managing your vendors - part 1

In the next two blog posts, I'd like to dive into the issue of vendors - how they work, what to expect when working with them, and how to avoid being taken advantage of.

Vendors are companies that sell goods and services to your company.  These range from alarm companies, garbage pick up, produce suppliers, papergood suppliers etc.  Each one of them has a different set of dynamics and issues.

The goal of this paper is to give some insight into how to deal with vendors, what to expect, potential pitfalls and how to get the most out of them.

A couple things to take into consideration when dealing with Vendors:

1. Everything is negotiable.  We, here in America, are programmed to accept all prices that are given to us.  WE have very few opportunities to negotiate anything, thus we are not very good at it at it.  But remember - with just about any vendor, prices, services, terms and conditions - all is negotiable.  AND just because you agree to something once, it doesn't mean you cant change your mind later!  So, if they come to you with a 5-year contract, you can simply say 'no'. 

2. The cheapest alternative will often cost you more in the long run.  Better to go with a reputable vendor that wont mess with you than go with the cheapest.  The cheapest bidder will usually under bid to get your business, then jack up your prices or find other sneaky ways to extract more money from you.  You end up spending a crazy amount of time just managing these guys and checking up on them to be sure they arent playing pricing games with you (which is just another form of expense).  Not worth the effort!!  

I once had a dairy provider who liked to screw with my prices.  Dairy is unique, because prices fluctuate quite a bit with market prices.  His favorite thing to do was to track market prices on the way up, and only partially track them onthe way back down.  EG -

week one:  market prices increase 10%, his prices would increase 10%.  

week two - market prices decrease 8%, his prices decrease 5%.  

week three - market prices increase 5%, his prices increase 5%.  

week four - market prices decrease 10%, his prices decrease 8%

Before you know it, you are paying 20-25% above market prices... if you are not carefully tracking prices vs. market prices, you will end up paying WAY over market.

I once had another vendor (a general food vendor) who also enjoyed messing with me.  Every week, we were ordering 20-30 items from him.  Every week, he would choose one or two items from the list, and bump up their prices 4-5%.  It was so subtle, that I did not realize it was happening.  When I did notice, it was usually just one item on my long list of items, and it only went up 4-5%, or maybe $5.  When you are paying $800 on an invoice, you tend to shrug off a $5 increase.  It wasnt until about a year later when I was doing some price comparisons that I discovered what this guy was doing.... by then, my *weekly* invoices were up by almost $200!!!  Needless to say, I dropped that company pretty darned quick.

The lesson learned? - go with honest vendors.  You might spend a bit more up front, but it is worth if if you dont have to constantly check up on them and waste your time. 

3. Always get multiple bids - and give yourself plenty of time to get multiple bids.  IT takes time to do this, but definitely worth it.  You will get a better understanding of the lay of the land, the issues and the players.  

4. The *person* you work with (ie - the salesman at the specific company) is almost as important as the company you choose.  There is a guy who works for one of my Vendors (Perkins - now Gordon Foods) who is just awesome.  He never messes with me, never jacks up my prices, gets back to me immediately when I need something.    

5. READ THE CONTRACT CAREFULLY.  Often times, these salesmen will hand you a contract to sign and want you to sign it there and then.  DO NOT do this.  Take the contract home and read it carefully, highlight the parts that dont make sense, or cross out the parts you *dont* agree to (and initial those parts).  You are absolutely allowed to alter any contract that you dont like.  You would not believe the sort of stuff these companies write into their contracts that almost no one ever reads.  NO matter what the salesman says, if it is written in the contract, they will try to enforce it - no matter how onerous.   I've had these salesmen tell me "oh, this is just boilerplate contract speak - no one every actually enforces it!"... yeah, right.  Dont believe it.  You need to think about signing a contract as if your worst enemy was on the other side of the table from you, and will try to use the contract to extract the maximum money and inflict the most pain possible on you.  90% of the time, nothing will happen.  It will either be too expensive, difficult or not worth pursuing.  But that 10% of the time, you will be glad for the effort you put forth in the negotiation.

Now that we've covered the generalities, I'd like to go into specific vendors, and what I've learned from each.  

GARBAGE HAULERS:

In most cities, there are 3-5 garbage haulers, so you can call them and find out their prices.

What will you need?

There are a couple directions you can go with your garbage hauler:

First, you could go with just straight garbage pick up - so the garbage company supplies you with a dumpster, you throw *everything* in the dumpster and they come and pick it up once a week (or more often).  This has the benefit of being easy - you dont separate anything... everything just goes in one bin.  On the downside, it is more expensive, and you will probably catch some flack from your customers for not recycling. 

Second, you could go with a garbage dumpster and a recycling dumpster.  This is a bit more work, because you need to have *two* containers everywhere, and your customers need to separate trash from recycling.  The two bins take up a bit more room everywhere.  On the plus side - this is the least expensive option.  The more you can recycle, the better,  It costs about half to have a recycling dumpster vs. a garbage dumpster.  In addition, in this day and age, most garbage haulers have single-stream recycling, so you can put plastics, glass, paper etc - all into the same dumpster and they will sort it out. 

Third, you could go with just recycling and compost.  There is only a small  handful of things that cannot go in the recycling these days:  styrofoam, waxed boxes, lightbulbs and empty insecticide spraycans.  Pretty much everything else can be recycled.  If this is the way you wanted to go, you could have a small 55gal *garbage* can, a couple compost bins and recycle everything else.  On the plus side, you get huge kudos from your customers for composting everything.  There are some downsides to separating your compost from your garbage: composting can be expensive.  Right now, it is pretty expensive to get rid of compost - I'm paying about 30% more for my collection now that I separate my compost.  In addition, I'm using these compostable bags (made from a cornstarch derivative) to collect the compost, which cost me about 3x more per bag than the traditional black plastic garbage bag.  In total, I'd estimate I'm paying $400 more per month to separate and dispose of my compost.  

Another consideration when separating compost;  To use compostable bags or not to use compostable bags.  There are some establishments that have just plastic cans that customers dump their organic matter into, then these are in turn dumped into a compost bin, without the use of bags.  While this is certainly cheaper (compostable bags are expensive), you will need to consider the potential for attracting pests (rats/flies/cockroaches) when you have open food garbage.  In addition, you will need a way to quickly and easily clean the compost bins that go in your shop.  If you can deal with these two issues and avoid the cost of the compostable bags, you will save alot of money.

The amount you pay for garbage pick up is dependent on three things:  First, the size of the dumpster (measured by cubic yards).  Second, by how often it is picked up per week.  Third, what is in the dumpster.  So, with my shop, we have a 2-yard recycling dumpster that is picked up three times per week, and two 60gal 'cans' of compost that are picked up twice a week.   I have to do some adjustments to frequency of pick up due to seasonality (we are located next to Yale, so summers are slow when school is out, and things peak in the fall and spring).

