How to start a business plan for a coffee shop

Coffee culture is a huge industry in the UK. Following the example set by our other European neighbours, we now have coffee shops on every high street where people can meet friends, relax on their own, or even get some work done.

Even in the modern-day, where physical retail is struggling, coffee shops will always be a familiar feature of the hospitality world. 

But how do you go about starting your own coffee shop? As with most business ventures, it all starts with a business plan. 

This guide will give you some helpful advice on everything you need to consider when you’re creating your very own coffee shop business plan. 

Specifically, we’ll be talking about:

• Market research
• Finding your niche
• SWOT analysis
• Budget
• Location
• Start-up costs
• Marketing 

Consider any competitors your business has (big and small) and find out why they operate the way they do. What will make customers come to your shop instead of your competitors?

Market research is also about your customers. Is there a high demand for coffee shops in your area? What kind of prices are they willing to pay?

Researching your competitors and customers should give you a good idea of whether or not there’s room for your coffee shop on the market. 

To help you put your market research into context, it’s important to know exactly how you will fit into the existing market.

To do that, we need to look at the way the coffee shop market is already divided. Generally speaking, we can divide coffee shops into two camps, big chains and independent shops. 

Stores like Starbucks, Costa, and Caffe Nero dominate the market. There’s most likely one near you already, so they will always be your main competition. They have the advantage of well-established brand recognition and a huge amount of resources. 

If you’d like to use those advantages, there’s nothing stopping you from opening a franchise on behalf of one of these big chains. 

It’s probably a safer bet in terms of customers (a Costa will always attract business) but you will have to share a portion of your profits with the chain or pay for the rights to the brand name. 

Starting your own coffee shop from the ground up will be more challenging, but potentially more rewarding. If you go down this route, you’ll need a strong idea of what makes your shop different from the competition. Will you offer a higher quality product or a more reasonable price?

Here are some common coffee shop ideas that others use to set themselves apart:

• Artisan coffee shops – They offer extremely high-quality products and customer service. It’s all about fresh, well-sourced ingredients, a beautiful atmosphere, and originality. Shops like these will often have slightly higher prices than the big chains, so the products have to be worth the extra money. 
• Cat cafes – You may have seen these around before. The name says it all – it’s a coffee shop with cats living in it. It’s a fun, interesting idea that’s sure to attract animal lovers. 
• “Nerd” cafes – Often doubling up as game stores, cafes like this put an emphasis on certain aspects of “nerd” culture. They might sell comic books, board games, card games, or even have some available that are free for customers to use. 

These are obviously not all the directions you can go with your business, just examples of what has worked for other coffee shops. The important thing is to offer something your competitors are not. 

Following your research, categorise your findings into four domains: Strengths, Weaknesses, Opportunities, and Threats. The first two are aspects of your business model, while the other two look at external factors.

For example:

• Strength: you have a good relationship with suppliers.
• Weakness: your business might have a lot of debt after start-up costs.
• Opportunity: there’s nothing around offering the same service as you.
• Threat: there’s a Starbucks within walking distance.

Using this breakdown, you can identify areas to highlight and areas that might need some special attention. 

Your budget is a crucial element of any business. A regularly updated budget should tell you if you’re making a profit and give you a reasonable estimate of future growth. 

If you’re starting a business, you’ll need to budget for any set-up costs like:

• Workspace furniture and equipment.
• Broadband and phone services to accommodate your business’ needs.
• Business cards or initial marketing materials.
• A dedicated website and email address.
• Software subscriptions or updates.

We have dedicated guides on budgeting so you can learn more about why budgeting is important to small businesses and how to budget for starting a business.

When you’re just starting out, you’ll find that most of your budget will go to a few essential items. 

Here’s a breakdown of the biggest expenses that every coffee shop needs:

• Building rental – for a shop that’s 50 square metres, anywhere between £5,000 and £7,000 per month. 
• Coffee machine – for a commercial machine that’ll last, prices start at around £1,000.
• Furniture – £1000 – £5,000
• Dishwasher – £600 – £2,000
• Display fridge – £599 – £1,500
• Barista wages – £7 to £10 per hour.

These figures are estimated at both ends of the price scale. You’ll have to decide as you go how much you’re willing to spend on each of these. 

The right marketing strategy will ensure a steady flow of customers heading into your coffee shop. Try a combination of the following tactics:

• Digital marketing
• Traditional marketing
• Branding

Social media sites like Facebook, Twitter, and LinkedIn are all great places to advertise your shop. 

Posting regularly is the best way to gain some traction, and there’s nothing wrong with getting friends and family to share your posts to get the ball rolling. 

You should also register on Google maps. It’s easy to do and will make it much easier for people to find you. To register, just go to Google My Business and follow the instructions. 

Alongside digital marketing, some more traditional forms of marketing can also be effective. You should consider:

• making business cards to hand out.
• printing flyers and posting them locally.
• networking with other coffee shops and restaurants in the area. 

You’ll want to think about the name of your coffee shop and if you want to include any unique branding with a logo or slogan. 

You’ll need to register your logo as a trademark with HMRC to prevent others from using it and to make sure you’re not using one that already exists. 

You don’t have to register your name unless you’re a limited company, but it’s a good idea to check it’s not already being used to avoid confusion amongst customers. 

Trademarking can be an expensive process and involves a few steps, so read our guide for more information. 

When you’re starting your own business, it’s important to keep your personal and business finances separate from day one – to save yourself from time-consuming admin headaches further down the line. 

Thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.