Written by E. Squires (@ericsguitar) and edited by T. Newton
Maybe you dream of one day owning your own specialty café. Maybe you already own a shop but are struggling to get out of the startup phase. Or maybe you’re just looking for ways to see a little more return.
The truth is that owning a specialty coffee shop may be the dream — but it’s not just about coffee. It’s also about business, costs, and profit margins. Regardless of where you are with your coffee shop, there’s always room to increase your profits, so read on for our top six ways to do it.
1. Know Your Brand
Creating a strong brand is important if you want to make it as a local shop. It communicates what you’re about, conveys your niche, and also sends a message about the quality of your product. It helps you focus your energy and resources and gives customers a connection point, something to latch onto with your brand.
Your brand should permeate everything you create—and I mean everything. From your logo to your shop design, and from the packaging for your products to your website and social media, create a quality, cohesive brand across all platforms in order to draw your customers in. Remember these three steps to crafting a specialty coffee brand: it should resonate with your personal values, communicate your niche, and tell a story.
2. Find a Niche
Do you know what sets your shop apart from other shops? A niche can be as simple as having the highest-quality standards (easier to do in a small to midsize town) or it can be a certain set of signature drinks. Do you create interesting specialty drinks or focus on awesome espressos? Do you only serve local or organic products? Do you have unique connections to a particular farm? Does your shop have a theme that may or may not be related to coffee?
Whatever your niche is, flaunt it. Let people know that’s what your shop is all about and that it’s what makes your shop awesome.
3. Do It Yourself
These days you can learn to do just about anything with a quick internet search. How to videos and instructions are abundant. So when the toilet breaks or the chairs start to wobble, fix them yourself instead of paying someone else to do so.
Learn how to repair — or even make — your coffee equipment. A shop owner I know in the tiny town of Marion, IN (population 29,000) is a certified La Marzocco repair man. He doesn’t get many service calls, but he did get the training he needs to repair his own espresso machine and all the other benefits of being a certified tech, such as discounts on parts.
It’s also helpful to know when to outsource projects. When the handle broke on one of our kettles, rather than replace the whole thing we sent it to a friend who does woodworking. He replaced it for a quarter of the cost of a new kettle. What started out as a pragmatic fix turned into a conversation piece for our guests and helped cut costs.
4. Know Your Costs
There’s a television show here in the U.S. where a failing restaurant owner contacts a restaurant expert and the expert spends a week with them teaching them how to make it in the industry. Invariably, they’ll sit down with a few menu items and the expert will ask the owner how much each of the dishes cost — and true to form, the owner stares blankly back and struggles to figure it out. The expert then spouts off what each dish actually costs, which is never even close to what the owner thought it was. The point is you can’t make any money if you don’t know what your costs are and what your markup should be.
Don’t focus on the items that you’re selling at a high price point if those same items cost a lot to make. Instead, focus on the items with the highest margins. Cold brew is inexpensive to make but can be sold for high margins, which is much more important than a high price.
5. Cut Costs and Increase Margins
Controlling your costs is the best way to be profitable regardless of the size of your shop. Search out waste ruthlessly and eliminate it. Analyze every cent you spend. Are you pouring a lot of milk down the drain? Are you wasting a lot of coffee pulling shots over again? Figure out what things are eating up your profits and eliminate them.
Although it’s a serious investment to begin with, roasting your own coffee can seriously increase your profit margins. If you don’t have the capital to purchase your own roaster right away then look into buying time on another roaster. Aside from increasing your margins, roasting will give you a deeper knowledge of the coffee you serve which can lead to a higher standard in quality.
6. Keep Your Regulars
Your regulars are your lifeblood. According to Bain & Company, it costs 6-7 times more to acquire a new customer than to retain an existing one. And not only is it cheaper to retain them, but regulars who continue to have good experiences will bring their friends and introduce new people to your shop. One week, it seemed like every other new customer mentioned one particular regular who had recommended our shop to them. Word of mouth marketing will always be more effective than traditional or social media marketing.
You don’t need a loyalty card to keep people coming back. Instead, try doing something small for your regulars to keep them coming back. Give them a free drink every once in awhile or let them sample new specials before the rest of the public. Do whatever you can to make them feel special and to remind them that you appreciate their business. That customer who recommended so many friends? The next time they came, their purchases were on the house and we told them we appreciated all the referrals they had given us. It really does pay to take care of your regulars.
Share your tips in the comments below!