Your trash hauler should plan on replacing dumpsters at least once a year to clean and repaint them.  The dumpsters get banged up, rusted and start smelling bad.  When you set up your initial contract, discuss with your hauler when/how they replace / upkeep & maintain their dumpsters.  Get it written into the contract...

Contractual Obligations - most garbage haulers want you to sign 5-year contracts.  DONT DO IT!!   I negotiated a single-year contract with my hauler, with a caveate that if they do not follow the contracted service, or repeatedly fail to address my customer service requests, that I can give them a 30 day notification to quit the service.   Make sure that there will be no price increases during the contract period... and if they do increase prices, that gives you the option to nullify the contract.  

LINEN COMPANIES

These are the folks who provide you with rags, mats, table cloths etc.  They usually come in once a week and take all the dirty stuff and replace it with clean stuff.  

A while ago, In my effort to keep my costs down, I tried buying my own rags and mats etc. and then washing / cleaning them myself.  It only took about a month before I went back to a linen company to take care of that for me.  It was WAYYY too much of a pain in the backside, and I wasnt saving much money.

Linen companies are a dime a dozen.  It is pretty easy to get them to bid against each other for you business.  However, the same thing I mentioned before also applies to these companies - the cheapest may not be the best... and actually might cost you more in the long run (or be such crappy service that you'll pull your hair out).   I'd recommend contacting a couple different companies to get some idea of prices.  Then, go around to a couple nearby restaurants and ask who they use... and how good they are.   Once you find a quality company, tell them about the competitive bids you've gotten and see if they will come close.

These guys are terrible about arbitrarily boosting their prices.  At least 2-3 times per year, they will just increase my price.  At first, I got angry and called the company to complain... over time, I realized that I could just *ignore* the price increase and keep paying them the same I had been paying them before.  They would eventually just reset my price back down.  You see, these guys rely on your not noticing any price increase.  For most coffeehouses, you are not paying much to these people - maybe $40-60 per week.  So, if your price goes from $45 to $50, the company banks on your not really noticing / caring about a $5.00 increase to price.  However, remember that even a $5.00 increase adds up to real money over the course of a year - $5.00 x 52 = $260.  

You might get a call from their accounts receivable department about partial payment.  Just tell them that you did not accept the price increase, and that if they do not reset your price back to where it was before, you can easily switch to another company.  I had that conversation about six or seven times.. but now they dont even bother me.  About once every six months, they reset my price and eliminate all the back charges.  

AGain, these guys like you to sign contracts - the longer the better.  When I first started out, I signed a 3 year contract, then I signed a 1 year contract... and now, I just dont sign any contract.  I explain that I have been with the company for a long time now, I have always paid my bills on time, so I see NO reason for signing any long term contract.  They try heavy-handed tactics with me, but I simply ignore them - they continue to provide me with the service and I continue paying my bills.  Nothing happened.  

If you do end up signing a contract, make sure there is a caveat in there that says if they raise the price for any reason, you have the option to decline the increase and/or you have the option to cancel the contract. 

Payment terms - you can usually push payment out at *least* 30 days.  

Alarm Companies

These are the companies who install alarm systems, then have long-term monitoring contracts

What do you need:

- I'd recommend broken glass detectors on the windows, motion detectors inside, a door alarm and a panic switch under the cash register.   You can also tie in fire alarm systems (These are usually a selection of heat and smoke detectors).    It will cost a couple thousand dollars to get this stuff installed.  

- You will also need a monitoring box (that all the detectors hook into).  You can either get one that ties into the phone line, or that uses a wireless signal.  The wireless signal is a bit more expensive,  but worth it.  I'm trying to eliminate our analog phone line (because AT&T charges an arm and a leg for a single commercial phone line!) and the alarm box wont go through a digital VOIP line.  For a while, I tried having the alarm signal on our regular phone line.  It didnt work.  Whenever you picked up the phone, the alarm would start beeping at you.  Just shell out the extra cash to get the wireless box - itis worth it in the long run.

There are a bunch of companies that do alarm systems.  Some are as small as a one-man operations (who install it, then sign you up to a monitoring service), some are huge, nationwide businesses (ADT for example) that do everything from install to monitoring themself.   I have had some bad experiences with the big businesses.  Once I had a salesman promise me a 1-year contract, then had me sign something that I did not read closely enough.  Turned out to be a 5 year contract (in the fine print) and the company tried to come after me when I tried to cancel the contract after 3 years.  

Like many of these service companies, they will want you to sign long-term contracts.  Dont do it.  Explain that you dont know what their service is like, and if you discover they are not a good company, you want the ability to get out.  Likewise, if your business is brand new, you just dont know if you will even last a year, let alone five.  Believe me, if you sign a five year contract, and your business folds after a year (or you sell it in two years...and the new owner does not take on the new alarm contract), these guys will come after you personally for the remaining term of the contract.  If you DO have to sign a contract, keep it as short as possible - 1-2 years... and add in caveats about how you can cut the contract short if service is not up to expectations, if they try any price increases (for any reason).  Some alarm companies will try to fight you on this by saying that the equipment they install is paid for with the long-term service contract, so if you have a shorter contract they will have to charge more for the monthly fees.  

If that's the case, go and find one of these single-man alarm installers, and ask how much it would cost for them to install the system for you (JUST the system, NOT a service contract).  This will give you an accurate assessment of the real cost of install.

I've generally found people in the alarm industry to be a bit untrustworthy.   Many will try to slide something past you, and tell you things that are maybe not 100% true.... so be careful when dealing with them.

Well, that is enough for this posting.  In the next posting, we will cover coffee roasters, bulk supply places (BJ, Costco, Sams, Restaurant Depot etc), specialist vendors and a quick summary of negotiating strategy when dealing with these.

thank you for your interest!!

Duncan

The Coffeehouse Guy

On a final note: as you may know, I'm in the process of writing a series of guides to show people how to move from a corporate job to owning a coffeehouse.  Unfortunately, they are not going to be ready for a little while.  However, If you are REALLY serious about starting your own coffeehouse, and you cant wait for my guides to come out, I also offer a 2-day, one-on-one intensive boot camp on starting a coffeehouse.  You come up to New Haven for these two days, and we spend two intensive days going through all the intricacies of starting, owning and operating a successful coffeehouse.  If you are interested, send me an email and we'll get it set up: coffeehouseguy1@gmail.com

So much GARBAGE out there!!!

Do a google search on "increase sales coffeehouse" or "Improve sales coffeehouse" or even such things as "effective coffeehouse marketing"... anything along these lines, and you will be faced with an array of utter garbage.  Umm - let me revise that - mostly garbage.  Almost everything I could find boiled down to: advertising,  garbage from people who dont know what they are talking about & expensive consulting firms staffed by people who have not actually owned coffeehouses in 20 years.  

