Opening a coffee shop can be a great decision if you are looking for a way to make a living and you want to enjoy a flexible business startup model. However, even though coffee shops are easier to start than many other businesses, there are still a lot of expenses that can surprise new business owners along the way.
Being prepared for the total amount of your coffee shop’s startup cost can help you to open the business that you have been dreaming of owning in 2023. As a business owner, you need to know how much to start a coffee shop business before you go any further.
The cost to open this kind of business can vary. You might only need to spend about $80,000, or you could need more than $300,000 to fund your new business. The difference in cost is usually associated with small kiosk locations compared to brick-and-mortar shops. Franchising can cost you as much as $650,000.
You will need to complete thorough market research before you decide which kind of shop you need to open based on your budget.
How Much Capital is Needed for a Coffee Shop?
The question of how much capital is needed for your shop has a lot to do with the shop style that you would like to open. You should expect to spend about three to four times as much to open a permanent location as compared to a coffee stand.
A coffee stand that can be placed in a parking lot will probably only require about $100,000 or less to fund and start. But, if you have plans to open a more permanent location, you will want to plan for as much as $300,000-$500,000 to fund your business. This can show us that how much to start a coffee shop business can be quite steep.
Many people end up needing to take out large business loans to fund their coffee shop, but if you have investors or family who is partnering with you, you might be able to keep the loan amount to a more reasonable number.
Within the considerations related to cost are the costs for licensing, marketing, sign fees, and more. The true total cost of your business might exceed your original forecasted budget when you start digging into the nuts and bolts of your specific location.
Being sure that you know the total cost for your coffee shop project is essential so that you are not shocked by surprise fees, charges, and liabilities that might keep you from opening your store on time. You will also want to consider having some amount of money in reserve that can be used for emergencies that cannot be included in the business loan that you take out.
As you can see, it can be very complex to plan to open a business, and finding financing is often one of the places where people have the most trouble. You might need to work with a business advisor or a lawyer to figure out just how large your budget needs to be to get your shop up and running.
How do I Open a Low Budget Coffee Shop?
The lowest-cost coffee shop is operated from a food truck or possibly a small kiosk in a parking lot. If you are looking to keep costs down, you will plan on having a very small staff and a narrow range of products and drinks that you sell.
You will also need to make sure that you are planning to do the legwork of advertising yourself and that you are not going to count on expensive ads or advertising agencies to help get the word out to the coffee lovers in your area.
There are trade-offs for opening a coffee shop on a very low budget, and one of the perks is that you will be positioned in a very flexible way that will allow you to grow your business organically over time. However, you might also find that your lack of funding leads to limitations that cannot be overcome by your current business model.
If you are not sure that you want to take out large loans to get your shop up and running, you will want to look long and hard at the mobile coffee shop option. This will require different licensing and permits than a more permanent location, but you might be able to go to events or drive to different places on different days to try and secure new business for your coffee and food truck.
There is a lot of flexibility in this model, but it is much less certain than other business models due to the roving nature of this kind of business.
What Kinds of Items Will You Need to Consider in Your Budget?
Many factors will need your attention when you are putting together your budget. You should be sure that you think about as many details as you can during this part of the planning phase so that you do not miss anything that will lead to a shock down the road.
You should be sure that you do not shy away from seeking expert guidance when you need it. Finding the funds for help from a lawyer or a business planning expert can be well worth it in the long run.
1. Utilities
This is one of the things that sometimes gets overlooked by business owners and those who are planning to open a coffee shop. It can be easy to forget about the costs of gas, water, and electricity, and you might find that some locations that you have considered are more expensive than others.
This can be one of the last things that people think of, and sometimes you might feel like you are stuck with high costs in this area due to your location.
Make sure that you think about this part of your operating costs early on so that you do not pick out a place to build or get permits only to find out that the utilities are much more expensive than you expected.
