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Coffee Shop & Cafe icon Religious Coffeeshop Business Plan

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Inspirational Grounds

Executive Summary

Inspirational Grounds will provide a relaxing, Christian-focused, neighborhood-centered place with freshly roasted coffee, specialty drinks, good books, and music. Inspirational Grounds is the answer to an increasing demand. Our target market wants:

  • Neighborhood businesses in South Central Minneapolis
  • Great coffee at a competitive price
  • A comfortable place to socialize with others with similar interests

Inspirational Grounds’ goal is to provide the community with a social, entertaining atmosphere where Christian neighbors can meet each other in a neutral, non-denominational setting.

Inspirational Grounds is incorporated as an S corporation. This will shield the owner from issues of personal liability and double taxation.

This proposal is prepared to obtain financing in the amount of $80,000. The supplemental financing is required to prepare the selected site, purchase equipment, and cover expenses during the first year of operation. The owner will invest $15,000 of her own into the business.

This financing will allow Inspirational Grounds to successfully open and maintain operations. The large initial capital investment will allow Inspirational Grounds to provide its customers with an inviting atmosphere and quality products. A unique, upscale and innovative environment is required to provide customers with an atmosphere that will create socialization. Successful operation in year one will provide Inspirational Grounds with a customer base that will allow it to be self sufficient in year two.

Even with our conservative sales forecast, we will maintain a positive cash flow in all months, repay the loan in 12 years, and have a positive net worth over $27,000 by year three. We project that our net profits will increase from $12,000 to over $14,000 over the next three years.

Religious coffeeshop business plan, executive summary chart image

1.1 Objectives

Inspirational Grounds’ objectives for the first three years of operation include:

  • The creation of a unique, upscale, innovative spiritual environment that will differentiate Inspirational Grounds from local coffee shops.
  • To make Inspirational Grounds the destination for quality coffee in a welcoming atmosphere for people who are serious about their coffee and growing in their spirituality.
  • The formation of an environment that will bring people with diverse backgrounds and interests together in a common forum.
  • To be an active and vocal member of the community, and to provide continual re-investment through participation in community activities and financial contributions.
  • Consistently providing excellent specialty beverages, bakery items, inspirational books, and music.

1.2 Keys to Success

The keys to the success for Inspirational Grounds are:

  • The creation of a unique, innovative, upscale atmosphere that will differentiate Inspirational Grounds from other local coffee shops and future coffee shops.
  • Fresh Coffee roasted on-site daily will give customers a unique experience as well as excellent product.
  • Selling beverages and products that are of the highest quality.
  • The creation of an environment that won’t intimidate the spiritual seeker. Inspirational Grounds will position itself as an educational resource for individuals wishing to learn about the benefits of growing spiritually.
  • The establishment of Inspirational Grounds as a community hub for socialization and entertainment.
  • Encourage the two most important values in Christianity: love and service.

1.3 Mission

As people are becoming more interested in their spiritual side, a neighborhood shop with excellent freshly roasted coffee and non-denominational Christian books and tapes, is a welcomed alternative and/or addition to the local church. Inspirational Grounds is a specialty beverage establishment focused on providing freshly roasted coffee beans, coffee/espresso drinks and information to enhance our customers’ spiritual experience. We also understand that coffee drinkers interested in growing spiritually want a destination, not just a location;we provide them with the best of both.

Our goal is to be the destination for Christian coffee drinkers seeking a non-secular environment in the Twin Cities area. People of all ages and backgrounds will come to enjoy the unique upscale, educational, motivational and innovative environment that Inspirational Grounds provides.

We believe it is important to remain an active member of the community and to impact our customers’ lives in more ways than the selling of specialty drinks.

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Company Summary

Inspirational Grounds, Minneapolis’ South Central area, will offer great specialty beverages and easy access to exciting spiritual information. Inspirational Grounds sells quality products and provides excellent customer service for coffee lovers and persons looking to enhance their spiritual experience. We are looking to lease a retail store which we will use to market and merchandise our products. The company took its name in July 2002, and organized as an S Corporation in October, 2003.

Our book and music selection and helpful staff will appeal to the audience that is seeking to grow and learn spiritually in this age of uncertainty. This invigorating aspect will attract younger and elderly members alike who are gaining interest in their spiritual condition. The central location will provide easy access from most points of origin throughout the Twin City area for those who will recognize Inspirational Grounds as a destination point, as well as provide local community residents with convenient access to freshly roasted coffee.

2.1 Company Ownership

Inspirational Grounds is incorporated as an S corporation. This will shield the owner Regina Brown from issues of personal liability and double taxation. The Corporation was formed in October of 2003.

2.2 Company Locations and Facilities

The site, Midtown Commons (Also known as the Sears Project), is located in South Central Minneapolis. The initial space is approximately 2,000 square feet and has ample space for the first three years of growth. The complex has ample parking and significant foot traffic from Allina Healthcare Office Facility.  This area was chosen for various reasons, including:

  • Proximity to other areas within the Twin Cities; Central location easily accessed.
  • Proximity to the Lyn/Lake and Uptown areas.
  • High Visibility.
  • Proximity to the many local churches in South Central Minneapolis.
  • Diverse population within the community.
  • Desire for South Central Businesses.
  • Scarcity of other coffee houses in the area.
  • Proximity to the light rail depot and 12th Precinct of the Minneapolis police.

All of these qualities are consistent with Inspirational Grounds’ goal of providing a community hub for socialization and entertainment.

2.3 Start-up Summary

Inspirational Grounds’ start-up costs will cover coffee, espresso, and specialty drink making equipment, micro-roasting equipment, training, site renovation and modification, capital for operating expenses in the first year, and the inventory necessary to provide customers with the information needed to grow.

A large portion of our start-up requirements will go towards the purchase of specialty drink equipment from Espresso Services, Inc. Our long-term assets will include:

  • One espresso machine
  • One micro-roasting system
  • an Espresso grinder/doser
  • water filtration system

Expensed equipment includes:

  • A Bulk grinder for drip coffee
  • Single airpot brewer
  • Smoothie blender
  • Minor additional equipment

Additionally, we need funding for initial inventory, both for the coffee shop side of things and the other specialty merchandise, books, and music. Music items will be purchased from Provident Music, Diamante Music Group, and New Day Christian Distributors among others. Books and other inspirational material will be purchased from Bridge-Logos Publishers, KCM, Bethany House Distributors, and others.

The site Inspirational Grounds chooses will require funds for renovation and modification. A single estimated figure will be allocated for this purpose. The renovation/modification cost estimate will include the costs associated with preparing the site for opening business.

Current Assets, in the table below, includes furniture and fixtures.

Long-term assets, in addition to our major brewing, grinding, and roasting equipment, includes a POS System.

Religious coffeeshop business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $1,500
Stationery etc. $800
Brochures/Mailings $1,000
Marketing Consultant $1,000
Insurance $500
Rent $2,000
Research and Development $1,500
Build Out Expenses $8,000
Initial Marketing $2,000
Training $1,500
Website development $50
Expensed Equipment $4,950
Other $5,000
Total Start-up Expenses $29,800
Start-up Assets
Cash Required $30,600
Start-up Inventory $6,600
Other Current Assets $12,000
Long-term Assets $16,000
Total Assets $65,200
Total Requirements $95,000
Start-up Funding
Start-up Expenses to Fund $29,800
Start-up Assets to Fund $65,200
Total Funding Required $95,000
Assets
Non-cash Assets from Start-up $34,600
Cash Requirements from Start-up $30,600
Additional Cash Raised $0
Cash Balance on Starting Date $30,600
Total Assets $65,200
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $80,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $80,000
Capital
Planned Investment
Owner Investment $15,000
Investor 2 $0
Other $0
Additional Investment Requirement $0
Total Planned Investment $15,000
Loss at Start-up (Start-up Expenses) ($29,800)
Total Capital ($14,800)
Total Capital and Liabilities $65,200
Total Funding $95,000

2.3.1 Itemized Start-up

The following table represents an itemized list of the equipment, supplies, furniture and fixtures needed at start-up.