Advertising:  

I found a video with a guy from some Roaster called Kahwa Coffee who claimed that the single most important thing when setting up a coffeehouse was choosing coffee beans... HA!!  What a load of garbage.  Sure, having good coffee is important - I spent a good amount of time investigating different coffee suppliers, blends, etc.  However, it is number seven or eight on the list of important things to worry about when starting a coffeehouse.  The top three things that are WAYYYY more important?  1) location 2) location 3) niche  

I stumbled across one of those hokey 'top-10' lists that made me laugh.  It was a 'top ten ways to increase revenue and profitability in your coffeehouse" - AWESOME!  I quickly clicked across to it...   Oddly enough, all 10 involved selling more drinks with syrups, promoting drinks with syrups, putting syrup displays near the cash register.. bla bla bla.  I then scrolled down to the bottom of the top 10 list, and discovered this *insightful* top-10 list had been put together by (you guessed it) a syrup manufacturer.

This garbage was sooo common - it really began to tick me off.  When you are considering making a huge investment and enormous lifestyle change, you need REAL information, AUTHENTIC direction and SOLID advice.  Too many companies are putting forward false advice they dress up as helpful guidance, but is nothing but thinly veiled advertising that will actually distract potential coffeehouse people from the real issues that could make or break the business.  A young coffeehouse is very fragile.  Something as simple as the owner not being focused on the right issues could be enough to sink a it.

People who dont know what they are talking about:

There were a number of instances of articles or lists generated by people who clearly had not owned a coffeehouse... or had not owned a coffeehouse in a VERY long time... or just worked in some monster organization like Starbucks.

One quick note here - owning a small, single-location, independent coffeehouse is COMPLETELY DIFFERENT from working for some Corporate Coffee Leviathan.   Working in the marketing department for Starbucks is more akin to working in the marketing department of Ford, Proctor & Gamble or Taco Bell... large scale advertising and promotion for large mulit-location business concerns is a very different animal from a single,local independent coffeehouse.   How do I know this?  Simple - I used to work in Corporate America, and now I own a small independent coffeehouse.  Why is this important?  Because many of these self-proclaimed 'experts' in coffeehouses are ex-corporate-bigwigs that work for some impressive-sounding consulting firm that consults with coffeehouses and charge an arm and a leg.  I found one 'consulting' firm that charged $3000-$5000 to drop by your location for a couple days and rain down their 'extensive experience' on your potential coffeehouse. .  So, what is some of this wonderful advice they are hawking?   One example: I found several that recommended new owners spend alot of time on social media (Facebook and Twitter) to get their name and brand out there.    I love tech, and when twitter and facebook started going mainstream, I tried all sorts of experiments with both of these to see how I could use 'new media' to build a coffeehouse.  My findings were neatly summarized by Rich Westerfield (owner of Aldo Coffee - a small independent coffeehouse) "Other than some laptop warriors and a handful of certified coffee geeks, NO ONE really pays attention to Twitter or Facebook for coffeehouses."   Yes yes yes.  Exactly what I found.    

I found a handful of articles on eHow that talked about starting a coffeehouse - I'm not sure where they got their information, but much of it was just generic recommendations that sounds good... until you actually do it.  Some examples:

- Host Music Events / Poetry slams... On a superficial level, makes sense.  Do these events to draw people to your shop, so they get to know the place.. then potentially become long-term customers.  Unfortunately, it doesnt work like that.  Coffeehouses are all about repeat customers.  The most valuable customer is the one who works down the street, and comes in every morning for their latte and muffin.  Those customers who come in once and grab a cookie and a coffee, and dont come back because they dont live/work in the area?.... nearly worthless.  I have a rule of thumb - 1 1/2 block radius.  Most coffeehouses are not destinations in their own right - convenience plays a big role in a customers decision to go to one.  Thus, 90% of my customers work, live or transit through (every day) a 1 1/2 block radius from my shop.    The people who come in for music / poetry slams etc - these are generally not the people that live/work/transit within the 1 1/2 block radius on a regular basis.    They come in once for the poetry slam and they might have a beer and a cookie.  (though people who come for music and poetry consume less then other customers - many dont even buy anything!), then come in again six months later.... who cares!!  these are not your real customers.    POetry and Music do NOT bring in the people you want!

Furthermore, organizing these events takes up valuable time.... and when the event is done, then you have more work cleaning up, puttting stuff away etc.... and there is no long-term, residual benefit.  Better to spend your time on something that will have a longer-term impact (like finding ways to reduce your expenses etc.).  I've rarely seen a good pop to sales when I've organized some sort of event.   Furthremore, when you host music, you have to get a license from those vulture Music Rights companies like BMI, who threaten you with legal action unless you buy some expensive license from them that allows you to  play live music.   No, to heck with that.  Not worth it.

- Coffeehouse Layout - one eHow document talked about the best layout for a coffeehouse.  It indicated that the best place for the service counter was in the back of the shop.  This is a bad idea.  Your most profitable customer is the one who walks in, grabs a latte and muffin and walks out (because they dont use your tables/chairs/heat/ac etc.) .   The majority of these customers want to get in and out as fast as possible - they are usually on their way to work and in a rush.   You want to make it as fast and easy for these in-and-out customers to use your shop.  Part of that speed of service is easy access - Get your counter area RIGHT UP FRONT. so people can peer in the door, see the counter, and realize they can get something fast and easy.     it may only take 8 seconds for a person to stride from the front of the shop to the service area in the back, the distance acts as a psychological barrier to people.

- Set up WiFi - Yeah.... sure, but not for the reason stated.  The author was concerned with customer access to free WiFi.  That is not important at the initial stages.  This can wait.  However, you MUST have wifi for another more important reason - payments.  Most payment systems (gift card machines, credit card acceptance machines, ATM machines etc, all connect to the internet for verification.  Without internet access, it makes it very difficult for people to pay you!

Other people in the coffee industry leading you down the wrong path.

There is this strange aspect to the coffee industry that I have never understood - so many roasters and coffeehouse owners focus a disproportionate amount of time and energy on showing you how they travel to these distant, obscure destinations to see where the coffee is grown, dried etc.   I fail to see the purpose of this.  I believe it is important to support environmentally & socially sustainable practices (such as organic, shade grown, fairly traded coffee), and to ensure top-quality coffee.  However, that can all be done from home - there is no compelling business reason for traveling to central Guatamala to shake the farmer's hand that grew the actual coffee.  That makes about as much sense as a mechanic traveling to the offshore oilfields of Venezuela to ensure the quality of the oil he is putting in your car.  I insist my roaster produce top-quality, sustainable coffee, but I'm not going to waste my time traveling around the world to check up on the supplies.  My time is much better used building the business.