2. Location
The location of your coffee shop matters when it comes to how much to start a coffee shop business. You cannot hope to succeed if you pace your shop in a location that will not get enough traffic. You will have to be sure that your drive-thru is well placed just like a brick-and-mortar location.
You must make sure that location research is part of your business plan. You will have to pay for permits and various kinds of other considerations just to use your chosen location. This means that you need to be sure that you are picking the right location so that you do not waste a bunch of money that you cannot get back.
3. Machines and Supplies
One of the biggest costs to consider when you are looking at your overall startup funds for your coffee shop is the machines that you will need to place in your store. You will need coffee grinders, refrigerators, and a whole host of other appliances.
These can be purchased from wholesalers or on payment plans. You will need to budget for your purchases in this category carefully since this kind of equipment can be really expensive. Wise purchases will help your bottom line at this stage of your business creation process.
4. Furniture and Design
How much to start a coffee shop business can even depend on the furniture and design of the business. If you are going to have a brick-and-mortar location for your coffee shop, you will need to think about furniture and décor for the inside of your business. Make sure that you budget carefully for this part of things as well.
It can be easy to run up large charges for things like chairs and tables, and you do not want to forget about things like lights, signage, and displays. Your music system can also be a big added cost, and you could need to buy a license to play certain music in your coffee shop as well.
All of the interior design aspects of your business can be costly, so make sure that you are not going into this part of the planning process without some idea of what your budget is. Sticking to your budget here can help you to save money during the early months that your business is open to serve customers.
5. Training and HR
No matter how few people you have on staff at your shop, you need to be sure that you have the right training plan in place and that you have thought about HR concerns as well. The better your plan for onboarding new employees, the more likely you will be to retain these people and keep them involved in your business.
The process of onboarding staff can be expensive as they will need licensing, and if your business is the right size, they will need insurance. You will also need worker’s compensation insurance for all of your staff.
You should look around at the average costs to the onboard staff so that you are prepared for how much it will cost to get your team built and trained before opening day.
6. Marketing and Merchandise
While you might not need to have gear and swag to sell to customers from the beginning, you will need to market your business and work on branding for the company as well. This can necessitate color in designing a logo, picking out paint and other themed colors for your company, and then paying for advertising that makes customers aware that your business exists.
Marketing is one of those costs that are always higher than people think it will be, so be sure that you leave some wiggle room in your budget for this part of the cost of opening your business. Website building and other kinds of branding tasks can add up in no time, so be cautious about budgeting too little money for this part of your company’s needs.
How Much Money Should I Have Before I Open My Business?
It is recommended that you have enough capital on hand to cover initial opening costs, 3-6 months of operating costs, and then an emergency fund for things that you cannot predict. You will want to be sure that you can repair or replace things that break in your store before it makes any money.
The more conservative you are about how much slush fund money you have on hand, the more likely it is that your business will survive the first few years. Most coffee shops are not profitable until after the first two years of being open for business. Keep in mind that how much to start a coffee shop business in 2023 may be higher than you planned.
Thinking about the long game when it comes to funding will protect your business from being shut down due to a lack of money to keep the doors open in the early stages. Remember that you have to build clientele, and you cannot expect to make a ton of money right away as soon as you open the doors of your business. Having some cash in reserve is always a really good idea when it comes to starting a business.
Coffee Shops Can be Fairly Affordable to Fund
If you have never funded a business, you might not realize just how expensive it is to get a company up and running. However, if you have opened some other businesses, you probably realize that the coffee shop is industrially affordable compared to other kinds of companies that you could start.
The success of your business will depend largely upon your funding of it, and you need to be sure that you have taken the time to make a thorough business plan that includes a complete budget. When you have the capital that you need to fund your business, you can survive the ups and downs that come along with the first few years of operating a business.
Once your company has started to make a profit, you can stop worrying so much about the funding aspect of your business. The more thorough your budgeting considerations, the more likely it will be that your business will stand the test of time, no matter how much to start a coffee shop business it is this year.