Turning a café business plan into a successful coffee shop can be a daunting challenge during those first few start-up years. Managing your budget, turning a profit and establishing yourself could have you feeling like you’re being pulled in a million directions with too many things to focus on.
At the end of the day, the important thing is to quickly become profitable. For small business owners wanting to increase their profits and combat a painfully slow growth rate, here are a few ways you can increase sales.
Identify the reason for slowing growth
It’s hard to fix a problem if you don’t know what’s wrong. There might be a barrier that’s affecting everything else. Or, because there are so many parts to a business, it might not just be one thing but a few little ones that have added up.
To help you get an idea of how to handle the situation, here are a dozen questions you’ll want to ask yourself right off the bat to narrow in on why your business isn’t growing as quickly as it should be:
- Do your customers want different products or promotions than what you’re selling?
- Is there more competition in the area than there used to be?
- Do you have a competitive advantage? What makes your cafe different to other cafes in the area?
- Are your existing customers happy with your menu? Would they recommend you to their friends?
- Is your staff happy? How is your employee turnover?
- Does your location or facilities need an upgrade? If you have toilets, are they clean?
- Do you simply need to ramp up your marketing?
- Are finances/business expenses poorly managed?
Decide on how you want to grow
If there are no major inefficiencies that are draining your profit margin, the next step is looking at growing your coffee shop. There are two ways you can physically grow your store: expand the current café and/or open a new one.
We’ll break both options down to help you decide which one is right for your business:
What to do when renewing / expanding your cafe
If you’ve come to realise the reason your café shop sales are stalling is because you’ve reached max capacity to serve your customers, you might need to revamp your service offering. This is especially true if new ‘bigger and better’ competition has come in and is drawing away your market share. If that’s the case, you need to grow too. Expanding your service offering might help you retain customers and attract new ones. Be situationally aware. Listen to your employees and customers if they’ve found a gap in the current products or services that will require a renovation or if you have equipment that needs updating.
Collecting feedback will help you understand what parts of your current café business need to be renewed or upgraded.
What to listen for when talking with customers: food and beverage satisfaction, comments on décor or space interior, the menu (should you offer more food or different drinks?).
What to listen for when talking with your staff: user-friendly POS system and software, glitchy computers, coffee-making equipment, cooking appliances
What to keep an eye out for with competitors: sales, promotions, new food, unique differentiator/selling point, equipment upgrade
How you could encourage feedback: Promotions like ‘give a review, get a free cup of coffee/tea’ and leaving flyers on each table with details to your social media accounts and review pages
Negotiate with your suppliers
Over the first few months and years, you’ll start to get a good idea of how much inventory you need to buy and will get more confident buying in bulk. You’ll probably also settle on a few favourite suppliers based of the quality of their products and service. When this happens, use your status as a loyal customer to negotiate a better price. Being a consistent buyer can qualify you for better bulk deals.
Consider not having your expansion store adjacent
If you’re looking to expand the physical location of your café but your next-door neighbours aren’t interested in giving up their lease or relocating, don’t panic. Look around them and widen your scope from ‘immediately next door’ to ‘very close walking distance from your café’. You might be able to expand by hopping over a store and staying within eye shot of your original location. As long as you keep it convenient for your customers, an expansion like that could work too.
Plan your renovation period for off-season
Shutting down your coffee shop to renovate can be a worthy investment, especially if you’re strategic with the build time. Plan the temporary closure during your off-season when your sales are at their lowest anyway. To eliminate a complete zero on your store’s income for that time period and risk your clients finding a new favourite place, plan a pop-up coffee stand near the location during the construction period. Only sell your most popular coffees, teas and food to minimise complexity.
Choosing a New Location
Opening a second location is an exciting milestone for store owners. While you obviously did a lot of things right when opening the first one to get to this point, don’t let it get to your head. Remember to follow the same research patterns you did when staking out your first store space. Doing your due diligence before opening a new store – whether it’s your first, second or hundredth – is vital to giving it the best chance of success.