Equipment: Total $15,946.78

Item Description Supplier Number

Per Item Cost

Total Cost

Espresso Machine

La Cimabli MN29 Select ESI 1

$6,900.00

$5,643.50

Grinder/Doser Mazzer Super Jolly ESI 1

$770.00

$629.78

Bulk Grinder Mazzer Major ESI 1

$1,025.00

$838.35

Brewer Single Pot Brewer ESI 1

$865.00

$707.48

Airpot Service Idea 3 ltr ESI 4

$54.90

$179.61

Water Filter Head Everpure SO MC twin ESI 1

$175.71

$143.71

Filter Cartridge Everpure MC ESI 1

$69.07

$56.49

Water softener Everpure 7-SO Cartridge ESI 1

$94.92

$77.63

Knockbox Countertop ESI 1

$40.00

$32.72

Creamer Bell Creamer ESI 0

$40.00

 

Thermometer ESI 0

$7.35

 

Steam Pitcher 1 liter ESI 0

$12.15

 

Steam Pitcher 1.5 liter ESI 0

$19.15

 

Whipped Cream Maker ISI 1 Pint ESI 0

$69.23

 

Espresso Hand Tamper ESI 0

 

 

Blender Vita Mix 48 OZ – Bar Boss Zesco 1

$379.00

$379.00

Coffee Roaster Micro Roaster ESI 1

$3,500.00

$3,500.00

Microwave Oven Amana lgt duty 1000 wt Zesco 1

$200.00

$200.00

Refrigerator 27 1/2″ Undercounter Zesco 1

$837.00

$837.00

Refrigerator Upright beverage – True Zesco 1

$1,092.00

$1,092.00

Freezer Chest Zesco 1

$379.00

$379.00

Ice Machine Undercounter Zesco 1

$1,096.00

$1,096.00

Dipperwell w/faucet Zesco 1

$154.50

$154.50

Supplies: Total $2,667.94

Item Description Supplier Number

Per Item Cost

Total Cost

Detergent Espresso cleaning ESI 1

$7.57

$7.57

Barspoon ESI 1

$2.15

$2.15

Nail Brush Zesco 1

$8.70

$8.70

Cleaning Brush Group head O-Ring ESI 1

$4.38

$4.38

Cleaning Brush Airpot ESI 1

$3.75

$3.75

Cleaning brush flat grounds ESI 1

$3.09

$3.09

Cleaning blank back flush ESI 1

$3.58

$3.58

Foam Cups – hot 8oz – 1000 count ESI 1

$39.33

$39.33

Foam Cups – hot 12 oz – 1000 count ESI 1

$55.92

$55.92

Foam Cups – hot 16 oz – 1000 count ESI 1

$63.92

$63.92

Insulated Cups – hot 20 oz – 500 ESI 1

$64.42

$64.42

Plastic Cups – cold 12 oz – 500 ESI 1

$36.83

$36.83

Plastic Cups – cold 12 oz – 500 ESI 1

$36.88

$36.88

Plastic Cups – cold 16 oz – 500 ESI 1

$51.72

$51.72

Lid – Hot 8 oz – 1000 count ESI 1

$28.36

$28.36

Lid – Hot 12/16 oz – 1000 count ESI 1

$36.58

$36.58

Domed Lid 12/16/20 oz 1000 ESI 2

$36.58

$73.16

Lid – Cold flat 12 oz 1000 count ESI 1

$36.51

$36.51

Lid – Cold flat 16/20 oz 1000 count ESI 1

$44.72

$44.72

Lid – Cold dome 12 oz – 1000 count ESI 1

$52.09

$52.09

Lid – Cold dome 16 oz – 1000 count ESI 1

$67.41

$67.41

Bus Boxes Zesco 5

$4.70

$23.50

Mugs 3 oz Barista – 3 doz Zesco 1

$180.00

$180.00

Mugs 8 oz barista – 3 doz Zesco 1

$201.00

$201.00

Mugs 12 oz Barista – 2 doz Zesco 1

$152.00

$152.00

Saucers 5 1/4 ” Barista – 3 doz Zesco 1

$118.00

$118.00

Saucers 6 1/2″ Barista- 3 doz Zesco 2

$128.00

$128.00

Demitasse Spoons 1 doz ESI 2

$3.00

$6.00

Plasticware Spoons/Forks/Knives Costco 2

$6.00

$12.00

Flatware Spoons – 3 doz Zesco 2

$35.60

$71.20

Flatware Forks 3 doz Zesco 2

$49.70

$99.40

Utility Cart 300 lb capacity Zesco 2

$230.00

$460.00

Stir Sticks wooden 1000 count ESI 2

$1.57

$3.14

Straws Individually Wrap 500 cnt ESI 3

$2.72

$8.16

Coffee Bags 1 lb bags – 50 cnt ESI 3

$6.38

$19.14

Coffee Bags 1/2 lb bags – 50 cnt ESI 3

$5.45

$16.35

Coffee Filters 13×5 1000/case ESI 1

$12.02

$12.02

Carrier 4 cup carrier- 300 cnt ESI 1

$52.57

$52.57

Java Jackets 1500 cnt ESI 1

$87.21

$87.21

Condiment Dispensers Salt & Pepper shakers Dollar Store 6

$1.00

$6.00

Furniture & Fixtures: Total $10,570.50

Item Description Supplier Number

Per Item Cost

Total Cost

Menu Board Laminated Eckel Sign Co 1

$150.00

$150.00

Cash Register Restaurant POS System 1

 

 

Hand Sink w/ faucet Zesco 1

$73.10

$73.10

3 Compartment Sink 94″ w/ 2 drainboards Zesco 1

$612.00

$612.00

Faucet 3 comp sink Direct Buy 1

$100.00

$100.00

Prep Sink TBD Zesco 1

$100.00

$100.00

Mop Sink Zesco 1

$170.00

$170.00

Trade Scale 10 lb Avert Berkel Digital Zesco 1

$342.00

$342.00

Chairs Zesco 90

$53.10

$4,779.00

Stools Zesco 12

$88.60

$1,063.20

Table Tops 24×24 Zesco 30

$22.70

$681.00

Table Tops 24×42 Zesco 10

$35.40

$354.00

Table Bases 22×22 Zesco 30

$27.00

$810.00

Table Bases 33×33 Zesco 10

$34.00

$340.00

Bakery Case Zesco

 

 

Storage Shelving Amco II Zesco 20

$38.60

$772.00

Stackable high chairs Zesco 3

$63.90

$4,191.70

Lighting Direct Buy

 

 

