Open a new cafe: consider buying an existing business

by | Nov 16, 2020 | Open a New Cafe | 0 comments

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The journey of setting up a new business may seem daunting. So many steps, so many details to pay attention to, let alone all the paperwork that needs to be addressed before the inauguration. One solution that can be overlooked, but definitely offers great advantages if you want to open a new cafe, is to buy an existing business.

Here is a list of advantages of buying an existing business and how they compare to the process of setting up a new cafe from scratch:

1. Know how much investment you will need to open a new cafe before committing

When buying an existing business, you will be able to get a comprehensive view of all the money you will need to invest to operate. Not only the price of buying the business itself, but you will have your payroll history,  utility bills, suppliers database with past invoices; the list goes on.

Also, you will be able to evaluate if you want to remodel the place, and what the costs involved with that will be. Or leave the place as is and start operating straight away. You will have the power to make all those decisions that will impact your initial costs.

On the other hand, when opening a new business from scratch, very often you will face situations where you have to deal with unpredicted costs and time. You might have a surprise during the construction phase, or special requirements of the council of your location (councils may have slightly different requirements depending on where you are).

Not only the money you will invest, acquiring an existing business will help you have control over the time and deadlines of your project. You would need a great team of experts supporting your business opening just so you don’t find yourself in any kind of trap.

2. Spend much less on your initial investment to set up a new business

When researching to open a new cafe, if interested to buy an existing business, you will find that sometimes learning the reasons why a business is being sold can guarantee you a great deal. Sometimes, a healthy and profitable business is being sold under a distress situation, and in those cases, you can be sure to get a good deal if negotiating the acquisition price. Examples of distress situations are:

  1. partnership fall out
  2. marriage problems, when couple-operated
  3. owner facing health problems
  4. owner moving back to their home country or city
  5. owner facing financial distress due to the lack of skills to operate

Also, if you choose to buy an existing business when opening a new cafe, you will save yourself from all the hassle (and extra costs) of getting a council development approval, which can cost A LOT. Also, you will not be looking into the costs of equipment, starting stock (if the business is currently operating), music licenses, and so on.

If you decide to set up from scratch, there are a number of questions you will need to take into consideration to set up a new business. It will necessary to think about your acquisition cost, infrastructure, equipment, development approval… it all costs a whole lot of money.

If you are on a tight budget, you might want to check our post on “How to start a cafe with no money

3. Open a new cafe having a baseline to explore opportunities 

Having an already tested business concept that you can work from is one of the most important benefits of buying an existing business when you decide to open a new cafe. When acclimatizing yourself to the place, you will be able to analyze how things are and get ideas of what can be improved. Some examples of what you can evaluate are:

  • is the decoration helping to create a cozy environment for your customers?
  • is the playlist in tune with the ideal client you want to attract?
  • is your menu comprehensive enough? big enough? small enough? creative enough?
  • is your customer service adding value to your store? is it too slow? how can it be more efficient?
  • Is the store layout helping you create and/or optimize the sale process?
  • Can you increase revenue by exploring takeaway options?
  • Is it possible to create more sales by installing a retail section?
  • is your coffee supplier supporting your growth?

The whole process is much more assertive because you already have a structure in place that you can objectively analyze and take action.

If you are looking into buying an existing business, you might want to check with a proactive business broker to help you with the acquisition of a business that best fits your needs.

When starting a business from scratch, you will have no baseline. You will have to create everything on your own, do your research, and start planning on a blank slate. It is great for creativity, but when it comes to business it can take a long time, and it can also take a few tries to get the formula right. So why not let other people do the first couple of tries for you and start in a much more secure position?

4. Have an ongoing revenue stream

Well, the scariest thing when opening a new cafe is the uncertainty about your revenue. How much will you sell the first week? the first month? the first year? How long will that “rump up” take? Will you be able to at least break even within the first 6 months?

If you acquire an existing business, you will already know all that. You will have an operating business with an existing revenue stream. That can leave you in a much more comfortable position to manage your business. The learning curve will happen much quicker, and in no time you will be making changes and making the cafe your own.

Other benefits are that you will already have a customer base, a setup menu, prices to test the market elasticity. The list is truly huge!

5. Take advantage of having a team in place

If you have no experience in the coffee/hospitality industry, having a skilled team in place can be a lifesaver. They will know how to run the business operations and you will be able to learn from them.

There are many specifics when opening a new cafe that can take a lot of time to learn, such as workflow, stock organization, the profile of the customer service, the timing of your ideal customer.