You want to buy a coffee shop, and as you sit there in the dining area of your local café, sipping on your coffee, you start to wonder just what you really need to be successful. At first you look at the barista at the machine, hair slipping out of the tight bun as they pour the milk on the next order. Obviously, you think, you will need a good barista, you might even go and take a course yourself and fill that role.
But then you start thinking deeper. This is a simple business venture where you simply create coffee and nothing else. Where do the coffee beans, the milk, the cups come from? How often do you need to order? How much do you need to order? How much is it to rent the property? Where do the customers come from? How do you compete with that coffee shop only 100 metres away?
If you are serious about following the venture through you realise that you need to identify the key areas that are crucial to running a business. While these will be considered using the coffee shop theology, these core business areas are the same no matter what business you wish to set up or start.
Strategy and Development
Before anything else, you really need to understand your business. Who do you want to serve, what are its strengths and weaknesses? What are the goals you have and your vision for the future? What is your brand?
As you sit there nursing your coffee, you allow yourself to be taken by the aroma of the ground coffee beans and you know you want to serve an atmosphere. You now have a basis of a strategy, the creation of a warm atmosphere, in a homely café with wood decal and the ever present aroma of coffee. But who do you want to serve? A relaxing atmosphere could work in a family friendly area, and you could accommodate for smaller children, or maybe you want to attract the business persons, who seek quiet relief away from the flurry of the corporate world. Knowing who you are going to serve affects where you decide to establish your coffee shop.
Your goal for the future it to turn over a profit, and build a selection of loyal customers whom you will know personally. Your brand is the warmth of the café, and you know that to reach this strength you need to find the right staff, the right barista, to create coffee, preferably you think with the latte art carved into the milk, who will serve customers with a bright smile.
You need to understand at the core where your business if going, have a good strategy to use in developing your business. From the strategy you can build your marketing, your sales, your operations and finally your finance.
Sales and Marketing
You have a business strategy, now you need to work out how you are going to promote it – good marketing after all means more money. But how do you hit your target market? Do you simply open and hope that people come? Do you run a promotion, free coffee perhaps for the first day to celebrate your opening and hope people are converted? Maybe you should make use of social media, your store has a certain aesthetic and the barista is making beautiful coffee, maybe Instagram would get your brand out there.
If you get the marketing of your business right, you will drive more customers through the door, which in turn will drive your business. If you get it wrong, essentially your business may fail, and it definitely won’t reach its total potential – just because you build it, doesn’t mean they will come!
There’s a reason that so many of the gurus in business are marketers or salespeople: good marketing equals more money. We all know that cash-flow is the pulse of any business, and marketing that is done properly is what gets you cash-flow.
You need to ask, what gets the best return on interest? This isn’t an area that you can expect to get right all the time, its trial and error. You need to understand your business, know what you are promoting before you can begin to promote it. In the modern day, social media is becoming a more prominent means of marketing, but it’s also easy for your message to get lost if you aren’t clear. You may need to balance it with direct marketing, in order to build a network which can then assist you in getting your message across other channels.
You may need to consider a professional who understands marketing and sales who can give you advice if it is not your core strength.
Operations
You have your strategy for your business, and you have a marketing plan, but now you need to actually consider how this coffee shop is going to operate. To start with you’ll order supplies every Tuesday to be delivered on Thursday, because you assume Wednesday may be a reasonably quiet day which isn’t going to cause a drastic difference to how much product you require. What staff will you hire? You already know you need a barista, but maybe you need two or three so they can alternate shifts, you also need a cook or a chef, and someone to serve the customers. As the owner you have to take care of the core of operations, and you need to make sure you have employees who are trained to cover all the critical tasks in running the coffee shop.
You need to drive the strategy and marketing plan, and make sure your ideas actually come to fruition. Be proactive, but be realistic, identify the areas of your original plan that you possibly won’t be able to achieve and re-adjust, don’t waste time and resources on something that is not possible at the current time. Rather, take a note and remember to revisit it in the future. That commercial kitchen to service full lunch time meals at this time is not possible, but a simpler kitchen that is capable of producing a rustic side of chips and a burger may be more achievable. Re-evaluate and replan to make sure your operations are executed.