Hand Towel Dispenser Zesco 1

$32.50

$32.50

Start-up Inventory: Total $1,812.96

Item Description Supplier Number

Per Item Cost

Total Cost

Espresso Beans Lavazza 6/2.2 lb case ESI 2

$102.93

$205.86

Decaf Espresso Beans Lavazza 1.1 lb ESI 2

$9.70

$19.40

Green Beans Columbian Supremo ESI 2

$75.45

$150.90

Green Beans Costa Rican Tarrazu ESI 1

$89.48

$89.48

Green Beans Tanazanian Peaberry ESI 1

$66.35

$66.35

Green Beans Indian ESI 1

$64.08

$64.08

Green Beans Nicaraguan ESI 1

$74.32

$74.32

Green Beans Guatemala Antigua ESI 1

$79.25

$79.25

Green Beans Peru Organic ESI 1

$74.04

$74.04

Green Beans Columbian Decaf ESI 1

$72.50

$72.50

Green Beans Costa Rican Decaf ESI 1

$81.25

$81.25

1883 Flavored Syrup 6 per case ESI 4

$37.38

$149.52

1883 Syrup Pumps No Charge ESI 12

$0.00

$0.00

1883 Syrup Rack No Charge ESI 1

$0.00

$0.00

Sugar-Free Syrups DaVinci ESI 4

$5.82

$23.28

Chai Syrup DaVinci 750 ml bottle ESI 2

$6.49

$12.98

DaVinci Pumps No charge ESI 8

$0.00

$0.00

Chocolate Sauce DaVinci 6/64 case ESI 1

$42.81

$42.81

White Chocolate Sauce DaVinci 6/64 case ESI 1

$42.81

$42.81

Caramel Sauce DaVinci 6/64 case ESI 1

$48.44

$48.44

Sauce Pumps DaVinci – No Charge ESI 3

$0.00

$0.00

Fruit Smoothie Base Case ESI 3

$54.42

$163.26

Pwd Smoothie Base Case ESI 2

$24.96

$49.92

N20 Chargers 24/case ESI 1

$13.85

$13.85

Stash Tea Display No charge ESI 1

$0.00

$0.00

Stash Tea Start-up case ESI 1

$24.57

$24.57

Milk 2% Gal 4/case Clover Super Foods 2

$2.38

$4.76

Milk Skim gal 4/case Clover Super Foods 1

$2.53

$2.53

Milk Soy 32 oz 12/case Clover Super Foods 1

$16.48

$16.48

Milk Half/Half Clover Super Foods 1

$8.27

$8.27

Sugar packets 2000 ct Clover Super Foods 1

$10.84

$10.84

Equal packets 2000 ct Clover Super Foods 1

$35.74

$35.74

Bakery Cheesecake – Amaretto Clover Super Foods 1

$14.39

$14.39

Bakery Choc Chip Cheesecake Clover Super Foods 1

$15.54

$15.54

Bakery Dipped Cheescake Clover Super Foods 1

$18.67

$18.67

Bakery Raspberry Cheescake Clover Super Foods 1

$16.43

$16.43

Soft Drinks Jones Soda 12 oz 24/cs Clover Super Foods 4

$15.95

$63.80

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Products

Beverages and Baked Goods

Inspirational Grounds sells quality freshly roasted coffee, specialty beverages, and beverage related items to the discriminating coffee drinker. The beverages are made by trained staff members who know the products and make recommendations to customers.

The coffee varietals, teas, and other beverages items are supplied by Espresso Services, Inc and delivered within 24 hours. The roasting of the green beans will take place on-site for the freshest product possible. Owner will rely on customers and employees to shorten the communication and feedback loop in product and service offerings.

Inspirational Grounds will offer custom roasting services to our customers. Customers will be able to order selected coffee varietals roasted to order for enjoyment in their homes or offices. These custom roasted coffees will create a unique experience for our customer, and allow them to further their specialty coffee knowledge.

Books and Music

Containing Christian, uplifting, and life-affirming messages will be sold to complete the ambiance and community centered feel of the store.

3.1 Product Description

Inspirational Grounds sells the entire array of coffee and espresso-based drinks,specialty drinks, and bakery items, as well as music and books geared toward the spiritual reader.

Specialty Coffees
The primary product of Inspirational Grounds is the specialty coffee. Several unique blends will be micro roasted for daily serving or specially roasted to order at our customers’ request which will give our customers the variety they seek. These coffee blends include: Columbia Supremo, Tanzanian Peaberry, Jamaican Blue Mountain, Guatemalan Antigua, Costa Rican Tarrazu, Sumatra Mandheling, and Ethiopian Yaefacheffe. Other blends and decaffeinated coffee will be offered as well.

Espresso & Coffee Drinks

The Straight Shot – The foundation of every espresso beverage; served in a demitasse, when consumed alone.

Espresso Macchiato – Espresso served in a demitasse with a small amount of foamed milk on top

Espresso Con Panna – Variation of the Macchiato substituting whipped cream in place of the foamed milk.

Caffé Americano – A single or double shot of espresso is combined with hot water from the espresso machine. This produces a smoother and fresher (as well as hotter) cup of coffee than conventional brewing.

Cappuccino – Espresso mixed with foamed milk upon the pour; can be garnished with shaved chocolate.

Caffé Latte – Espresso mixed with steamed milk, and topped with foamed milk; can be garnished with shaved chocolate.

Mocha – Espresso, steamed milk, and chocolate syrup, usually topped with whipped cream and chocolate shavings.

The Breve – An extra rich Caffe’ Latte made with half & half instead of milk.

Café Au Lait – Drip coffee with steamed milk added and topped with foamed milk.

Flavor-Based Drinks
Hot Chocolate and Steamers – These drinks are made like lattes and mochas without the addition of coffee. Flavored syrups are added to steamed milk and may be topped with whipped cream at the customer’s request.

Italian Sodas and Creamosas – An Italian soda is a combination of flavored syrup and high quality carbonated mineral or soda water, served over ice. A creamosa is an Italian soda with heavy cream or half & half added and gently stirred to making a swirled appearance in the drink.

Granita – An Italian style granular ice drink similar to a slushy but much more dense in consistency.Granita flavors are usually coffee or fruit based

Other specialty drinks include: Gourmet hot tea, iced Tea, Chai, smoothies, blended coffee and tea-based drinks, and bottled soft drinks.

Books and Music

Books – The most popular titles will be stocked in limited supply. Such books as Woman, Thou are Loosed by T.D. Jakes; In Pursuit of Purpose, by Dr. Myles Munroe; Prayers That Heal The Heart, by Mark & Patti Virkler; A Fresh Word For Today, by Bob Gass; Run Baby Run, by Nicky Cruz; Morning By Morning, by Charles H. Spurgeon, and others.

Music – Inspirational Grounds will carry the finest in contemporary Christian music. Titles include Kirk Franklin; Mary Mary; Set Free; Audio Adrenaline; Yolanda Adams, and more.

Bakery Items
Inspirational Grounds will also offer its customers a variety of baked goods, including pastries, cookies, and cakes. Bread for sandwiches and buns for soup will also be secured. Negotiations with several local bakeries are now underway. Quality and consistency will be the determining factors for this decision.

3.2 Competitive Comparison

Inspirational Grounds will be unique in the vicinity. Not only will Inspirational Grounds differentiate itself from the strictly-coffee cafes by providing its customers with a theme based on sound spiritual principles, we will also be the first independently-owned, urban store to roast its own beans on-site, providing the customer with a unique experience in a welcoming environment.

3.3 Sales Literature

Inspirational Grounds will use print advertising and sales programs to get the word out to customers.

Fliers will be distributed throughout the Twin City area to chambers of commerce, tourism council offices, hotels, neighborhood stores and shops, churches, schools, and other areas one month before the grand opening.

Newspaper advertisements in Minneapolis and St. Paul, The Shepherd’s Guide, and neighborhood publications will be used to attract customers with grand opening offers, as well as 1,000 door-to-door flyers offering a free 16 oz. drink.

See attached example flier.

3.4 Sourcing

Inspirational Grounds has associated itself with the finest coffee supplier in the Twin Cities area, Espresso Services, Inc. We will bring fine coffees from all over the world to South Central Minneapolis, where residents, other Midtown tenants and passers-by can enjoy a freshly roasted quality cup of coffee, an espresso or specialty drink in an inviting and friendly atmosphere.

3.5 Technology

The technology Inspirational Grounds is dependant upon is the micro-roasting equipment it will use to roast the beans on-site. This equipment is serviced through the supplier;Espresso Services, Inc.

Inspirational Grounds will also use our website to advertise specials and events, and to post the monthly menu and talent offerings. We will use email to communicate with customers wishing to sign-up for email specials. Eventually, we would like to institute online ordering for roasted coffee and specialty merchandise, but that plan is at least two years off.

The Point of Sale (POS) technology Inspirational Grounds will use allows for order taking when the lines are long, keeps customer discount information, inventory, and revenue/profit information. The system has a battery back-up in case of power surges and temporary power losses.

The Inspirational Grounds’ logo will be Federally Trademarked. Although the beverages will not be protected in content, beverage names for specialty drinks reflecting the theme of the shop will be protected under the Federal Trademark laws.

