Covering Starting Payroll?

[Shopwanter]

Hello! I have a GREAT desire to one day open my own coffee shop! I have worked in various other coffee shops for quite some time and LOVE it. I truly truly love it. But i have so many questions, for instance...

I always hear that I need at least 6-12months worth of cash saved up when I open to cover utilities, payroll, etc.... But couldnt I just take that from the money that the coffee shop makes? I realize that it will take longer on the books to get out of the red, but cant a new shop sustain its basic operations without having to have every single cent go towards the defecit?

PLEASE RESPOND! I love reading everyone's posts, and I see that there is quite a wealth of knowledge on this site!

 

[everydaygourmet]

Hello! I have a GREAT desire to one day open my own coffee shop! I have worked in various other coffee shops for quite some time and LOVE it. I truly truly love it. But i have so many questions, for instance...

I always hear that I need at least 6-12months worth of cash saved up when I open to cover utilities, payroll, etc.... But couldnt I just take that from the money that the coffee shop makes? I realize that it will take longer on the books to get out of the red, but cant a new shop sustain its basic operations without having to have every single cent go towards the defecit?

PLEASE RESPOND! I love reading everyone's posts, and I see that there is quite a wealth of knowledge on this site!

one month in the books......my answer is "NO"

:-D

I thought the same thing......good luck.

Glad I pre-paid my rent for the first 6 months (10% discount negotiated for doing this)

 

[OzarkB]

Dear ShopWanter -

What someone has tried to advise you about when they tell you that you need 6-12 months of payroll is something called Working Capital. I'm not sure what the statistics are to back this up, but one of the main reasons that businesses go by the wayside as quickly as they do (and I've seen it happen in 60 to 90 days) is they don't have enough Working Capital. Basically, they don't have enough liquid assets to sustain and build the business. As far as the importnace of payroll, you're going to HAVE to pay your employees (on time, of course), because without them (or customers) you don't have a business.

Even if you're doing everything right -- a great location, lots of foot or motor traffic, great product, excellent customer service -- it's going to take you a while (longer than you'd think) to build your business. I think new business owners sometimes get the impression that they're going to open their doors and the customers are just going to come streaming in. Unfortunately, it usually doesn't happen that way. It's going to take time for you to build up your customer base, which also means building up sales. Can you afford to stay in business in the meantime?

It's clear that you love the "coffee" end of the coffee business. But at the end of the day, it's a business. If you don't have a firm grasp on basic business, bookkeeping and accounting practices, then you're going to be putting your venture at risk. There are lots of great books on the topic. You may want to start with one like "Keeping the Books," by Linda Pinson. You can also find inspiration from books about small business success like "Beans: Four Principles for Running a Business in Good and Bad Times" by Leslie Yerkes, et al.

Hope you find this helpful. Good luck!

 

[CoffeeBlends]

That's very good advice Ozark.

Think of it this way, how many mochas do I need to sell to cover the rent?

We may have a good profit margin but when you consider the average cost depending on your area is $2.00 to say $4.00 that is a whole lot of coffee you need to sell. Although you may hope to sell a lot of lattes you may end up selling more cups of coffee.
My locations vary by what side of town they are in some sell all black coffees while some are mochas.
Location, location, location. It means a lot when people are rushing to work in the morning.

Good Luck!

 

[tlhamzy]

how long does it take?

I've been working on this for over a year, and plan to open end of March. Of course, I got detoured on the drive thru thing, which doesn't work in this town. But still, if I were to do it over again, I would make sure I have at least 2 years living expenses if I were to try this again without any income. I am mortgaged to the hilt, but I'm gonna make it....Good luck!