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If you're giving the coffee business a try, you'll need to get a good handle on the various expenses before you start brewing and serving. As with any other retail business, you'll have legal and marketing costs, as well as rent, utilities and advertising. On top of all that is the inventory of assets and perishables that will need to be in place before the first bean is ground.
Start with your plain-vanilla legal expenses, including the cost of registering the business and getting the necessary local and state permits and licenses. Estimate the cost of insurance premiums that need to be paid before you open, as well as accounting services and any consultant services you're using. Add marketing expenses, including the cost of a website, print advertising, direct mail, fliers and any other promotional expenses.
The Property and the Space
Add the cost of rent you need to pay before the opening, including any deposits you'll have to make. You may need to pay utility deposits, including for phone and Wi-Fi service. Then there's buildout: Coffee shops typically make renovations and improvements to the space before opening; if you're a franchisee, these costs are determined by the site plans and standards furnished by the franchisor. You may need to include the cost of an architect. Add in signage, which can be a significant expense, and tables, chairs, fixtures, lighting and carpets or flooring.
Tally the cost of your equipment. Food-service operations need kitchen hardware, such as refrigerators, microwaves, utensil racks, food cases, dishwashers, toasters, blenders and the like, and coffee shops need grinders, regular coffee makers and espresso machines. You may need to purchase new countertops, shelves and cabinetry for the work area; you'll need cups, saucers, tableware, glasses and a cash register. Office supplies are boring but necessary: a fax machine, computer, printer, file cabinets and desk.
Add up your inventory costs. Inventory is the stuff you have available to sell, which includes the coffee beans and ground coffee, milk and syrups, sugar and any food you'll have on the menu: baked goods, sandwiches, tea and sodas. You may also be stocking items such as mugs, coffee makers, bags of coffee and coasters; to display them, you need stands, a separate counter or shelving.
Figure your payroll expenses for the first six months of operation. The larger the shop, the more employees you need. There will be workers' compensation insurance premiums, training expenses, benefits, payroll taxes and payments to any payroll management company you're using. As a rule of thumb, payroll costs, including your own salary, should be no more than 30 percent of sales.
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.