The security system Inspirational Grounds uses will protect the contents of the store and reduce insurance premiums.

3.6 Future Products

As Inspirational Grounds grows, more features will be added to the existing store. A key part of this is the addition of live entertainment. This entertainment will be in the form of Jazz singers, poetry readings, Comedy for the King, motivational speakers, and Christian musical Artists.

Food items will be added to the menu of offerings. The soup will be made fresh daily, one kind per week. The soups are: Chicken Noodle, Minestrone, Clam Chowder, Vegetable Beef, Vegetable, Chicken and Rice, and Wild rice. Sandwiches are made to order and include deli favorites such as herbed turkey, egg salad, tuna salad, roast beef, corned beef, and turkey. A variety of condiments will also be available. Inspirational Grounds will obtain deli meats from Costco. The salad sandwiches will be made fresh on-site.

Inspirational Grounds will establish itself as the destination for non-secular and motivational entertainment. We also envision adding meeting rooms, hosting receptions, and adding small devotional rooms for private reflection. The meeting rooms will be perfect for small business and non-profit organizations with limited office space. Coffee and pastries will be served to ensure a successful atmosphere for business. Inspirational Grounds will also be available for private receptions, such as birthday parties, anniversaries, or showers. Customer provided catering will go a long way to ensure the guests’ parties are successful. The devotional rooms will be wired for individual music selection, equipped with one-way TV cameras, and furnished with a comfortable chair and table.

These additions complete the vision for Inspirational Grounds, and provide its customers with a place for socialization, relaxation, and reflection.

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Market Analysis Summary

Inspirational Grounds is faced with the exciting challenge of being the first-mover in the Minneapolis/St. Paul Christian coffee house and roaster market. The consistent popularity of coffee and specialty drinks, combined with the ever growing and ever profitable Christian bookselling and music market, is a winning concept and will produce overwhelming results. Our target market includes coffee drinkers, spiritual seekers, Christians seeking fellowship (and snacks), and local neighborhood residents.

4.1 Market Segmentation

Census data, religous adherent research, and coffee consumption statistics were used to determine market share for Inspirational Grounds. Recent census data shows that there are 38,860 persons in the 55407 zip code, and 1,126,944 persons in Hennepin county. Coffee Research Institute data shows that 54% of the population drinks coffee daily, and 25% drink coffee occasionally. The Glenmary Research Institute shows that 64.9% of the Minnesota population are self-professed religous adherents. Minnesota ranks 5th in the nation for percentage of population religiously affiliated. National statistics show that most persons do not travel more than 20 minutes to eat or listen to entertainment; we are using a conservative 10%. The following is a breakdown of target customers:

55407 Market

AGE % of Population
15-19 7.1%
20-24 8.4%
25-44 35.8%
45-64 17.3%
TOTAL 68.6%
INCOME % of Population
15,000-24,999 16.5%
25,000-49,999 29.0%
50,000-99,999 28.6%
TOTAL 74.1%

55407 market = (38,860 x 68.6% 15-64 year olds, x 74.1% in targeted income bracket, x 54% coffee drinkers) + (38,860 x 68.6% x 74.1% x 25% occasional coffee drinkers)

The formula takes the total 55407 population and then multiplies that number by the percentages in order of importance, that figure is multiplied by the percent of persons who drink coffee daily. The next formula is calculated the same except it uses the percentage of person who drink coffee occasionally.

Hennepin County Market

AGE % of Population
15-19 6.5%
20-24 7.3%
25-44 33.1%
45-64 22.2%
TOTAL 69.1%
INCOME % of Population
15,000-24,999 10.8%
25,000-49,999 23.9%
50,000-99,999 37.6%
TOTAL 72.3%

Hennepin County Market = ((1,126,944 – 38,860) x 69.1% x 72.3% x 64.9% x 54% x 10%) + ((1,126,944 – 38,860) x 69.1% x 72.3% x 64.9% x 25% x 10%))

The formula takes the total county population minus the 55407 population and then multiplies that number by the percentages in order of importance, that figure is multiplied by the percent of persons who drink coffee daily multiplied by the percentage of the population likely to travel to Inspirational Grounds. The next formula is calculated the same except it uses the percentage of person who drink coffee occasionally.

Religious coffeeshop business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Neighborhood Resident 1% 13,165 13,297 13,430 13,564 13,700 1.00%
Religious Adherent – Henn County 1% 19,731 19,928 20,127 20,328 20,531 1.00%
Other 0% 10,000 10,000 10,000 10,000 10,000 0.00%
Total 0.77% 42,896 43,225 43,557 43,892 44,231 0.77%

4.2 Target Market Segment Strategy

The customers will be between 15-64 years old. The income level is between $15,000 and $99,000 annually. They live in the 55407 zip code, the proposed area for Inspirational Grounds. The Hennepin county customer is between 15-64 with income levels ranging from $15-99K annually. They live in the Hennepin county area and are self-professed religious adherents. A limited number, estimated at about 10,000 will come from other areas out of curiosity or to see a particular entertainer or poetry reading. A majority of the customers will be persons who enjoy a relaxing atmosphere, reading, reflection, and excellent coffee.

The specialty beverage market will continue to grow as younger people are opting for non-alcoholic beverages and wholesome entertainment. Religious book retail sales grew 2.3% in 2002. In 2000 they represented 5.25% of all book sales resulting in $1.25 billion in revenue. In 2001, these sales grew 4.7% to $1.3 billion and market share grew to 5.5%. With the increasing interest in spirituality, sales and market share will increase steadily.

4.2.2 Market Growth

The Hennepin County area is expected to grow .8% annually. The 55407 zip code area is expected to grow 1% annually. These estimates are based on most recent census data and projected growth rate for the the Minneapolis area.

4.2.3 Market Needs

Current trends and historical sales data both indicate that the high demand for coffee will remain constant over the next five years. The Christian book and music business is expected to continue to grow as contemporary Christian artists rival secular music. In addition to the increased sales in these areas, Generation X’ers are more religious than their parents, according the GlenMary Research Institute.

The needs of this market are decidedly soft in nature. The soft needs of this market include, but are not limited to, a general feeling of acceptance, a place of belonging, and non-judgmental atmosphere.

4.3 Industry Analysis

The retail coffee industry in the Twin Cities experienced rapid growth at the beginning of the 90’s and is now moving into the mature stage of its life cycle. Many factors contribute to the demand for excellent coffee and specialty beverages in Minneapolis. The climate in Minneapolis is extremely conducive to coffee consumption; coffee consumption increases in colder months. Current trends in the Midwest reflect the popularity of fresh, quality coffee and specialty drinks, Minneapolis/St. Paul boasts sophisticated coffee lovers.

The popularity of Christian entertainment is growing immensely as people are searching for meaning during these uncertain times. Those who are familiar with Christian music and book trends and sales are looking for authors and performers to keep up with the seemingly insatiable demand.

Due to competition, cafe owners must look for ways to differentiate their place of business from others in order to achieve and maintain a competitive advantage. The founder of Inspirational Grounds realizes the need for differentiation and strongly believes that combining freshly roasted coffee, a cafe, spiritual books and music, and entertainment are the keys to success. The fact that no other such cafes are established in the Twin Cities presents Inspirational Grounds with a chance to enter the window of opportunity and take hold of a very profitable niche market.

4.3.1 Competition and Buying Patterns

Inspirational Grounds will face competition on two fronts: coffee retailers and book & music stores. The good news is that Inspirational Grounds does not currently face any direct competition from other cafes in the market. There are no independently operated Christian cafes in the Twin Cities. Christian based coffee houses are either located within, or owned by a church.

Heavy competition in the Twin Cities area creates an industry where cafes face the same costs. There is a direct relationship between price and quality of coffee. Some fresh roasted coffee retails from $12/lb while other more exotic beans may sell as high as $40/lb. Wholesalers sell green (unroasted) beans to retailers at an average of 50-75% discount. For example; a pound of Columbian Supremo beans wholesale for $3.06 and retails for $12.85. As in most industries, price decreases as volume increases.