Another oddity is this practice of cupping.  If you have ever seen people cupping, it is just absurd (and pretentious  .  There is a very specific process involved in creating the cupping experience...  a certain grind of coffee, a certain oz amt with water of a specific temperature.  then you 'break the crust' with a spoon, slurp a teaspoon of coffee and swish it around your mouth.  Then you are obligated to make some obscure comment about how 'chocolaty, oakie, full-bodied, mildly temperamental" etc the coffee is.  What bolderdash.  What truly matters is that your customers like your coffee - so dont waste your time doing cupping to test various beans.  Just grab 4-5 different types of beans and let your customers taste-test them.  Whichever one they (and you) like best, that is the one you use.  Your time is WAYYYY too valuable to waste on cupping - your time is better spent devising an effective marketing campaign.

How about those barista competitions?.  These are competitions where highly trained baristas show their skills at pulling the best espresso, creating lattes, latte art, cappuccinos etc.    People who talk about these competitions pretend as if these events and the skills they demonstrate are vitally important to the success of any coffeehouse.  What a load of crap.    If you are using good beans, at the right grind on a good espresso machine and you are no over or under pulling your shots, your espresso will be delicious.   Only the 0.1% of the population who are serious coffee nuts will know the difference.    In short - dont bother with the competitions for now.  At some point in the future, when your coffeehouse is thriving and you have some spare time on your hands, it is fun to check them out.... but remember... barista competitions are just games, and have nothing to do with the success or failure of your coffeehouse.

So, what lesson should we draw from this?  Be careful what you read.  Check the source of the information.  Before you take any advice to heart, think about where it comes from, who is giving it and whether this person is qualified to give such advice... or if it just some twisted way to sell their own product.    Caveat Emptor.

Thanks for listening!

Duncan 

Coffeehouse Guy

On a final note: as you may know, I'm in the process of writing a series of guides to show people how to move from a corporate job to owning a coffeehouse.  Unfortunately, they are not going to be ready for a little while.  However, If you are REALLY serious about starting your own coffeehouse, and you cant wait for my guides to come out, I also offer a 2-day, one-on-one intensive boot camp on starting a coffeehouse.  You come up to New Haven for these two days, and we spend two intensive days going through all the intricacies of starting, owning and operating a successful coffeehouse.  If you are interested, send me an email and we'll get it set up: coffeehouseguy1@gmail.com

starting a coffeehouse on the cheap - pt 3

In this third section (of three) we will go into the final source of expense when starting a coffeehouse - operational expenses.

When you first start a coffeehouse, it is not immediately profitable.  Far from it.  It can take up to a  year to flip into profitability!  (by the way, if your coffeehouse is not profitable after a year, you need to pull the plug on it).  So, for the first six to ten months, you are in the unenviable position of working your backside off, while not only NOT making money, but actually losing money every month.    While this is the normal state of affairs for a new coffeehouse, there are many things you can do to reduce your operational expenses in the first year, so you can stretch out your savings for as long as possible, and shorten the time to when your coffeehouse flips to profitability.

The basic rule: KEEP EVERYTHING AS CHEAP AS POSSIBLE, WHILE NOT IMPACTING THE PRODUCT QUALITY AND SERVICE.  Product quality and service are sacrosanct.  Everything else is up for the chopping block.   Spend money on quality ingredients - make absolutely certain that all your raw materials are fresh and delicious, and are prepared in quality manner.  If you screw this up, your customers won't come back.

YOUR two largest sources of expense will be labor and cost of goods (materials), followed by overhead.  I will broach each of these in turn.

1) When you first start out, OVER hire - in other words, hire too many people.  When you hire them, make sure they understand that you are unsure exactly how many people you will eventually need for your operation, so it is likely that the final number of staff members will not be what you start with.

Over the next MONTH, carefully watch the employees.  I've noticed that employees can put on a performance for about two weeks - then after that, their *true* colors start showing through.   Take note of the employees that start showing up late, not completing their tasks, are not 100% on when serving customers, leave their station dirty... likewise, identify those that really seem to be having fun and are energized by the work.    Also, I like to use this time to assess the honesty of the employees.  Most people have either a rigid sense of what is right and wrong,  or they have a *flexible* sense of morals.   Look for signs of the latter, and find a reason to let them go.   People who have a flexible sense of moral values can easily find ways of justifying stealing from you, treating customers badly etc etc. 

(by the way, you can only do this if you are living in a "At Will" state, or you have had your employee sign an 'at will' contract.  Most states are At Will states, except Delaware, Florida, Georgia, Indiana, Louisana, Mass, Missouri, Montana, North Carolina, Pennsylvania, RI, Texas and Virginia.  At Will employment is one in which the implied contract between an employer and employee is that the employee is there at their own will, and the employer is under no contractual obligation to continue employing that employee.  IN short, it means if you are not living in an At Will State, you can fire someone for any reason.. or no reason.  If you are living in an AT WIll state, then you need your employee to sign a statement when they first start indicating they are an At Will employee - look up the paragraph on line).

AFter the first month, choose your top 2-3 employees to keep (depending on your production needs), and get rid of the rest. 

The benefit to this is twofold: first,  while you are trying to figure out the operations of your new business, you will have a surplus of labor to ensure that every person who walks through your door has amazing service (remember - product quality and service are the two primary aspects of  your place you focus on).  After about a month, when things settle down, and you are figuring out how everything works, setting up systems etc - you just wont need as many people.  Second, you will end up with the best employees, and you will have instilled a meritocratic culture in your coffeehouse (in other words, the best employees get the best jobs etc.)   You employees will now understand that you value performance, attitude, diligence and reliability.

Dont forget - you can pay employees below minimum wage, so long as their tips plus wages surpass the minimum wage (double check this is the case in your state - it is the law in my state).  I always start people off at around 50 cents below minimum wage.  This is because for the first month or so, I have to spend a lot of time, energy and money training a new employee.  Last year, I sat down and figured out that every new employee costs me $500 to bring up to speed. (most states have labor laws that allow businesses to pay new 'trainee' employees below-minimum while they are in their training period).   Virtually every new employees is useless for 2-4 weeks.  After a month, I'll assess how they are doing.  If they are starting to really *get* the job, and dont need constant supervision, I'll boost their wages 50 cents to $1.00 per hour.  In about 3-4 months, when they are promoted to Shift Leader, I'll give them another wage boost of 50 cents to $1.00.  

Another helpful tip - you have 90 days to determine if you want to keep an employee.  If you get rid of an employee before the 90 day trial period is up, then you are not liable for unemployment taxes on that individual.  After 90 days, you are now liable for unemployement.  Whenever I hire a new person, I add a note to my calendar 80 days in the future - something to the effect of "Do you want to keep Mary? If not, you have 10 days to remove her from the rolls".   

