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Permalink Reply by John P on August 28, 2011 at 6:37pm

 

The honest answer is:

There are many metrics out there for guesstimating sales. All of them are wrong.

 

....

 

Visit local shops off and on for a month. Go on different days. Go at different hours of the day. Count people. Count what they buy. Do they math based on each shop's menu prices. Extrapolate. Get an average.

Now that you understand the lay of the land, take a hopeful guess at how many customers you can get, allowing for a reasonable % increase per month. Run that for a year and you have a fairly good guess. Now multiply that number by about 30 to 40%, and you will have a number that's closer to reality.

Bottom line: Either you know you have the necessary skills to pull it off or not. In the end, numbers on paper are nothing more than numbers on paper. Projections meant little to me. They're good fodder for conversation. It's about the reality of what you do that first month, and how to continually increase sales throughout the year.

 

Advice: Do the work! Finding answers is wholly different than expecting to be given answers without any work. READ! Take advantage of the search button and the thousand of posts that already exist.  That being said,

 

Take basic business courses if you are not familiar with basic bookkeeping/accounting. Over the next year go to a minimum of one each: SCAA convention and CoffeeFest (or regional SCAA training session), and avail yourself of all of the great free classes and all the necessary paid classes there. It may take a year or two depending on the level of information you can soak in.

 

Travel. Visit the best shops you can find. Look at volume. Look at quality. Understand both. There are no fast answers. There is only hard work, ambition, and a lot of planning. Without taking the time to plan and understand everything before you think of opening your doors, your chances of success are about zero. Your success will increase exponentially with your level of understanding of all facets of the business and your ability to execute them.

 

Good Luck!

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Permalink Reply by Benza Lance on August 30, 2011 at 5:27pm

Andrew,
I've worked at shops where there's almost no vehicle traffic, and average 400 tickets in a 16 hour day.
Conversely, I've worked at shops where there's nothing BUT vehicle traffic, and average 400 tickets in a 16 hour day.
There's way to many variables to consider when asking a blanket statement like this.
Your overhead (utils, staff wages, taxes on those wages, your lease, etc) is a pretty big deciding factor. If it's gonna take 5 people at a time to run your shop, you should better have excellent marketing and product in place to make sure you can afford to do so.
I can say from experience that I've spent the last 3 years (with my biz partner) running numbers and projections, doing research, scrapping all of that and starting over, running numbers and projections, doing reserach... and it goes on. We're opening in November, and I can still say that I have a good theory about what we can do in our location, but you wont have ANY idea until your doors are open, and you're making people happy. My original plan had our roastery/coffeehouse NETTING 100k per year... I can tell you that's not realty (at least in Sacramento), and it took going back to the drawing board, asking tons of people (including my former boss) who are familiar with your specific industry and locale, and, honestly, talking to a coffee consultant would be wise. I know Lubbock and Amarillo arent that "close", but Jason Haeger could possibly help you out, as he's a fellow Texan and does this sort of thing.

Since John covered pretty much everything, I wont touch on that too much.

You do state that 45,000 cars drive by daily, which is a pretty strong number. Now, is there easy, accessible parking for those potential customers? If not, you might as well be on a freeway. Your goal should be to break even for a few years, and then finally start to earn some money within the next few.  

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Permalink Reply by Sid Gauby on August 31, 2011 at 7:34am

To go along with the above comments you might want to think about when, where, and how the cars are traveling past you.

Is the traffic going toward their work place? Can they turn in easily into your location and then get back into traffic without much difficulty? (Right turns are always more appealing)

 

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Permalink Reply by Brady on August 31, 2011 at 8:11am

I really like what's been said already... however I sense that you were looking for numbers. I deal with lots of independent coffeehouses in my area, so feel pretty comfortable speaking to that.

 

Around here, I'd estimate that the range of annual revenues for independent shops that have been open for 6 months to 2 years is between $50,000 and $750,000. I have a couple of clients at the low end of that spectrum and a couple at the high end.

 

PS... don't make the mistake of just shooting for the middle. In each case, their planning work told them that they'd be somewhere in the middle of that range. This has left the owner of the lower-volume shop unable to pay expenses and the higher-volume shop exceeding the capacity of their space and equipment.

 

If you were to visit the shops that I mentioned, you could probably get some ideas about why their revenues are what they are. Some reasons are obvious, some are a little harder to figure out, and some appear to be just good or bad fortune. But the process of figuring out the potential causes will improve your ability to evaluate your own options, and hopefully get you closer to your target number.

 

Good luck!

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Permalink Reply by Andrew Unruh on August 31, 2011 at 9:04am

Thanks so much for all of your posts, everyone has great points and all will be taken and applied.  I am looking at some training classes during the SCAA event in April 2012.  I feel the common thread is to take my time, plan plan plan and don't rush into it.  What are some common start up prices?  I have a location where the owner will pay for the build out, so fixtures prices are table, couches, chairs and such.  I own a small drive thru so my equipment is purchased.  Any other hidden expenses that take a new owner by suprise?

Around here, I'd estimate that the range of annual revenues for independent shops that have been open for 6 months to 2 years is between $50,000 and $750,000. I have a couple of clients at the low end of that spectrum and a couple at the high end.

 

 

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Permalink Reply by Benza Lance on August 31, 2011 at 10:59am

I find that a lot of greenhorn owners aren't that familiar with the various permits (building, health code, fire, etc, as needed), and this can throw a big time/money wrench into things. These vary county by county (and sometimes even city by city), so I would do some research into that factor, specifically in your area. If you're walking into a turnkey situation, then some of that isn't going to be applicable (particularly the building dept permits, unless you're altering somethings).
Also, most definitely make sure you still have money in the bank. There was a shop in town a few years ago that opened "on budget", and then couldnt survive those first few weeks because they didn't have proper money to even make change for customers.
Whatever budget you come up with, I would add another 25% on top of that. Worst case scenario, you use all that money, and still open (potentially), best case is you come in under budget, and throw that money back at your loan (or whatever type of fiscal situation you'll have), or keep it for that sweet extra "buffer" zone.

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Permalink Reply by Brady on August 31, 2011 at 1:45pm

Permitting. Training. Inventory until breakeven. Equipment installation if you're moving it. Just a couple that come to mind right off.

 

Sounds like you've already locked in on a location and selected equipment... which you may or may not determine is a good thing once you get further down the planning road. The fact that you already own a business probably means that you understand the value of location, though.

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