4.3.2 Main Competitors

The main competitor in the retail coffee segment is Dunn Bros, as they also sell freshly roasted beans. In fact, the largest part of Dunn Bros’ revenue is generated from the sale of the roasted beans to the consumer. The difference is Dunn Bros. does not roast their beans on-site, nor do they have the ability to custom roast for their customers.

Dunn Bros. – Uptown
Local chain cafe that boasts freshly roasted beans. The bulk of these sales are in the form of roasted beans sold to the consumer. The cafe caters to  customers who want fresh beans and brewed coffee. The atmosphere is homey, the prices are competitive, no entertainment is provided. They are known for good quality coffee. The stores are clean and well managed.

Vera’s – Lynn/Lake
A nice specialty coffee cafe with an atmosphere that caters to the “Green Peace” crowd. They have competitive prices, good quality coffee, and an excellent location. The cafe has three rooms; one with tables and chairs, one with couches and over-stuffed chairs, the third “room” is an outside patio. Vera’s doesn’t offer entertainment, on-site roasted coffee, or books and music.

Boathouse Coffee – 42nd & Cedar Ave South
Serves specialty coffee drinks, sandwiches, soft drinks, and ice cream. The street is busy, there is not a lot of foot traffic, and there is no parking lot so the location doesn’t allow for easy access. The shop is clean and prices are competitive. The Boathouse Coffee Cafe has several tables, and a couch. It can accommodate about 25 patrons.

4.3.3 Industry Participants

There are countless coffee wholesalers who could conceivably do business with Inspirational Grounds. These wholesalers distribute coffee and espresso beans to restaurants and retailers. Competition in this industry creates an even amount of bargaining power between buyers and suppliers resulting in competitive pricing.

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Strategy and Implementation Summary

Inspirational Grounds uses a strategy of total market service. Our promise is in our uniqueness in the market and the products we sell, the people we attract, the atmosphere we create.

We will create an atmosphere that lures the “spiritual seeker.” The “coffee lover” and others will come because of the quality and the atmosphere. Ultimately, we aren’t selling either products or coffee. We are selling the experience. We want to be part of the community, part of their lives, part of the search for meaning.

Strategic Assumptions:

  1. Every person is a potential customer and all potential markets experience growth.
  2. Marketing to the soft needs of the customer will produce sales of products.

5.1 Value Proposition

Inspirational Grounds will position itself as an upscale coffee house, spiritual resource and entertainment provider. It will serve on-site roasted, high quality coffee and espresso, as well as specialty beverages at a competitive price. Due to the number of coffee shops in the Minneapolis area, it is important that Inspirational Grounds set competitive prices for the freshly roasted coffee. Customers will see coffee as it roasts throughout the day, and they will be able to order coffee beans roasted to their specifications while they enjoy a beverage.

5.2 Competitive Edge

The competitive advantage of Inspirational Grounds is threefold:

Our uniqueness in the market – Inspirational Grounds will be the only spiritually centered coffee shop in the Twin Cities metropolitan area which roasts its own beans daily, sells quality coffee and espresso based beverages, and specialty drinks, along with inspirational music and books. Inspirational Grounds is upscale, not stuffy. Our community-based focus will be hard to duplicate, even if products and service are similar.

Excellent Customer Service – Because competition in the specialty beverage market is high, Inspirational Grounds will work to ensure that each customer is treated in the same respectful manner as the next. Technology will play a key role in ensuring that our customers get that special one-on-one feeling they might experience at a high-end retail store. Our Point of Sale system will not just ring orders, but keep key data on customers’ previous purchases in the area of freshly roasted coffee. In this manner, sales staff will know about the customer’s buying habits and tastes, and will be able to make suggestions for purchases that will likely result in increased sales and make the customer feel special.

Excellent service in a community focused environment will be a unique undertaking. We will ensure that Inspirational Grounds is a fun place for people to gather. Inspirational Grounds will employ the principles that make Seattle’s World Famous Pike Place Fish Market an invigorating experience for customers. These principles are: Play, Make Their Day, Be there, and Choose Your Attitude. We will ensure that each employee understands the fundamentals at the base of any successful service organization.

Quality – We are committed to serving only the best quality beans and beverages. Moreover, the training the staff receives will ensure that the art of espresso making is understood. There is more to a good espresso than the beans and the machine. At Inspirational Grounds, we understand it, and will ensure our customers do as well.

It’s the combination of these three elements that make up the competitive advantage of Inspirational Grounds.

5.3 Marketing Strategy

Inspirational Grounds’ marketing strategy focuses on the key elements of the target markets’ soft needs, and the focus of the venture.

Soft Needs:

  • Spiritual Growth
  • A place of belonging
  • Learning & communication

Venture Focus:

  • On-Site Roasted Coffee
  • Community Involvement

5.3.1 Pricing Strategy

Pricing in this industry is very competitive. The price of  freshly brewed coffee and specialty beverages doesn’t vary by more than a few cents between the corner coffee shop and the large chains.

The price of roasted coffee beans can vary. Larger chains, having the benefit of volume, can charge slightly lower prices per pound. Inspirational Grounds will charge a slightly higher price as our coffees are freshly roasted on-site daily. Inspirational Grounds will roast its coffee to maximize the flavor of the specific bean. We will also roast coffee to the customer’s specifications. This strategy of bringing the customer in to the whole coffee experience, gives the customer an additional service, for which a slightly higher price will not be deemed excessive.

5.3.2 Promotion Strategy

Inspirational Grounds will use several ways to reach new customers. We will leverage schools, churches, community organizations, print ad, internet advertising and word of mouth.

1. Advertising–We’ll be developing our core positioning message: “On-Site Roasted Coffee, Made to Order.” to differentiate our service from the competition.

2. Postcards— Inspirational Grounds will employ targeted mailings to our 55407 customer base. These postcards will announce Grand Opening Specials.

3. Internet Advertising–As customers come in, they will be asked if they wish to sign up on our internet mailing list. Special promotions will be available only through Internet “coupons.”

4. Media–Inspirational Grounds will work with local media on several different “story of interest” venues. The Homework Happy Hour is one example that would gain media attention at no cost to Inspirational Grounds.

5.3.3 Marketing Programs

The programs Inspirational Grounds will initiate are depicted on the following graphs. These programs support the soft needs and product offerings listed in the Marketing Strategy section, and have been transliterated into “Vision Focus” and “Customer Focus” programs.

Vison Focus

  1. Community Involvment
    • Community Reinvestment
    • MCDA Hiring Program
  2. Spiritual Information
    • Product Offerings
    • Speakers and Entertainment
  3. Welcoming Environment
    • Vision Communication

Customer Focus

  1. Roasting Expertise
    • Micro Roasting Program
  2. Custom Offerings
    • POS System
  3. Excellent Training
    • EST Training Programs
    • Encourage F.I.S.H. Philosophy

5.3.4 Positioning Statement

For the Christian who needs a place to seek, have fun, relax, and enjoy quality beverages, Inspirational Grounds is a place to feel welcome, special, informed, and energized. Inspirational Grounds meets the needs of this market. Unlike the other coffee shops in the metro area, Inspirational Grounds has character and a purpose.

For the neighborhood, Inspirational Grounds brings a positive message with a community centered focus. This is a place where all are welcomed and embraced with a warm greeting and hot coffee. The look and feel of the shop will ensure that anyone who walks through the door feels right at home. We want our customers to learn about coffee, and experience quality first hand.

5.4 Sales Strategy

The trained baristas at Inspirational Grounds will handle the sales transactions. To speed up the customer service, at least two employees will be servicing clients–while one employee prepares the customer’s order, the other one will take care of the sales transaction. All sales data logged on the computerized point-of-sale terminal will later be analyzed for marketing, Cost of Sale, and volume purposes.

