RoastOnCoast
New member
Greetings fellow dreamers and doers! This is our first post, so it is only fair to give our story, with a little mystery, but it is our intention to initiate a discussion on the realities of profitability within the Roaster community.
We are in the beginning phase of a new roastery, to be located in a town imbued with a sense of discovery and a taste for quality. Currently, there is no local roaster, so, as we researched the market, it appeared to be a wonderful place to fire up some excitement about quality crafted coffee. We can't share where it is yet, as we feel this is a special opportunity for us and don't want someone else to take it...that's the mystery part. Thank you, gentle reader, for your patience with this.
Dream to bean:
Like all new light industrial manufacturing plants, the "wonderfulness" can quickly become overshadowed by the regulatory requirements, location feasibility issues and sheer cost of purchasing the necessary equipment. As ours is a pursuit attempting to adhere to Lean Startup Principles, we have spent a good deal of time analyzing different models, researching pricing structures and trying to find a way to keep our costs as low as possible while, at the same time, creating a roastery that can survive the ups and downs of business. Our greatest hope is to contribute to our community non-profits and the coffee grower's communities, while being able to sustain ourselves, our employees and our supply chain friends.
Specifics of our business:
We are able to self fund our startup (good news), but we are not able to invest in anything larger than a 3Kg roaster (bad-ish news) due the other expenses surrounding buildout, delivery vehicle, etc. Based on our model, we believe we will be able to produce enough coffee to meet demand.
As an example, roasting 8 hours per day, two days per week, will provide us with 384 250g bags per week (2 batches per hour, for 8 hours) with a gross profit of $3840*. This will allow us time to work with potential customers and accomplish all the other tasks surrounding a small business.
*(Based on the research of our market, selling at $10 per 250g bag is probably pushing the upper limit of what people will pay. Our cost for Bourbon is $6 per Kg).
We expect to sell 50 bags per week initially, so we will break this down into our weekly estimated costs:
Factoring in production, we have arrived at a cost of $161/week (beans, delivery, gas, electricity, bags, etc). This does not include Income taxes to be paid, sales tax, or salaries of our employees.
Factoring those in, we have approximated additional costs of $243/week for salaries (including necessary taxes) $169/week for business income taxes (State, Fed and Sales). Hence, with a gross profit of $500, we've ended up with a Net Profit of -$73/week in the initial startup phase...not exactly the result one would hope to have.
Our cash flow model predicts positive results after month 12, however, the bean cost creates a negative cash flow every time we have to reorder stock. Our cummulative cash flows are so small that we are challenged to find a way to pay back our initial seed money, let alone expand our manufacturing plant in the future. Additionally, we imagine it will take some time (24 months in our model) to reach a sales goal of 384 bags per week. That may be too conservative, but we don't want to overestimate the market.
We are curious to start a discussion around the business of Roasting, how different models have succeeded or failed/taught the owners, and the best means are to achieve profitability to sustain the supply chain while following the principles of Lean Manufacturing. In other words, we currently can't see the forest through the trees and don't understand how anyone makes a living roasting coffee as a full time business without starting off with a massive bank roll to fund it for the first 3 years.
In our case, we hope that some of the Master Roasters here might give us insight into the untapped power of the roaster force and keep us away from the dark side, so that we may find our way to the light...er, roast.
We have been lurkers for some time and are finally sharing our thanks to all of the contributors and moderators of coffee forums.com. We have learned so much already and look forward to any and all ideas to spur our collective wheels of creativity.
---RoastOnCoast (ROC)
We are in the beginning phase of a new roastery, to be located in a town imbued with a sense of discovery and a taste for quality. Currently, there is no local roaster, so, as we researched the market, it appeared to be a wonderful place to fire up some excitement about quality crafted coffee. We can't share where it is yet, as we feel this is a special opportunity for us and don't want someone else to take it...that's the mystery part. Thank you, gentle reader, for your patience with this.
Dream to bean:
Like all new light industrial manufacturing plants, the "wonderfulness" can quickly become overshadowed by the regulatory requirements, location feasibility issues and sheer cost of purchasing the necessary equipment. As ours is a pursuit attempting to adhere to Lean Startup Principles, we have spent a good deal of time analyzing different models, researching pricing structures and trying to find a way to keep our costs as low as possible while, at the same time, creating a roastery that can survive the ups and downs of business. Our greatest hope is to contribute to our community non-profits and the coffee grower's communities, while being able to sustain ourselves, our employees and our supply chain friends.
Specifics of our business:
We are able to self fund our startup (good news), but we are not able to invest in anything larger than a 3Kg roaster (bad-ish news) due the other expenses surrounding buildout, delivery vehicle, etc. Based on our model, we believe we will be able to produce enough coffee to meet demand.
As an example, roasting 8 hours per day, two days per week, will provide us with 384 250g bags per week (2 batches per hour, for 8 hours) with a gross profit of $3840*. This will allow us time to work with potential customers and accomplish all the other tasks surrounding a small business.
*(Based on the research of our market, selling at $10 per 250g bag is probably pushing the upper limit of what people will pay. Our cost for Bourbon is $6 per Kg).
We expect to sell 50 bags per week initially, so we will break this down into our weekly estimated costs:
Factoring in production, we have arrived at a cost of $161/week (beans, delivery, gas, electricity, bags, etc). This does not include Income taxes to be paid, sales tax, or salaries of our employees.
Factoring those in, we have approximated additional costs of $243/week for salaries (including necessary taxes) $169/week for business income taxes (State, Fed and Sales). Hence, with a gross profit of $500, we've ended up with a Net Profit of -$73/week in the initial startup phase...not exactly the result one would hope to have.
Our cash flow model predicts positive results after month 12, however, the bean cost creates a negative cash flow every time we have to reorder stock. Our cummulative cash flows are so small that we are challenged to find a way to pay back our initial seed money, let alone expand our manufacturing plant in the future. Additionally, we imagine it will take some time (24 months in our model) to reach a sales goal of 384 bags per week. That may be too conservative, but we don't want to overestimate the market.
We are curious to start a discussion around the business of Roasting, how different models have succeeded or failed/taught the owners, and the best means are to achieve profitability to sustain the supply chain while following the principles of Lean Manufacturing. In other words, we currently can't see the forest through the trees and don't understand how anyone makes a living roasting coffee as a full time business without starting off with a massive bank roll to fund it for the first 3 years.
In our case, we hope that some of the Master Roasters here might give us insight into the untapped power of the roaster force and keep us away from the dark side, so that we may find our way to the light...er, roast.
We have been lurkers for some time and are finally sharing our thanks to all of the contributors and moderators of coffee forums.com. We have learned so much already and look forward to any and all ideas to spur our collective wheels of creativity.
---RoastOnCoast (ROC)
