A lot of people open or buy a café imagining that the business will be a sure win. Little do they know that, actually, most coffee shops fail (and shut the doors) within the 1st year of business.
Don’t get us wrong, opening cafés can be a very positive experience if you know what you are doing. When you get the hang of it, a coffee business can be a steady source of income. So here are 4 of the main reasons why, in our opinion, so many Coffee Shops fail.
1- Underestimating the workload: cafes are not lifestyle businesses
New entrepreneurs may believe that coffee shops are a chill business that they can operate from a laptop by the beach. That is a huge mistake. It is a business that requires real effort to work out alright. It also has a huge potential to go wrong. Owners that don’t want to be too involved will find it hard to make actual money from the business. Owners that think they will make money quickly will be frustrated since it is a business that requires consistency to actually deliver consistency. In other words: it takes time.
2- Lack of at least a basic business plan
Starting any kind of business without at least a faint idea of profit margin and estimated cost of sales is a very risky route. When it comes to coffee shops, a good business plan can be the difference between successful cafés or complete failures before even opening.
Having a business plan will also save you money and a lot (really, a lot) of time. You don’t need anything too fancy. Even if it is only some scribbles on a piece of paper, you will gain a lot by setting aside some time to plan for success. It will ensure that you have every aspect of the business figured out, including your exit strategy.
3- Too little or no preparation: cafes require knowledge and capital
In line with topic number 1 regarding “Underestimating the workload”, people tend to underestimate the resource you need to be able to manage cafés successfully.
For example: Having appropriate knowledge around how to manage coffee shops is a must. Don’t try to venture into the unknown with no previous experience. If you plan to open a cafe and have zero knowledge, take a job in another coffeeshop. Work for a couple of months to understand the dynamics of the business, how to set up a good workflow, and how to build good relationships with your customers.
Also, plan how much capital you will need to run the business within the first months. Especially if you are opening a new café from scratch, it might take you 6 to 12 months to reach the break-even point before you start making a profit. Lots of coffee shops fail because the owner is not counting on that, and don’t have the means to power through the hard first few months.
We have previously created some content that might interest you on how to start a new cafe with a low budget.
4- Lack of flexibility
Having a good attitude towards learning and adapting can be decisive in the success of coffee shops. It doesn’t matter how much you love your business concept idea. If it doesn’t work in real life, you need to adapt.
A successful cafe owner is a person who is able to learn from their mistakes, get feedback from customers, analyze sales volume to understand performance, study competitors. And, of course, act on top of that information.
Change the menu, negotiate with suppliers, improve the training of your staff, hire better people. It doesn’t matter the short-term outcome, what is important is that you are constantly improving your business.