In order to build up its client base, Inspirational Grounds will use banners, fliers, postcards and other advertising, utilize customer referrals and cross-promotions with other businesses in the community. At the same time, we will use customer retention programs like drink punch-cards to make sure the customers are coming back and spending more at the coffee bar.

5.4.1 Sales Programs

Internet Coupons – As customers come into the store, they will asked if they’d like to put their name on the internet mailing list. Once added, these customers will receive special “internet only” solicitations for discounts and specials, as well as a calendar of events.

Community Based Programs – Inspirational Grounds will partner with community organizations, schools, and churches to provide unique offerings which strengthen the community and provide sales for the store. The Homework Happy Hour is a prime example of leveraging community needs with sound sales techniques and business practices.

Direct Mailing – Inspirational Grounds will periodically mail special product offerings to people in the 55407 zip code. This promotion will also be used to announce the Grand Opening of Inspirational Grounds.

5.4.2 Sales Forecast

Inspirational Grounds is taking a modest approach to forecasting. Inspirational Grounds is forecasting an 8% average growth which is in line with industry estimates. With our unique product and service offerings, along with our aggressive marketing strategies, the sales forecasts are actually on the conservative side.

Religious coffeeshop business plan, strategy and implementation summary chart image

Religious coffeeshop business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Fresh Brewed Coffee $41,079 $44,365 $47,914
Espresso Based Beverages $53,507 $57,788 $62,411
Specialty Drinks $34,725 $37,503 $40,503
Pastries/Desserts $14,458 $15,615 $16,864
Music/CDs $11,604 $12,765 $14,041
Books $11,604 $12,765 $14,041
Fresh Roasted Coffee $19,341 $21,275 $23,402
Misc Candies/Products $17,121 $17,977 $18,876
Total Sales $203,440 $220,053 $238,054
Direct Cost of Sales Year 1 Year 2 Year 3
Fresh Brewed Coffee $1,370 $1,397 $1,425
Espresso Based Beverages $3,855 $3,933 $4,011
Specialty Drinks $7,216 $7,289 $7,361
Fresh Roasted Coffee $5,809 $5,867 $5,925
Pastries/Desserts $7,229 $7,807 $8,432
Candies, etc. $8,561 $8,989 $9,438
Books/Music $11,617 $11,733 $11,851
Subtotal Direct Cost of Sales $45,657 $47,014 $48,444

5.5 Strategic Alliances

Inspirational Grounds has aligned itself with key players in the industry: Espresso Services, Inc. located in Minneapolis, Minnesota, and the specialty Coffee Association of America. Both of these organizations are nationally and internationally known for their knowledge of, and expertise in, the specialty beverage industry.

Inspirational Grounds has also formed key alliances with non-competing experts in Restaurant and Retail markets.

Finally, Inspirational Grounds has established itself within the community through developing relationships with five of the surrounding Neighborhood Associations, key developers and planners of the Midtown Exchange project and various City Officials and city Counsel Members.

These alliances will serve to be conducive to the company’s success and marketability.

5.6 Milestones

The accompanying table lists important program milestones up to the date of opening. Further milestones, with dates and budgets for each, are currently being developed to line up our live-performance events and to meet our marketing and sales goals. These post-opening milestones are dependent on receiving adequate funds for opening.

Religious coffeeshop business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Accounting Plan 9/30/2003 10/15/2003 $1,500 ABC Department
Personnel Plan 10/1/2003 11/1/2003 $500 ABC Department
Technology Systems 10/1/2003 11/1/2003 $1,500 ABC Department
Communication Systems 10/1/2003 11/1/2003 $1,500 ABC Department
Site Selection 6/1/2003 2/1/2004 $1,500 Regina Brown Owner
Business Plan 7/1/2002 2/4/2004 $500 Regina Brown Owner
Shop Design 9/15/2003 10/1/2004 $2,500 Regina Brown Owner
Secure Start-Up Funding 5/1/2003 12/31/2004 $150 Albert Brown Manager
Grand Opening Materials 1/1/2005 1/15/2005 $500 ABC Department
Opening Inventory 1/5/2005 3/1/2005 $2,500 ABC Department
Totals $12,650

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Web Plan Summary

Inspirational Grounds will use our website to advertise specials and events, and to post the monthly menu. We will maintain a confidential email list to communicate with customers wishing to sign-up for email specials. Our website is being developed by the owners, and will be hosted with a professional hosting service which allows us to post our own changes as often as we wish.

Although we would eventually like to institute an on-line ordering system, we realize this development may have to wait until the business is firmly established and has sufficient cash for designing and maintaining these dynamic features. Online ordering will not only increase sales geographically, but allow Inspirational Grounds to utilize the full spectrum of its POS system’s capabilities. 

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Management Summary

Inspirational Grounds is owned by Regina Brown, and operated by Albert Brown. The company, being small, requires a simple organization structure. Implementation requires the owner, Regina Brown, to make decisions on the mission and vision, while Albert Brown makes operational decisions. Major decisions affecting the execution of the plan are made jointly by the owner and operations manager.

7.1 Personnel Plan

The personnel plan is included in the following table. It shows the owner’s and operations manager’s salaries, followed by 5 part-time salaries for espresso servers. Part time employees will collectively work 19.5 hours daily with an hourly salary of $8.00. Inspirational Grounds assumes a 5% annual increase in barista salaries. These employees will share any tips received while they are on duty. The owner will receive no payments or dividends until at least the fourth year of the business.

Personnel Plan
Year 1 Year 2 Year 3
Albert Brown – Operations Manager $18,000 $18,000 $25,000
Owner $0 $0 $0
Baristas $56,160 $58,968 $61,916
Total People 6 6 7
Total Payroll $74,160 $76,968 $86,916

7.2 Management Team

Regina Brown, owner and operator, has extensive start-up experience within the corporate sector and has successfully managed key areas for Fortune 500 companies. She has an entrepreneurial spirit which has made her corporate ventures successful. Her people savvy, and ability to turn vision into strategy, and strategy into tactics, will be key elements of success for Inspirational Grounds. She has successfully managed million dollar budgets. Currently, Regina is starting up a new venture within Wells Fargo Home Mortgage. This is her third start-up for that organization.

Albert Brown has start-up experience as well as restaurant management experience. Most recently Albert owned and operated RB Mortgage Company. Albert received a bachelor’s degree from Cheney University in Cheney, PA, a Juris Doctorate from Lasalle University, and is currently pursuing a Masters in Divinity at Bethel Seminary in St. Paul, MN. Albert has held several management positions within the restaurant industry.

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Financial Plan

Inspirational Grounds is basing projected sales on the market research, industry analysis and proximity of other coffee houses in the area. We are looking to obtain a modest .1% of the market share.

The cost of goods sold is based on the price list of Espresso Services, Inc., and is consistent with costs in the coffee and espresso industry. The cost of the bakery items and candies is 50% of the selling price.

Inspirational Grounds will use its POS System to keep cash flow and sales goals on track, and to indicate which marketing efforts are worth the investment. We expect sales to easily exceed the break-even point from the first month onward. The following sections outline our projected Profit and loss, Cash Flow, and Balance Sheet.

8.1 Important Assumptions

We do not sell anything on credit. The personnel burden is very low because part-time workers receive no benefits. The long-term interest rate is extraordinarily low because of the MCDA business program which loans money to start-up ventures at a 2% annual interest rate.

Inspirational Grounds will obtain employees through MCDA’s community reinvestment programs, which further establishes our commitment to the community, and raises community awareness of our presence and purpose. We will also look to local seminaries to involve their students in a internship capacity.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.75% 8.75% 8.75%
Long-term Interest Rate 2.00% 2.00% 2.00%
Tax Rate 25.00% 25.00% 25.00%
Other 0 0 0

8.2 Break-even Analysis

For our break-even analysis, we assume fixed costs of approximately $11,650 per month, which includes our full payroll, rent, and utilities, and an estimation of other running costs.