2) Plan to work alot.  You personally need to work all the time.  Plan to work in your shop 12 hours a day, six days a week for at least six months.  This is one of the best things you can do for your nascent business.  First, it means you are there doing the work, so your payroll expenses are lower.   Second, as you are there doing the work, you gain a detailed insight into what needs to be done, how long things take to do, what 'done' looks like... in short, you quickly learn every detail of the business inside out, upside down and backwards.  Third,  you learn how to keep your expenses to a minimum - by being there and seeing what is going on, you can see where the waste is, what is being thrown away, and you can figure out ways to reduce those expense.  Fourth, you learn what sells and what is not selling... and why.  Your one-on-one time with each customer allows you to ask customers what they like about the experience, what they dont like, and what sorts of things they would like more of.   After speaking with a number of customers, you begin to see patterns of answers - which will help guide your business forward.

3)    Purchasing Raw Materials:  Clearly, you are going to need raw materials for your business.  Coffee beans, filters, cups, produce, dairy, cleaning products etc etc.  There are many places  you can get these items - most often, restaurants (and cafes)  rely on vendors that they order from (over the phone) that then deliver the materials to you.    These include the likes of Sysco, Perkins, Thurston Foods, Gordon's... the list goes on and on.  While it is very convenient to order from these places (just a call, and they deliver the stuff the next day), it is also EXPENSIVE.   When you are first starting out - do not use these distributors.  It is MUCH MUCH cheaper to go to places like the Restaurant Depot (that specializes in supplying restaurants - they have locations in 27 states - check em out www.restaurantdepot.com), Sams club, BJ's, Costco etc.    Sams club has this amazing program for small business customers - you can order all your materials you want from them online, and they will send someone around the store to get everything you want.  The next morning, you just drive up and pick up your stuff.  They even help you load up the car.  My average cost of materials dropped 15-20% when I started using bulk warehouse stores.  It can even help improve the quality of the products you are using - when you are selecting produce, you can pick out the freshest, nicest stuff.  (as opposed to a vendor that picks the stuff out for you). 

An example of the savings:  most small independent coffeehouses reach their break-even point somewhere around $250,000 - $300,000 in sales per year.  Cost of goods (raw material costs) usually ranges around 28-31% of sales, so that means you are spending in the range of $100,000 per year in cost of goods.  If you save 15% on $100,000, that translates to an extra $15,000 per year in your pocket.  I'd say that is worth while!

4)  Overhead:    Your overhead costs include such things as electricity, rent, water, internet, garbage collection, alarm monitoring, telephone, music, gas, heat, a/c etc etc.    These are all the products and services you need to just keep the doors open, and unfortunately, most cannot easily be adjusted, nor do they move the cost needle much.  At the same time, they too are sources of expense.  If you have already focused your attention on your labor costs, AND your cost of goods, this is another area that you can look into to try and save money. 

RENT - when negotiating a lease, see if you can get lower rates for the first year.  For example, if the landlord wants $3000/month for the space,  ask if you can go to $2000 per month for the first year, then $3500 for year II and III etc.   This will help to better match up your expenses with your anticipated income.  In Year I, you will have very little income, so lower rent will help you make it through the first year.  Presumably, in Year II, you will have flipped to profitability, so you can pay the higher rent much easier.  At the end of the day, it is in the landlord's best interest to do something like this.  He is looking for a tenant that will be in his space for a long time, and pay the rent for a long time.  Only a stupid landlord will look to maximize his income for one year, and kill the business in the process.

HEAT - gas gas gas.  Avoid electric heat.  It is EXPENSIVE!! (especially up North where we are located).   I had one shop that used electric heat, and during the winter, my electricity bill went from $900/month during the summer, to almost $2200 per month in the winter.  I had no idea it would get that expensive when I took over the space.    I spent one long weekend in the middle of January weatherizing the space, insulating it, and generally figuring out ways to reduce heat loss.  I managed to get my electric bill down to $1600 per month, but it was still a substantial expense!

GARBAGE - if your town has a commercial composting facility, you may consider switching to a split-stream waste system.  It is VERY cheap to have someone pick up your recycling.  Last year, we switched from a regular garbage dumpster to single stream recycling (you'd be surprised as to how much stuff can now be recycled), in conjunction with a separate compost bin.  In short, all food waste (and napkins) went into the compost bin, and everything else went into the recycling bin.   There are only a handful of things that cant go in the recycling - so they were pretty easy to eliminate from our supply chain.  Previously, we were paying $270/month for garbage pick up.  The same sized dumpster - only for recycling - cost me $140/month. 

Compost (food waste) can be either processed by a commercial compost facility,  some locals often like to pick it up for their gardens, or close by pig farmers might be interested in taking your food waste to feed their pigs.   Right now, my compost is being processed by a compost facility , but I'm talking with a couple local farms that have pigs to see if they'd be interested in grabbing my compost.  We'll see how that works out.

TELEPHONE - do NOT get a phone line through your local AT&T / sprint etc.  Those phone lines are INSANELY expensive.  Before I dropped my AT&T line, they were charging me $80 / month for a single business phone line that I barely used!!  I mentioned this in an earlier posting, but you can get an Obitalk box (www.obitalk.com)  - it costs $60 on Amazon.  Then set up a Google Voice account, and funnel that google voice account through obitalk (they have all the detailed instructions on how to do this).  Voila!  Free phone service!!

ALARM MONITORING - go with the little guys.  There are many many small alarm companies out there.  Use them instead of the big alarm companies (like ADT).  ADT will charge $50-60 per month to monitor your place.  You can bargain the smaller guys into monitoring contracts of $25/month (including fire monitoring, break in monitoring etc).

ELECTRICITY - The two biggest electricity suckers are refrigeration, and any kind of equipment that generates heat.

There are four ways to keep your refrigeration costs low:   First, use fewer, larger coolers.  Ideally, a walk in cooler with a couple smaller units.   You see, larger coolers use less electricity per space cooled than smaller units.   They are just generally more efficient.   Second, keep the condenser cool.  The way refrigeration works, is a liquid is pumped into a compressor... which compresses the liquid.  The act of compression forces the liquid to give off heat... which is then bled off in the condenser coil.  The now room-temperature (yet high pressure) liquid is now pumped into the evaporator (inside the refrigerator) and is allowed to expand out to its normal pressure.  In the process, it *absorbs* heat from inside the refrigerator, causing the inside to get cold.    The place where the compressor is working hardest (and uses alot of electricity) is in the part of the cycle where the liquid is compressed.  If the condenser coil is in a hot environment (say in a hot kitchen), it will not bleed off the heat efficiently, forcing the compressor to work harder and use more electricity.  It works better if the condenser coil is cool (or in a cool environment - say outside).    When we had high electricity bills , I added a couple cooling vents to the outside with powerful fans to the bakery to better circulate the air - this made the entire environment cooler and reduced our electricity costs.   The third way to keep your refrigeration costs lower, is to keep the condenser unit clean.   They have a tendency to clog up with all kinds of junk - and the more junk there is on them, the less efficient they are in shedding heat (the junk acts like mini sweaters!).  So, clean them at least once a week!  The final way to keep your refrigeration costs low is to put them on timers.  You are not opening or closing your coolers from 10pm - 5am are you?  Well, then they should not be on during that time.   Set them on electric timers so they go on for 10 minutes every hour during the night.  That keeps them cool, but also keeps your electric usage to a minimum.

