. What do you notice about the other coffee shops? Where are they located in relation to traffic patterns, and how do they appeal from the outside? Then, go inside and take note of their customer service, menu offerings, and ambience. Keeping track of what others seem to be doing well and what could be better will ultimately help your coffee shop stand out.
Consider the neighborhood where you plan to open and what locals will want from your business. Are you located near a university? If so, what kind of drinks are most popular amongst young adults? Are people in your area typically on the go, or do they prefer more of a sit-down experience?
To gather more insights, you can talk to customers and read industry publications to understand trends. You could even look into coffee shops in your town that have closed to try to figure out why they failed so you can avoid those same mistakes.
Focus on what sets you apart
To bring your coffee shop vision to life in a competitive landscape, you need to differentiate yourself in the market. Your business plan is where you focus on developing your coffee shop’s unique value proposition (UVP). You should not only understand, but be able to clearly explain what makes you different from your competitors.
Maybe you have stellar supplier relationships that will let you serve better tasting coffee for cheaper? Or maybe your coffee shop will double as a community gathering place?
Your unique value proposition explains what solves your customers’ problems, the benefits of your product or service, and why your target customers should choose to do business with you. Regardless of what sets you apart, you need to emphasize it across your business.
Create an appealing menu
A compelling menu is crucial for any food and beverage establishment. Your business plan shouldoutline your beverage offerings, as well as food if you plan to provide it. And your description of menu offerings should connect to your target market: If you’re catering to busy commuters, you can emphasize quick meals like pastries and to-go options for each of your coffees. If families are your primary market, highlight kid-friendly options like hot chocolate.
Maybe you can provide large amounts of coffee and pastries for community events or business meetings? If so, include a subsection about these additional services you can provide, since these may be part of your unique value proposition.
It’s also crucial to plan for the design aspect of your menu. If visual design isn’t your strength, mention in the plan the intention to hire a graphic designer for a professional and appealing prototype. Additionally, consider involving an editor for quality assurance – you may be able to find a trusted friend or business partner for this.
Utilize marketing and promotion strategies
In a highly competitive space like the coffee business, creating a well-thought-out marketing and promotion strategy is arguably the most important part of planning. Along with reflecting your brand’s unique appeal, the marketing plan should also be adaptable to your business’s growth over time. Consider including these key elements:
Digital Platforms: Outline which social media platforms (like Instagram, Facebook, etc.) will be most effective for reaching your target audience. Include strategies for content, such as promotional posts or interactive engagement.
Local Advertising: Discuss the use of physical signage in strategic locations to attract local foot traffic. Mention the design and messaging of these signs to ensure they align with your brand identity.
Launch and Community Engagement:
Detail plans for a soft opening or launch event. Consider including community-oriented activities like live music or local collaborations to generate initial interest and goodwill.
Growth and Adaptation Strategies:
Describe potential programs for customer retention and engagement, such as loyalty programs or seasonal promotions. Mention the use of automated communication tools (like texts or emails) for keeping customers informed and engaged.
Feedback and Evolution: Include a plan for gathering customer feedback and how this will inform future marketing and promotion strategies. Doing this shows adaptability and a commitment to continuous improvement.
Incorporating these elements into your business plan will not only provide an outline for your marketing efforts but also demonstrate to potential investors or partners how you intend to attract and retain customers.
Don’t neglect your operations plan
Just like having a strong marketing plan, staying on top of your day-to-day operations is crucial. That’s why your business plan should include a detailed operations plan.. The operations plan details all of the tasks you’ll need to manage as the owner to ensure you’re running a functional business.
Who is responsible for each task, and what are your staffing and training requirements? Ensure that you have the right people for the job, the right amount of people to help run each task, and a delegated plan in order to keep your coffee shop business running smoothly.
Consider the potential for equipment breaking and running out of cups, plates, and other inventory. How might things need repaired, and how much inventory should you have on hand to be best prepared?
Here, you will also want to factor in storage needs for supplies and a layout that supports quick and easy access for staff – proper layout and organization will encourage good customer flow and barista efficiency. Discuss the seating capacity, counter space, and equipment arrangement to ensure optimal service speed and customer comfort.
Financial planning is essential
When setting up your coffee shop business, there will likely be more upfront costs. These could include:
On top of startup costs, you will need to take into account recurring costs like recurring coffee beans and ingredient purchases, utility costs and Wi-Fi access for customers. Don’t forget the cost of paying yourself and your employees. Bucket these all into categories so that you can easily keep track of them.
You’ll also want to consider your revenue streams. Will you charge more for milk alternatives? If people want to rent out your space for work meetings or events, what is your rate?
Going further, when do you anticipate you will break even? Don’t just consider when your revenue costs equal your startup costs, as this isn’t the most accurate. We recommend you do a break-even table twice – once with your assumptions and again with your actual results. We have a full writeup on this if you’d like to dive deeper.
If you’d like extra guidance with forecasting your financials, tools like LivePlan help you do just that.
Just like with any business, challenges might arise. Issues with supply chain, service consistency, or poor quality products are just a few of the things that can unfortunately go wrong when running a coffee shop business.
It’s important to have strategies for long-term sustainability that keep potential risks like these in mind. Documenting things like your training strategy and coffee bean storage protocol will help keep up with proper quality control of the drinks and service you provide. Strategic inventory management will also reduce the chance you run into supply chain or pricing issues.
Download your free coffee shop business plan PDF
By anticipating potential challenges, your business plan prepares you for sustainable success. If you’d like some extra help, download our free sample coffee shop business plan – you’ll get a full business plan example that you can follow as you create your own for your successful coffee shop business.
See why 1.2 million entrepreneurs have written their business plans with LivePlan
Makenna Crocker is the Social Brand Manager at Palo Alto Software. Her work focuses on market and social trends, educational content creation, and providing entrepreneurs with small business tips and tools. With a master’s degree in Advertising and Brand Responsibility from the University of Oregon, she specializes in generating a strong and responsible brand presence through social media and sharable content.