The chart shows that we need to sell about $15,000 per month to break-even, according to these assumptions. Our conservative projections will exceed the break-even point even in the first month of business.

Religious coffeeshop business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $15,017
Assumptions:
Average Percent Variable Cost 22%
Estimated Monthly Fixed Cost $11,646

8.3 Projected Profit and Loss

Projected profit and loss are depicted in the table below. Payroll expenses reflect the annual salaries of operations manager and 5 part-time baristas. Rental Expense is based on leasing 2,000 square feet at $12.50 per square foot.

We project sales and marketing expenses at $12,000 for the first year. Inspirational Grounds will depend on curiosity, established community involvement and media human interest stories to spread the word, in addition to the tradition sales and marketing tactics.

Religious coffeeshop business plan, financial plan chart image

Religious coffeeshop business plan, financial plan chart image

Religious coffeeshop business plan, financial plan chart image

Religious coffeeshop business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $203,440 $220,053 $238,054
Direct Cost of Sales $45,657 $47,014 $48,444
Other $0 $0 $0
Total Cost of Sales $45,657 $47,014 $48,444
Gross Margin $157,783 $173,038 $189,610
Gross Margin % 77.56% 78.63% 79.65%
Expenses
Payroll $74,160 $76,968 $86,916
Marketing/Promotion $12,000 $15,000 $18,000
Depreciation $2,004 $2,000 $2,000
Leased Equipment $3,000 $3,000 $3,000
Utilities $4,000 $4,700 $5,800
Insurance $1,800 $1,900 $2,000
Rent $28,380 $31,691 $33,100
Website Hosting and Maintenance $300 $325 $350
Payroll Taxes $11,113 $11,545 $13,037
Other $3,000 $4,000 $4,500
Total Operating Expenses $139,757 $151,129 $168,703
Profit Before Interest and Taxes $18,026 $21,909 $20,906
EBITDA $20,030 $23,909 $22,906
Interest Expense $1,528 $1,400 $1,267
Taxes Incurred $4,124 $5,127 $4,910
Net Profit $12,373 $15,382 $14,730
Net Profit/Sales 6.08% 6.99% 6.19%

8.4 Projected Cash Flow

We will be a medium risk concern with steady cash flows. Sales are in cash, giving Inspirational Grounds an excellent cash structure. Solid product offerings and intelligent marketing will secure a cash balance of close to $48,000 by December 2005.

Religious coffeeshop business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $203,440 $220,053 $238,054
Subtotal Cash from Operations $203,440 $220,053 $238,054
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $203,440 $220,053 $238,054
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $74,160 $76,968 $86,916
Bill Payments $102,996 $125,217 $133,830
Subtotal Spent on Operations $177,156 $202,185 $220,746
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $6,660 $6,660 $6,660
Purchase Other Current Assets $0 $4,000 $4,000
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $183,816 $212,845 $231,406
Net Cash Flow $19,624 $7,208 $6,647
Cash Balance $50,224 $57,432 $64,080

8.5 Projected Balance Sheet

The following table shows our projected assets and liabilities over the next three years. We anticipate a steadily increasing net worth, as we pay off our loan and sales show modest increases. The Balance Sheet also reflects new current asset purchases in years 2 and 3.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $50,224 $57,432 $64,080
Inventory $4,418 $4,549 $4,688
Other Current Assets $12,000 $16,000 $20,000
Total Current Assets $66,642 $77,982 $88,767
Long-term Assets
Long-term Assets $16,000 $16,000 $16,000
Accumulated Depreciation $2,004 $4,004 $6,004
Total Long-term Assets $13,996 $11,996 $9,996
Total Assets $80,638 $89,978 $98,763
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,725 $10,343 $11,059
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $9,725 $10,343 $11,059
Long-term Liabilities $73,340 $66,680 $60,020
Total Liabilities $83,065 $77,023 $71,079
Paid-in Capital $15,000 $15,000 $15,000
Retained Earnings ($29,800) ($17,427) ($2,045)
Earnings $12,373 $15,382 $14,730
Total Capital ($2,427) $12,955 $27,685
Total Liabilities and Capital $80,638 $89,978 $98,763
Net Worth ($2,427) $12,955 $27,685

8.6 Business Ratios

The following table outlines some of the more important ratios from the Coffee Shop industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.