Heat - generating equipment:  There are a number of types of restaurant equipment that use electricity to heat - but in a very wasteful manner.  First, ovens.  You can get electric convection ovens - while they are convenient because you dont need a draft exhaust for an electric oven (since there is no combustion, there is no Carbon Dioxide being produced, you dont need an exhaust vent), they use HUGE amounts of electricity.    I have two full-sized electric convection ovens for my bakery, and they cost me about $400/month in electricity alone (needless to say, it is on my list of things to do - to replace them!).    Second, conveyor toasters.    When you go shopping for a commercial toaster, you can get a conveyor toaster (that is on all the time) or a pop-up toaster (that is just on when toasting).  DO NOT use the conveyor toaster.  It is better to get three pop-up toasters if you need the volume.  When that conveyor toaster is on, not only does it use huge amounts of electricity for 18 hours a day while it is on, but during the summer, your A/C bills are higher, because the A/C has to work harder to get rid of all that excess heat the toaster is throwing off. 

Well, I think that is enough for now.   Thanks for reading the posting.  Let me know if you have any requests for issues you'd like me to address!!

Best

Duncan

Coffeehouse Guy

On a final note: as you may know, I'm in the process of writing a series of guides to show people how to move from a corporate job to owning a coffeehouse.  Unfortunately, they are not going to be ready for a little while.  However, If you are REALLY serious about starting your own coffeehouse, and you cant wait for my guides to come out, I also offer a 2-day, one-on-one intensive boot camp on starting a coffeehouse.  You come up to New Haven for these two days, and we spend two intensive days going through all the intricacies of starting, owning and operating a successful coffeehouse.  If you are interested, send me an email and we'll get it set up: coffeehouseguy1@gmail.com

starting a coffeehouse on the cheap - pt 2

In my previous posting, I covered how to build out your coffeehouse cheaply, using creative construction, materials from Craigslist (and other similar sources), and avoiding major renovations.

In this segment, we will cover how to get equipment for cheap.

First - getting NEW equipment for cheap.   Usually the best place to get brand new equipment for very cheap prices is expos, equipment fairs, barista competitions etc.  I once picked up a brand new $12,000 espresso machine for $6000.  I was at a coffee expo, and Rancillio there with a booth.   They were demonstrating their new machine to people, so it was plugged in and operating.  Now, once a new machine has been used, it can no longer be sold as 'new'.  Likewise, the dealer doesnt like to use the same machine for every expo, because the machine gets dirty, it is difficult to find space to store, maintain etc.  Instead, they usually unbox a new machine for every event.  Thus, they are left with a "used" machine that has been used for less than a week...  They just want someone to come and pick it up so they dont have to deal with it.  

 Near the end of the expo, I stopped by the Rancillio booth, and offered to drop by after the expo was done and take the machine off their hands for $4000.  We went back and fourth a couple times, and I eventually agreed to $6000.   Voila - a new machine for half price.

Any time there is some kind of demonstration, expo etc - where new equipment is being used for a very short amount of time, you can bet the company will be willing to sell it to you for a steep discount - just to get it off their hands so they dont have to deal with it.   Bring a truck and a wad of cash (cash talks loudest). 

Second - used restaurant equipment:  Let me start by outlining the broad structure of the restaurant equipment market.  As you probably deduce, restaurant equipment is designed to last  a long time with heavy wear.   At the same time, there are a surprisingly large number of restaurants and other food establishments that fail early on in their lifespan - one study suggests a 60% mortality rate within 3 years of launching.   Thus, you have equipment that have only been used for a couple years of their six to ten year lifespan, resulting in a large amount of used restaurant equipment floating around the market.

There are many used restaurant equipment purveyors that buy the stuff from shuttered restaurants, clean it up, fix it up and resell  it for maybe 50% of the brand new stuff - just do a google search for 'used restaurant equipment' in your area, and I'm sure you'll come up a half dozen companies that do this.

Likewise, you can always find used equipment on Craigslist and Ebay - just keep your eyes open and pounce when one comes up.  For craigslist - the best ones to go for are the ones with no pictures.  These people usually have no idea what their equipment is worth, and the statistics say that a Craigslist ad without a picture has 30-40% fewer respondents - fewer respondents translates to fewer people calling about the equipment, which in turn strengthens your negotiating hand.   For a reasonably good piece of equipment (in good shape), I'd expect to pay about 1/3rd the new price when buying used off Craigslist and Ebay.

Now, how to get restaurant equipment for REALLY cheap:   restaurant equipment auctions.  Whenever a food establishment goes out of business (or creditors repossess the shop), the owner will call an auction house to auction off the contents of the place.  This is where the used equipment dealers go to get their equipment for resale.  You can get some phenomenally good prices.

I usually check Craigslist (business section) for auction listings, or just do a google search for restaurant equipment auctions to see what comes up.  These things are going on all the time, so they are not difficult to 

find. 

Auctions are a bit more tricky, because the equipment is usually sold as-is, where-is... and you have to provide the full amount you bid there and then.  It feels a bit wild-wild west.    Unless you are a restaurant equipment specialist, it is difficult to ascertain whether a piece of equipment is good or ready to break (you can usually turn it on to check if it actually works).   However, the way you deal with this is to just bid low enough on it, that if something does turn out to be broken, you can get it fixed and still end up with a good deal.  Likewise, you must remove the equipment from the store yourself, and then transport it back to your place.  Just a word to the wise here - the other bidders often do sneaky things to throw other you off ... make it seem like the equipment is broken etc.  For example, one auction I went to, someone went around before me and turned the thermostats up on all the refrigeration units (and freezer units), so when I came by to check them out, they were blowing warm air (usually a sign the compressor is bad).  When I noticed the thermostat and turned them back down, the refrigeration unit worked just fine.    I also saw one bidder turn on a meat slicer to check that it worked, then surreptitiously cut the cord and pocket the plug, so no one else could check to see if it works (rewiring the plug is a simple procedure).  This way, when the bidding started, he was the only one who knew it actually worked - the rest of the crowd only knew that the cord was cut...

