Business Planning - Equipment Capacity/Quality
I was reading through some business plan literature and an example of a business that planned to buy smaller-capacity equipment, a lower-quality register system, etc with plans to purchase higher capacity and quality equipment in the future as the company expands.
This immediately raised two questions in my mind:
(1) If you are planning for expansion, wouldn't it make sense to plan to purchase the equipment you'll need for the first 1-2 years' expected capacity needs (espresso machine group quantity, etc) and not what you would need for the first 6 months?
(2) Is there any sound logic in buying lesser-quality equipment in the effort to have more capital needed for operations (until reaching profitability)? I would imagine the quality of equipment, having significant implications for the quality potential of the products created with that equipment, would be of the highest importance!
I currently plan to buy equipment that will last for the first 1-2 years of expected growth and equipment that I can reasonably afford. To explain this in terms of an example, if I plan to only need a 2 group espresso machine during the first 6 months, then a 3-4 group machine after the first year, I plan to purchase the latter, though I don't plan to spend $50,000 on an espresso machine.
Thank you all in advance!
This immediately raised two questions in my mind:
(1) If you are planning for expansion, wouldn't it make sense to plan to purchase the equipment you'll need for the first 1-2 years' expected capacity needs (espresso machine group quantity, etc) and not what you would need for the first 6 months?
(2) Is there any sound logic in buying lesser-quality equipment in the effort to have more capital needed for operations (until reaching profitability)? I would imagine the quality of equipment, having significant implications for the quality potential of the products created with that equipment, would be of the highest importance!
I currently plan to buy equipment that will last for the first 1-2 years of expected growth and equipment that I can reasonably afford. To explain this in terms of an example, if I plan to only need a 2 group espresso machine during the first 6 months, then a 3-4 group machine after the first year, I plan to purchase the latter, though I don't plan to spend $50,000 on an espresso machine.
Thank you all in advance!
Replies to This Discussion
-
Permalink Reply by Brady on
-
I believe your conclusion is correct. If your growth and profitability curves match most cases that I'm aware of, you'll be less able to afford equipment after 1 year than you are before you open. Buy good quality equipment at the start that will meet your projected need for the first couple of years.
Besides, even in your first week you'll have times where you need higher capacity. To minimize wait time, you always need to be able to handle your peak volume. If you can't, your higher total volume days will never come.
As for the register... I'm not sold on that one, so best ask someone else.
-
Permalink Reply by Mike M on
-
Brady, thank you for the response.
You made a great point about the opening week needing the higher capacity. I would imagine the opening week, as a first impression, would be critical in putting a shop's best step (and product) forward to encourage people to come back! Hardly a time for long lines and poor products.
Thank you again!
Brady said:I believe your conclusion is correct. If your growth and profitability curves match most cases that I'm aware of, you'll be less able to afford equipment after 1 year than you are before you open. Buy good quality equipment at the start that will meet your projected need for the first couple of years.
Besides, even in your first week you'll have times where you need higher capacity. To minimize wait time, you always need to be able to handle your peak volume. If you can't, your higher total volume days will never come.
As for the register... I'm not sold on that one, so best ask someone else.
-
Permalink Reply by Jared Rutledge on
-
lemme throw you a couple observations from my first month of being open:
1) i bought a 3 group LM GB/5 used, cause it was a good deal and in good condition. my initial plan was to buy a new 2-group linea and PID mod it, but the used GB/5 was cheaper (and better). unless you plan on having 2 baristas on the machine at once, or find a good deal like i did, i'd stick with a 2 group. i just find myself never using the 3rd group if i'm on bar - by the time i'm done grinding, dosing, and tamping a shot the first group is free again.
2) for a register system, i HIGHLY recommend combining these three things:
http://www.newegg.com/Product/Product.aspx?Item=N82E16883152011
http://www.barcodesinc.com/mmf/heritage-200.htm
http://www.openbravo.com/product/pos/
i use all three, and they're really cheap and super flexible. i installed openbravo POS on my touchscreen and it works wonderfully for processing transactions and keeping solid records. i just use the cash drawer manually (push the metal button to open) and it's quick and easy. whatever you do, do NOT spend six grand on a system when you can grab a touchscreen computer, cash drawer, and open source POS software for under a thousand. openbravo is robust, flexible, and free!
-
-
Jared, admittedly I was looking for replies geared more towards the practice of buying for the future as opposed to conserving operations funding by starting with lower-end gear, but your recommendation looks incredible! Thank you very much!