It’s also important not to get caught up in other ways, getting caught in static loop of maintaining operations without the initiative to move forward in strategy and marketing or, alternatively, trying to force constant innovation, which leaves your staff overwhelmed and lacking the critical skills you require.
It may be necessary to insource a professional to come and consider your business set up to identify their strengths and weaknesses of your operation and how to improve your business as a whole.
Finance
As your planning gets away from you, you are suddenly bought down to earth. Just how much will this cost?
To run a successful business you need to know how much it will cost – if you don’t spend enough you won’t be able to generate interest and customers to drive the business, and if you spend too much you may find yourself unable to create a profit.
In considering the coffee shop you need to calculate the cost of renting the premises and the cost to outfit the premises for your purpose. Marketing can also require a sizable sum, and operational costs need to be considered – how much will your supplies cost every week? What will the electricity and water bill likely be? How much am I paying my employees? How much tax do I have pay on my revenue?
Once you know your costs, you then need to be able to project the profits of your business. Has your strategy and marketing allowed you to create a coffee shop that will thrive, will your chosen market be able to support business.
Finance also includes managing the payroll and accounts. How much PAYG do you owe for each employee, how much superannuation should you pay? How does annual leave work? You need to understand all of these, particularly payroll as it significantly impacts upon the net income of your company, but also the morale and investment of your employees in your business.
There is also the question of insurance, for the business, for the office and venue and for the employees. What is the correct policy for your needs?
Human resources, administration, office management and IT need to be considered under the branch of finance. These areas can be seen as subareas, desirable but not core, and whether you can afford to finance them is dependent on your budget and cash flow.
You need a clear understanding of the financials, being unsure of how much you have spent and earned leaves you unsure of just what you have to do and what you can do. If you are unsure, seeking advice from a professional, or outsourcing your financial operation procedures may assist you.
The Business Model
The four areas above are common to all business, coffee shop or not. When establishing a business each is essential, and it’s important that, as a business owner, you are aware of just what you can actually do. Identify your strengths, maybe you have a strong marketing vision but the finances leave you confused, so you aren’t actually sure of the budget you have to play with. While each of the areas is essential for business, it isn’t essential that you undertake the work yourself.
In the scenario where you feel confident taking on the marketing for your business, but not the finances, it may be possible to outsource your financial work to another business, leaving you to focus on what you know you can handle, whilst being assisted by an expert in the areas that you are weak.
Gino Wickman identified similar core areas that a crucial within all businesses:
I’ve had many debates about whether sales and marketing is the most important function. The argument is always that until somebody sells something, nothing else happens. That’s hard to disagree with. But realistically, all three have to be strong. To make the point, let’s consider three scenarios:
• You have a strong sales and marketing function, a weak operations function, and a strong financial function. What’s the net effect? In that scenario, you’re doing a great job selling and bringing in new customers, but you’re losing them right out the back because operations is not delivering what you promised and customers aren’t happy.
• You have a strong sales and marketing function, a strong operations function, and a weak financial function. What’s the net effect? Again, you’ll bring in a lot of customers and take good care of them, but money is coming in the front door and going right out the back due to a lack of financial controls: $10 million in and $10 million out, or worse, $10 million in and $10.2 million out. This may strike a nerve because many companies fall into a situation where there is no monitoring of spending, nor is individual customer profitability assessed.
• You have a weak sales and marketing function, a strong operations function, and a strong financial function. What’s the net effect? A bunch of talented people in operations and finance are waiting around for something to happen, and nothing is. If any of the three major functions are weak, your organization is not as effective.”
(From “Traction: Get a Grip on Your Business” by Gino Wickman)
Don’t be afraid to look at yourself and recognise that you need help, and reach out to someone who is a specialist in their field to help you. You can outsource your finance or marketing, or insource key people to look at your processes, equipment, legalities and general operations and strategy.
No one can wear all the hats of business at the same time, so be prepared to ask for help – otherwise you might just be left with burnt coffee and a sour taste in your mouth.
Written by
Katelyn Pickett
Social Media and Marketing Assistant
Pendragon Management
&
John Glover
CEO
Pendragon Management