Our business will be a little different from the standard coffee shop, in that we will also sell books and music. One of the major differences between us and the rest of the industry is our asset structure – most of our assets are short-term, rather than long-term, in part because of our extra inventory, but also because we will lease, rather than own, our space.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 8.17% 8.18% 5.24%
Percent of Total Assets
Inventory 5.48% 5.06% 4.75% 2.72%
Other Current Assets 14.88% 17.78% 20.25% 32.59%
Total Current Assets 82.64% 86.67% 89.88% 41.88%
Long-term Assets 17.36% 13.33% 10.12% 58.12%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.06% 11.49% 11.20% 21.75%
Long-term Liabilities 90.95% 74.11% 60.77% 29.17%
Total Liabilities 103.01% 85.60% 71.97% 50.92%
Net Worth -3.01% 14.40% 28.03% 49.08%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 77.56% 78.63% 79.65% 55.74%
Selling, General & Administrative Expenses 71.48% 71.64% 73.46% 37.46%
Advertising Expenses 0.99% 0.91% 0.84% 2.06%
Profit Before Interest and Taxes 8.86% 9.96% 8.78% 1.50%
Main Ratios
Current 6.85 7.54 8.03 0.81
Quick 6.40 7.10 7.60 0.51
Total Debt to Total Assets 103.01% 85.60% 71.97% 53.68%
Pre-tax Return on Net Worth -679.90% 158.31% 70.94% 2.39%
Pre-tax Return on Assets 20.46% 22.79% 19.89% 5.16%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 6.08% 6.99% 6.19% n.a
Return on Equity 0.00% 118.73% 53.20% n.a
Activity Ratios
Inventory Turnover 10.90 10.49 10.49 n.a
Accounts Payable Turnover 11.59 12.17 12.17 n.a
Payment Days 27 29 29 n.a
Total Asset Turnover 2.52 2.45 2.41 n.a
Debt Ratios
Debt to Net Worth 0.00 5.95 2.57 n.a
Current Liab. to Liab. 0.12 0.13 0.16 n.a
Liquidity Ratios
Net Working Capital $56,917 $67,639 $77,709 n.a
Interest Coverage 11.80 15.65 16.50 n.a
Additional Ratios
Assets to Sales 0.40 0.41 0.41 n.a
Current Debt/Total Assets 12% 11% 11% n.a
Acid Test 6.40 7.10 7.60 n.a
Sales/Net Worth 0.00 16.99 8.60 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Fresh Brewed Coffee 0% $3,239 $3,271 $3,304 $3,337 $3,371 $3,404 $3,438 $3,473 $3,507 $3,542 $3,578 $3,614
Espresso Based Beverages 0% $4,219 $4,261 $4,304 $4,347 $4,390 $4,434 $4,479 $4,523 $4,569 $4,614 $4,660 $4,707
Specialty Drinks 0% $2,738 $2,765 $2,793 $2,821 $2,849 $2,878 $2,906 $2,936 $2,965 $2,995 $3,024 $3,055
Pastries/Desserts 0% $1,140 $1,151 $1,163 $1,175 $1,186 $1,198 $1,210 $1,222 $1,234 $1,247 $1,259 $1,272
Music/CDs 0% $915 $924 $933 $943 $952 $962 $971 $981 $991 $1,001 $1,011 $1,021
Books 0% $915 $924 $933 $943 $952 $962 $971 $981 $991 $1,001 $1,011 $1,021
Fresh Roasted Coffee 0% $1,525 $1,540 $1,556 $1,571 $1,587 $1,603 $1,619 $1,635 $1,651 $1,668 $1,685 $1,701
Misc Candies/Products 0% $1,350 $1,364 $1,377 $1,391 $1,405 $1,419 $1,433 $1,447 $1,462 $1,476 $1,491 $1,506
Total Sales $16,041 $16,201 $16,363 $16,527 $16,692 $16,859 $17,028 $17,198 $17,370 $17,544 $17,719 $17,896
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Fresh Brewed Coffee $108 $109 $110 $111 $112 $114 $115 $116 $117 $118 $119 $120
Espresso Based Beverages $304 $307 $310 $313 $316 $320 $323 $326 $329 $332 $336 $339
Specialty Drinks $569 $575 $580 $586 $592 $598 $604 $610 $616 $622 $629 $635
Fresh Roasted Coffee $458 $463 $467 $472 $477 $481 $486 $491 $496 $501 $506 $511
Pastries/Desserts 50% $570 $576 $581 $587 $593 $599 $605 $611 $617 $623 $630 $636
Candies, etc. 50% $675 $682 $689 $695 $702 $709 $717 $724 $731 $738 $746 $753
Books/Music $916 $925 $934 $944 $953 $963 $972 $982 $992 $1,002 $1,012 $1,022
Subtotal Direct Cost of Sales $3,600 $3,636 $3,672 $3,709 $3,746 $3,784 $3,821 $3,860 $3,898 $3,937 $3,977 $4,016
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Albert Brown – Operations Manager 0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Owner 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Baristas 0% $4,680 $4,680 $4,680 $4,680 $4,680 $4,680 $4,680 $4,680 $4,680 $4,680 $4,680 $4,680
Total People 6 6 6 6 6 6 6 6 6 6 6 6
Total Payroll $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $16,041 $16,201 $16,363 $16,527 $16,692 $16,859 $17,028 $17,198 $17,370 $17,544 $17,719 $17,896
Direct Cost of Sales $3,600 $3,636 $3,672 $3,709 $3,746 $3,784 $3,821 $3,860 $3,898 $3,937 $3,977 $4,016
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $3,600 $3,636 $3,672 $3,709 $3,746 $3,784 $3,821 $3,860 $3,898 $3,937 $3,977 $4,016
Gross Margin $12,441 $12,565 $12,691 $12,818 $12,946 $13,076 $13,206 $13,338 $13,472 $13,607 $13,743 $13,880
Gross Margin % 77.56% 77.56% 77.56% 77.56% 77.56% 77.56% 77.56% 77.56% 77.56% 77.56% 77.56% 77.56%
Expenses
Payroll $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180
Marketing/Promotion $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Depreciation $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167
Leased Equipment $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Utilities $300 $300 $300 $300 $300 $300 $300 $300 $400 $400 $400 $400
Insurance $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Rent $2,365 $2,365 $2,365 $2,365 $2,365 $2,365 $2,365 $2,365 $2,365 $2,365 $2,365 $2,365
Website Hosting and Maintenance 0% $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25
Payroll Taxes 15% $927 $927 $927 $927 $927 $927 $927 $927 $916 $927 $927 $927
Other $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Total Operating Expenses $11,614 $11,614 $11,614 $11,614 $11,614 $11,614 $11,614 $11,614 $11,703 $11,714 $11,714 $11,714
Profit Before Interest and Taxes $827 $951 $1,077 $1,204 $1,332 $1,462 $1,592 $1,724 $1,769 $1,893 $2,029 $2,166
EBITDA $994 $1,118 $1,244 $1,371 $1,499 $1,629 $1,759 $1,891 $1,936 $2,060 $2,196 $2,333
Interest Expense $132 $131 $131 $130 $129 $128 $127 $126 $125 $124 $123 $122
Taxes Incurred $174 $205 $237 $269 $301 $333 $366 $400 $411 $442 $476 $511
Net Profit $521 $615 $710 $806 $903 $1,000 $1,099 $1,199 $1,233 $1,326 $1,429 $1,533
Net Profit/Sales 3.25% 3.80% 4.34% 4.88% 5.41% 5.93% 6.45% 6.97% 7.10% 7.56% 8.07% 8.57%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $16,041 $16,201 $16,363 $16,527 $16,692 $16,859 $17,028 $17,198 $17,370 $17,544 $17,719 $17,896
Subtotal Cash from Operations $16,041 $16,201 $16,363 $16,527 $16,692 $16,859 $17,028 $17,198 $17,370 $17,544 $17,719 $17,896
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $16,041 $16,201 $16,363 $16,527 $16,692 $16,859 $17,028 $17,198 $17,370 $17,544 $17,719 $17,896
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180 $6,180
Bill Payments $219 $6,662 $9,243 $9,349 $9,417 $9,486 $9,555 $9,626 $9,699 $9,836 $9,916 $9,989
Subtotal Spent on Operations $6,399 $12,842 $15,423 $15,529 $15,597 $15,666 $15,735 $15,806 $15,879 $16,016 $16,096 $16,169
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $555 $555 $555 $555 $555 $555 $555 $555 $555 $555 $555 $555
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $6,954 $13,397 $15,978 $16,084 $16,152 $16,221 $16,290 $16,361 $16,434 $16,571 $16,651 $16,724
Net Cash Flow $9,087 $2,804 $386 $443 $540 $638 $737 $837 $936 $973 $1,068 $1,173
Cash Balance $39,687 $42,491 $42,877 $43,320 $43,861 $44,499 $45,237 $46,074 $47,010 $47,983 $49,052 $50,224

Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $30,600 $39,687 $42,491 $42,877 $43,320 $43,861 $44,499 $45,237 $46,074 $47,010 $47,983 $49,052 $50,224
Inventory $6,600 $4,000 $4,000 $4,040 $4,080 $4,121 $4,162 $4,204 $4,246 $4,288 $4,331 $4,374 $4,418
Other Current Assets $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000
Total Current Assets $49,200 $55,687 $58,491 $58,917 $59,400 $59,982 $60,661 $61,440 $62,320 $63,298 $64,314 $65,426 $66,642
Long-term Assets
Long-term Assets $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000
Accumulated Depreciation $0 $167 $334 $501 $668 $835 $1,002 $1,169 $1,336 $1,503 $1,670 $1,837 $2,004
Total Long-term Assets $16,000 $15,833 $15,666 $15,499 $15,332 $15,165 $14,998 $14,831 $14,664 $14,497 $14,330 $14,163 $13,996
Total Assets $65,200 $71,520 $74,157 $74,416 $74,732 $75,147 $75,659 $76,271 $76,984 $77,795 $78,644 $79,589 $80,638
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $6,354 $8,931 $9,035 $9,101 $9,167 $9,235 $9,303 $9,371 $9,505 $9,583 $9,654 $9,725
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $6,354 $8,931 $9,035 $9,101 $9,167 $9,235 $9,303 $9,371 $9,505 $9,583 $9,654 $9,725
Long-term Liabilities $80,000 $79,445 $78,890 $78,335 $77,780 $77,225 $76,670 $76,115 $75,560 $75,005 $74,450 $73,895 $73,340
Total Liabilities $80,000 $85,799 $87,821 $87,370 $86,881 $86,392 $85,905 $85,418 $84,931 $84,510 $84,033 $83,549 $83,065
Paid-in Capital $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
Retained Earnings ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800) ($29,800)
Earnings $0 $521 $1,136 $1,846 $2,652 $3,554 $4,554 $5,654 $6,852 $8,085 $9,412 $10,841 $12,373
Total Capital ($14,800) ($14,279) ($13,664) ($12,954) ($12,148) ($11,246) ($10,246) ($9,146) ($7,948) ($6,715) ($5,388) ($3,959) ($2,427)
Total Liabilities and Capital $65,200 $71,520 $74,157 $74,416 $74,732 $75,147 $75,659 $76,271 $76,984 $77,795 $78,644 $79,589 $80,638
Net Worth ($14,800) ($14,279) ($13,664) ($12,954) ($12,148) ($11,246) ($10,246) ($9,146) ($7,948) ($6,715) ($5,388) ($3,959) ($2,427)

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