Some newbies are intimidated by auctions, because you are surrounded by used equipment dealers who do this sort of thing for a living.  They know the actual value of everything, and what things cost to fix, the bidding procedure, strategy etc etc.   However, you have a huge leg-up on these folks.... simply put...price.  They are buying equipment to resell - so they HAVE to buy it very cheaply.  You are buying equipment to use, so you can easily bid above them, and still get an amazing price.

If you want to try your hand at an auction, here are the steps you need to take:

1. figure out the equipment you need.

2. Look up the equipment online - both new and used prices of various brands.  Get a good idea what normal prices are for this kind of equipment. 

3. At auctions, I usually expect to pay 10-20% of new price for the equipment (depending on the item - the more popular items like sandwich making stations, slicers and stand-up refrigerators may be closer to 25%, whereas large convection ovens can be snagged for 5-10%).   This will give you a rough idea of what you should expect to bid up to.

4. You can usually pick up your equipment for a day or two after the auction, so you dont need to rent a u-haul truck to go to the auction.  You can grab that later (when you have a better idea of the size of the truck you are going to need).  Also, bring a bag of cash.  You can usually use cash, check or credit card for the purchases, but most places will give a 2-3% discount for cash.  I went to one auction and got $4000 worth of equipment, then paid in cash.  The guy knocked 3% off the price, thus saving me $120. 

5. Auctions are best used if you are getting a bunch of equipment.  If you are getting just one item - it may not be worth it (unless that item is expensive).  Once you factor in your time, truck rental (gas), hiring a couple guys to help you move it, possible fixing etc - it may not be that much cheaper than buying from a used restaurant company.  So, if you are going to go to one of these things - plan on buying a bunch of stuff.  I like to buy back up equipment for my vital pieces (under counter dish washer, ice machine, refrigerator, espresso machine etc) so if they go badly wrong, I can just yank them out and put the other piece in. 

As an aside - the WORST time to buy equipment is when you absolutely need it.  When you need it NOW, you will pay the most money for it.  Grab some back up equipment for your shop and stick it in the basement or a garage, so you have it there for when an emergency strikes.

Here is how the auction works:  usually the auction starts around 10am, but the shop is open for inspection a couple hours before-hand.   You get there around 9am, and sign in.  The auctioneer will take your information and then give you a card number.  This is your bidding card - keep it handy.  Next, walk around noting all the equipment, and what they look like.  Try and turn everything on to check that it works (and watch out for tricksters).   Make a list of the things you want to bid on, and write next to it what your max bid will be.  This is important, because in the excitement of bidding, you can easily lose your head and bid way above what you should.  If you have your max bid in front of you, you are less likely to over bid.  I always look for dirty equipment - you can usually get the best deals from dirty equipment.  Most people intuitively believe that dirty equipment is worth less - just because it is dirty.    This is crazy.   When a restaurant is going out of business, employees and owners spend less and less time on general cleaning, upkeep and maintenance, so things tend not to get cleaned.    So, focus on the dirty equipment to get the best deals.

When the bidding starts, the auctioneer and his buddies (spotters) herd everyone over to the first piece of equipment.  They start the bidding out at some arbitrary price and the auctioneer starts his fast-talking patter (250 250..do I hear 270 270 270... etc)  If you will take that price, you wave a hand, cock an eyebrow or some positive motion, and one of the spotters will point at you and yell "got" or somesuch to signal the auctioneer to move to the next price up.  If the price is too high, and no one is bidding, the auctioneer will actually step the price down. 

There will be two types of people there:  people like you (restaurant/cafe owners looking for cheap equipment) and dealers.  Dont worry about the dealers - you can always outbid them.  You need to be mindful of the other restaurant owners.  See if you can befriend them.  If there are only a couple of you, see if you can come to some side deals - find out what they want and tell them what you want - then cut a deal instead of bidding against each other.  For example, if there is a sandwich making station, a refrigerator, an under counter dishwasher and an ice machine there that two of you want, you could offer NOT to bid on the sandwich station and refrigerator, if they pledge not to bid on the dishwasher and ice machine.   Obviously the auctioneer wont like this, but he cannot stop you from talking with the other people there.

There was one auction I went to that had two 'bakers tables'  at auction- these tables are 4' x 8' with chopping block surfaces.  Very valuable tables for bakers... and very expensive.  A good quality table will sell for several thousand dollars.    I wanted one, and one other guy was bidding against me.  I didnt know if he wanted one or both of the tables, so in the middle of bidding, I quickly asked him - "you want one or two?".  He lifted one finger at me and I immediately dropped out of the bidding.  I managed to get the second table for less than he paid for the first.

If you are going to bid - dont bid in at the beginning.  Wait.  let the others bid up and drop out.  Once everyone else had dropped out, THEN you can drop in.  This tends to keep the prices lower.

Strategy:  You are allowed to bid in at any price you want.  So, if the last bid was for $350, and the auctioneer is calling for $375, you can yell "$355" and the auctioneer will accept that.  However, I would not recommend that.  Going up small increments tends to encourage other bidders to stay in the race.  If they put in the bid at $350, and your bid is just $5.00 more, they will be LOATHE to lose the bid due to just $5.00... they will likely be goaded into increasing the bid.

Most people stop bidding at certain monetary thresholds - usually x00 numbers or x50 numbers (such as $200 or $250, $550, $700).  They have set a mental threshold beyond which they will not bid.  So, if an item is at $300, and two guys are still in, chances are good that one will stay in to at least 350.  SO, if you just bump the bid directly to 350, that will tend to drop one from the running right off.  Furthermore, such a large increase shows the other bidder your intention to win the bid... and at that point, he will have to bump up his bid at least $60 to be considered - a much larger obstacle than just the $5.00 previously mentioned.   So, dont be afraid to play around with bidding increases.  Think strategically.

I recently went to an equipment auction in New Bedford, MA.  A  Big Y store (a big grocery store chain) had closed, and all the equipment in the store was up for auction. 

It was an interesting experience.  I ended up getting a truck full of coolers, tables, shelves, etc for a mere $4000.  Had I purchased this equipment new, I would have paid close to $20,000.  It was an all-day event (and I had to make two trips, because my truck was too small), but it was worth it.   Enormous savings.   

Thanks for reading!  Let me know if you have any issues or questions you'd like me to address!

Duncan

Coffeehouse Guy

On a final note: as you may know, I'm in the process of writing a series of guides to show people how to move from a corporate job to owning a coffeehouse.  Unfortunately, they are not going to be ready for a little while.  However, If you are REALLY serious about starting your own coffeehouse, and you cant wait for my guides to come out, I also offer a 2-day, one-on-one intensive boot camp on starting a coffeehouse.  You come up to New Haven for these two days, and we spend two intensive days going through all the intricacies of starting, owning and operating a successful coffeehouse.  If you are interested, send me an email and we'll get it set up: coffeehouseguy1@gmail.com

starting a coffeehouse on the cheap - pt 1

I received a request from one of our readers to do a segment on how to start a coffeehouse on a budget. - Here's to you Omondi!  If you have any requests for specific issues you'd like me to address - please feel free to send it my way: coffeehouseguy1@gmail.com

Many people have an impression that they must spend a packet of money to start a coffeehouse.  I've seen figures bandied about of $90,000 to $500,000 to get a coffeehouse up and running.  These same people feel compelled to go out and buy a bunch of brand new, shiny equipment from their local restaurant equipment dealer, all the top of the line furniture,  the 'perfect' plates and high-end espresso cups.... not to mention hiring expensive architects, designers and contractors to make the place 'perfect'.