Looks like a steal of a deal with the same bells and whistles the all-in-one POS systems have at a fraction of the cost. Which cash drawer configuration do you recommend amongst those listed on the page you listed? I see they are offered with different features.
Thank you Jared and Brady again for the replies!
-
-
i just got the first and cheapest model. like i said, i just pop it open manually. i bought a receipt printer but it's not hooked up cause i haven't needed it yet - my credit card machine can print cash receipts if needed (just enter the amount).
i'm not sure, at least for espresso machine and register, the dilemma you propose is a valid one. if you buy quality gear that fits your needs at the start, you should be set for a while. i mean, do you expect your espresso machine to only last 1-2 years? why not buy a linea and PID mod it? that'll last a LONG time if maintained properly. no need to get a crappy machine now and upgrade in a couple years. i don't think quality and economy are incommensurate.
-
Permalink Reply by Jay Caragay on
-
First off, if you're spending $50K on an espresso machine, I want to know which espresso machine that is!
1- Considering the expected lifespan/depreciation rate of capital equipment (leased: 5 years, owned: 12 years), it seems dubious to plan only for the first six months or two years. Better to buy what you project you will need at the outset and utilize that for write off expenses and you'll have the necessary capacity.
Of course, if your demand exceeds your capacity (presumably you're then making money hand over fist) then you're in a much prettier position for new capital purchases before the expiration of your original equipment lease.
2- Regarding the purchase of "lesser quality" equipment in lieu of top quality: that depends on the equipment. For the coffee joint I'm currently building, I ran into a situation that's similar to your question. Originally, I had spec'd out Randell FX refrigerators. Quite simply, they're some of the most amazing refrigerators I have ever come across and I wanted them.
However, I was only able to secure 2/3rds of the equipment financing. That meant that I needed to cut some equipment. The problem here is that I can't simply eliminate one or two of the FX units because that would impact my refrigeration capacity to an unsustainable level (in essence, the elimination of a couple units would mean I wouldn't have a place to store milk and stuff - unacceptable). Instead, I maintained the refrigeration capacity by going with True - a quality brand that I've used in the past that is about a thousand or so less per unit than the Randell FX.
The point here is that you should look at the equation carefully. I can go with a "lower" brand of refrigerator that's still top quality and cheaper, but to do the same with the espresso machine (which is the lifeblood of the business)? No can do. In that case, I would adjust the other equipment to lower priced units in order to maintain the La Marzocco.
-
-
Jared, again, your feedback is much appreciated!
I'm 99% sure about going with the touch screen computer with the POS software with a stand-alone register thanks to your recommendations.
I know now from discussions here that the quality of the espresso machine and grinder are amongst the most important items to buy for quality and cost will be covered by the customers who enjoy the products they create. As far as the other products go, I'm sure there will be others that need to be high quality and high cost, but others may be 2nd or 3rd tier in terms of quality if they are not as critical to the success of the shop.
Jared Rutledge said:i just got the first and cheapest model. like i said, i just pop it open manually. i bought a receipt printer but it's not hooked up cause i haven't needed it yet - my credit card machine can print cash receipts if needed (just enter the amount).
i'm not sure, at least for espresso machine and register, the dilemma you propose is a valid one. if you buy quality gear that fits your needs at the start, you should be set for a while. i mean, do you expect your espresso machine to only last 1-2 years? why not buy a linea and PID mod it? that'll last a LONG time if maintained properly. no need to get a crappy machine now and upgrade in a couple years. i don't think quality and economy are incommensurate.
-
-
Jay, the most expensive machine I could find was about $40K, but it was a super-superautomatic machine that not only brews coffee and makes espresso, but will add syrup and other tasks a barista would otherwise be responsible for.
You made some great points about the varying pieces of equipment and some being more important in terms of quality than others. The espresso machine needs to be top notch, the refridgerator could be second tier, and so on.
When I can get a rough draft of the equipment I'm considering to include in my business plan, I'll plan to post it in here and will request your feedback.
Thanks again!
Barista Exchange Partners
Barista Exchange Friends
Keep Barista Exchange Free
Are you enjoying Barista Exchange? Is it helping you promote your business and helping you network in this great industry? Donate today to keep it free to all members. Supporters can join the "Supporters Group" with a donation. Thanks!
© 2024 Created by Matt Milletto.
Powered by
