One of the many questions you are going to ask yourself on the road to opening a coffee shop is: What are the costs of starting and running this business?
The costs are not that easy to determine, and there is no guide that we can write that will help you come up with a number. The cost of starting a coffee shop in the UK depends solely on your business concept and what you specifically had in mind.
Are you married? If not, you surely know people who did and how they have determined costs of having a wedding. It’s the same with starting a business. It depends on a lot of factors, such as your menu, location, number of people and your budget.
Determining the costs of opening a coffee shop will take time, and you may not even get a close number the first time you run your calculations.
Now, you might come across people who will give you an immediate response on how much it costs to start a coffee shop. Do not listen to anyone because these numbers will just mess up with your head. It’s the same as if you have asked someone: “How much a car costs?”
Let’s see what the main elements that will determine the cost of starting a coffee shop in the UK are:
- Business concept/idea/vision.
- A location of your coffee shop.
- Labor costs
- Cost of the equipment.
- Legal and administrative costs.
- Furniture costs.
- Designing and Building costs.
- Marketing and branding services.
All of these elements are meant to create a foundation of your starting costs. They will be additionally increased along the way, but this is the beginning.
Determining the Total Costs
No, this is not the moment where we are going to tell you the exact price of starting a coffee shop in the UK. If you are looking for something like that, you are not going to find a number reading this article.
To truly determine the total costs of starting this type of business, you need to get a clear overview of the categories that make up this sum:
- One-time starting costs- These are the costs that only happen once, in the beginning, and it includes espresso machines, grinders, security deposits, installation fees, renovation fees, furniture etc.
- Fixed costs- This includes your monthly rent, insurance fees, salaries for your workers and your manager etc.
- Variable costs- These costs fluctuate and they are dependable on the amount of business you are having. Stuff like coffee beans, straws, paper, paper cups and payroll taxes, too.
- Miscellaneous costs- They are not as important as the first three on the list, but they can be real and I think they should find its place in this article.
Let’s work on every element separately to give you a general idea of the cost.
Marketing and Branding
This includes getting a logo designed, business cards made, website developed, sponsorships, marketing, advertising, etc.
There are a lot of costs involved with marketing and branding and this is not an element where you should even consider cutting some costs. It is important to build a recognizable brand and have a good marketing strategy because that will attract a variety of customers.
Getting a logo design will most certainly cost you at least £200, and you can get it done on a professional place such as 99designs. You can even search through LinkedIn and find successful graphic designers to do this job for you.
Having business cards designed and made will not be that costly, and you will be reinvesting here every time you run out of business cards.
Designing and developing a website can be costly, and you should opt for hiring a freelancer instead of an agency, as you will be able to get a website designed for a lot less money. You should pay anywhere between £400 and £600 for a website development.
You will have additional costs like exterior and interior signage, and total sum for marketing and branding should be between £1500 and £2000.
Now, we have not included any costs related to advertising, which we consider necessary. There is not a lot of value in having a website if no one is going to see it. Spending money on Facebook ads to generate website visitors that will eventually convert into customers or having money aside for sponsoring your local league team is up to you and the costs will vary a lot.
Coffee Shop Concept/Idea
We know that you might want to incorporate crazy ideas and dreams in your coffee shop that you had since you were a lot younger, but you need to be reasonable with your vision and adjust it according to your budget.
There are many coffee shop business concepts that are both attractive and lucrative and it is your job to do a research and find out what works the best in your specific area.
Location and Startup Costs
As we have talked about in our previous article, the location of your coffee shop can make or break your business. Where you set up your business will create a big difference in your startup costs as well as all fixed costs based on all natural market expectations.
Running a coffee shop in the most crowded place in London is way more profitable than running it in a small village outside of the city as you can profit a lot more. However, the costs are way higher and finding the right balance is not going to be an easy job for you.
Keep in mind that the location will determine your startup costs and your fixed costs greatly so be careful.
Menu and Equipment
These two elements from our earlier list are connected greatly, as the cost and choice of your equipment will be decided based on your menu. Each item in your menu may require a different equipment use or have a need for proper storage, preparation or cooking.
Think about every single detail. Do you plan to sell bagels? You will need a toaster oven to toast them, sinks and prepping station. If you want to serve them cold, you do not need additional equipment.
Try not think in terms of cutting costs if you are working on a tight budget. That rarely ever ended well for any business owner as you will surely risk on jeopardizing the quality of food and drinks you serve.
The equipment costs may be huge but it is always a lot better to buy new equipment than used because it will last longer, it won’t break that easy and you will have a lot less to worry about.
Labor costs make up a big part of your overall budget, and they more-less fall into fixed costs category. However, the initial training of baristas may take up a part in the startup costs category too.
Keep in mind that your working staff is not going to be the only labor costs you will be having. Hiring an electrician, a plumber, architect, designer, logo designer, consultant or carpenter will fall into this category as well.
When determining an overall price, try to calculate a number of hours it will take them to finish the job. An average hourly rate of a plumber is £80, while an architect or a consultant will certainly charge a rate over £100.
Legal and Administrative Costs
A lot of people wonder how big are these costs and whether they will occur in one instance or multiple times. Rest assured because most of these costs are one-time only, and you should be willing to resolve any issues before you start a coffee shop.
Having inspections costs or re-visits can be extremely expensive and you do not want to waste money on that.
Apply and receive your health department permit and building permit. They already have fees set up for coffee shops and restaurants, so there will be no calculations on your side.
We come to the fun part where spending money should be enjoyable. If you have found a location for your coffee shop and you intend to turn it into a magical place for all customers, money spent in remodeling and designing will be quite big.
Before you decide on your location and sign a lease, think twice whether you will be able to fit your concept in that place, and make sure you have a business plan incorporated alongside your financial predictions.
Your furniture is an important element of your coffee business. Furniture and fixtures will make up the décor and hiring an interior designer that will help is advisable. You will probably be spending thousands of dollars on furniture and décor, but it will eventually pay off.
Now, we saved up the end of this article to remind you that having enough money in your budget until you reach profitability is absolutely essential. Having some sort of predictions on when your business is supposed to be turning profit is also quite important and it should be outlined in your budget and business plan.
Try to calculate all the costs by going through each item on our today’s list. You should be able to get a good overview number especially if you utilize the power of Google to check the prices on equipment costs, labor hours, furniture and others.