I beg to differ. 

When setting up a shop, the two most important things are quality, prompt, courteous (and fun!) service, with EXCELLENT food and drink that people dont have to wait long for.    These are the two main things that will get your customers coming back again and again.   Everything else is of secondary importance.   Thus, when setting out to create your coffeehouse, you must focus on those two things.   All the other stuff - designed space, beautiful equipment,  perfect couches and the marble countertops??? Not as important.  Naturally you need something functional -  you need a usable space, just not an expensive usable space.

Creating a usable space cheaply -

There are three main sources of expenses when starting a coffeehouse: build out,  equipment and operational expenses.  I'll start by writing about the first of these three (build out) in this blog posting, and cover the other two in subsequent postings.

First - Build out!  The build out is any kind of construction you need to do to the space before you can open up for business.   Any time you start construction, it will get expensive pretty quickly.  Plumbers, electricians, carpenters, materials etc etc...  big money.    SO, the best way to avoid these expenses is to absolutely minimize the amount you will need them.   You can do this by finding a space that used to have some kind of food establishment before.    Ideally, you could find a restaurant, cafe, deli etc that you could buy from the current owner and then take over the lease (and change the business over to what you want).  (NOTE - I will write another section later about how to go about finding / buying a food-business that you can use to convert to your coffeehouse.  The short version of this is to find a run-down business in a good area with excellent foot traffic - that you can get for cheap.   Ideally the owner is older and looking to retire)  If a food business has been in that space in the past, all the plumbing, electrical, floors, ceiling etc will mostly be in place.  You will likely only need to do some minor adjustments to the space to make it work for you. 

I like to negotiate with the landlords to get them to throw in some $$ to cover some of the cost of renovations.  You wont always be successful, but it is worth a try.  I can usually convince the landlord to give me six months of free rent in lieu of a construction budget...

Once you have the space - plan on doing the *minimum* work on the space you can.  Focus on the aesthetics - make it  look nice.  Erecting walls, painting, trim, lighting decoration etc - this is cheap and easy to do, and can transform the look of the place.  That is what you should focus on.  Avoid as much plumbing/electrical/floors/ceiling etc as possible - that stuff gets expensive pretty fast.  

For now, focus on just using residential grade counters, cabinets, sinks, etc.   I like perusing Craigslist for used counters/ cabinet / shelving etc - you can get a steal of a deal there.  Here is an example!

$300 for a granite countertop with integrated undermount sink???  What an awesome deal!! 

Sometimes, you can actually get some of this stuff for FREE!  I found these cabinets for free online - all you'd need to do is replace the hinges and the pulls, then paint them, and voila - new cabinets!

So, you could get a bunch of stuff from Craigslist, and then fix them up a bit, give them a coat of paint and then cobble them together for your service area.   Right now you are NOT looking for perfect.  You are looking for usable.  Later on, when you have a strong, thriving business, you can replace the second hand stuff with upgraded materials etc.  THen you will have the money to make those upgrades.  For now, this will get you up and running. 

Who will do the work?  I like to do my own general contracting because it is less expensive and gives me more hands-on control of the process.   It is a bit more time consuming, but you might consider giving it a shot.  It is particularly good because you will learn alot about the different trades, and how to assess the quality of different professionals.    I suggest reading this book called "Be Your Own House Contractor" It gives good suggestions and insight into the process of finding subcontractors, negotiating with them, estimating costs, where to get materials etc etc.   I also like using Angies List to find good plumbers / electricians/ painters/ etc.  In addition, I 've had success finding professionals by talking with some local architects that have had experience with these subs in the past. 

The important thing to remember when figuring out what you are going to do with the space is that you can always go back and redo it if you need to.  Start out by doing it as cheaply as possible.. a year later once the business is thriving, you can always go back and get those marble counters.  For now, do it cheap... but with style.

This brings up the next point - style.  Just because you are keeping your expenses to a minimum, it does not mean the place has to look slap-dash thrown together.  Use creativity to create a wonderfully warm and happy space (which is consistent with the Niche market you are aiming at - more on that later).  I enjoy reading about cheap design / decorating ideas for the home - often times you can borrow them for your shop.  Makes a huge difference in the place, for relatively little money.  Here were some places I've gotten ideas:

HGTV - 10 inexpensive Decorating Ideas

CountryLiving - budget decorating

There  is also a cheap book on Amazon ($3.99) called "Cheap Home Makeover: Interior Decorating on a Budget".  I must admit I have not yet read it, but it was referred to me by a friend.  The next time I need to do some decoration, I'm going to read this book first.

In addition, you can find a bunch of cool stuff at Goodwill and other thrift shops to find cool decorations and decorative pieces that you can adjust to meet your needs. 

So, to summarize this section on starting a coffeehouse on the cheap :  First, find a place that just needs a cosmetic makeover - with as little serious construction as possible.  You can erect walls (fix walls), counters, paint and decorate pretty cheaply, but do as little electric/plumbing/floors etc as possible.  Second, try to get the landlord to cover some of the cost with either a direct cash injection or free rent.  Third, find USED materials on Craigslist (cabinets, countertops etc) and then paint them, change the hardware for cheap etc, and cobble together the service area.  Fourth, decorate cheaply - there are many websites and other resources that can teach you how to do this - buy decorations from Thriftshops, paint and repurpose.

In short, at this stage, you are just trying to get the place open for business for the lowest possible price.  You can use this to prove that your coffeehouse concept will fly - once it starts making money, you can replace things at your leisure with commercial grade stuff.   

In my next section, I'll go into finding cheap equipment for your coffeehouse...

Let me know if there are any topics you'd like me to write about!  I'd love to hear from you!!

best

Duncan

On a final note: as you may know, I'm in the process of writing a series of guides to show people how to move from a corporate job to owning a coffeehouse.  Unfortunately, they are not going to be ready for a little while.  However, If you are REALLY serious about starting your own coffeehouse, and you cant wait for my guides to come out, I also offer a 2-day, one-on-one intensive boot camp on starting a coffeehouse.  You come up to New Haven for these two days, and we spend two intensive days going through all the intricacies of starting, owning and operating a successful coffeehouse.  If you are interested, send me an email and we'll get it set up: coffeehouseguy1@gmail.com