- •Analyse your current cafe clientele – figure out who you’re targeting and be where they are
- Look for areas with a similar market that will suit your second café location
- Decide if this store is going to sell the same, supplementary, or a smaller/wider range of coffees/teas/food compared to your original café
- If you’re going to use this location as additional inventory management for popular drinks/food, figure out how much extra space you’ll need
- Draw up plans for the interior space and structural layout
- Look at the surroundings: Will there be a lot of competition? Based on the location, will there be sufficient foot traffic? Is it a low crime area?
- Ask nearby stores and consult with property agents to determine the average rent. Getting an idea of historical business success and longevity can help gauge the turnover rate and success of similar industries in the area.
- Do you have all the utilities you need? Can you provide bathrooms for your staff and customers?
Build Your Brand Online
No matter what you sell or where you are, having an online presence will make you easier to find. Someone might stumble into your café, but what if they want to tell their friends and couldn’t remember your business name? Being online will give you a digital presence as well as a physical one. It can also increase sales opportunities if you allow online orders through apps such as UberEats, Deliveroro, Zomato, Ritual, etc. When building your brand online, make sure your site has all these components:
- A menu with your drink and food offerings
- Current sales and promotions
- Contact information
- Social media accounts linked on your website
- About the team / business history (tell the story about how you started and what makes you different from all the other coffee shops in town)
Google My Business
- Website URL
- NAP: business name, address, phone
- Opening hours
- Description of your business and your unique selling proposition (USP)
- Customer reviews
- Logo and photos of your location and menu
- Service area if you deliver
Social Media Accounts
Utilise social media to attract new and loyal customers. Be on the social platforms they’re on – such as Instagram, Facebook and Pinterest – to be in front of people when they’re hungry and scrolling on their morning commute or before their lunch break. Strategically using hashtags and location check-ins can help people find you easily.
Social media can also help you build your brand and community. It’s a great place to push promotions or new products and should be part of your marketing strategy. You might even want to add online ads or post promotions to your budget to build a following and awareness. It’s free to advertise on your own social media channels; however, bumping your post with a little money will skyrocket the amount of people who see it in their feeds.
Building a loyal customer following is essential for creating a sustainable business, because it can be a challenge to find enough new people every month to make a profit. Creating an email list and utilising email marketing to stay connected to customers can keep you top of mind. Sharing promotions, new food or drinks, upgraded equipment, store information and building a community will get them opening your emails and thinking of you the next time they need a cuppa.
Now don’t be intimidated by the idea of digital marketing. There are fantastic ‘drag and drop’ platforms that make designing an email and maintaining an email list incredibly easy. It’s possible these days to make your emails look like a professional marketing team created them with surprisingly little cost to your budget.
Cafe Business Loans with OnDeck
Expanding your business, upgrading/fixing broken equipment, hiring staff for seasonal work or testing out new products can be just a handful of reasons why you could get a café business loan. The breathing room it provides can allow you to have peace-of-mind should something unexpected pop up. It can also give you the bump in cash flow to increase your service capacity, which will in turn increase sales and have a solid return on investment.
If order to acquire additional funding, consider the following:
Understand your credit profile
When looking at a loan application, banks and lenders will reference the applicant’s credit profile to see if it hits their qualifications. A credit profile looks at your credit score and report, which comes from your credit history. It helps them determine things like how good you are at paying bills on time or how reliable your income is. Credit scores can also give you a sense of your business’ financial position. By answering just a few questions, you can find your business’ credit score now here.
If you’re wondering whether you’re eligible for a café loan or not, here are key requirements to get an unsecured business loan with OnDeck:
- Minimum $100,000 gross annual turnover
- Minimum 1 year in business
- Minimum 3 monthly deposits
- No bankruptcy (prior or recent)
- Minimum 500 business credit score
Your purpose for a loan?
Taking out a loan might be the next step in your business strategy. As we mentioned, there are a dozen reasons why business loans can help you grow a successful café business. To add to the list above, you might be looking to grow your marketing strategies, expand to a second location, or cushion your cash flow in preparation for a slower reason.
No matter your purpose, a good investment can yield significant returns for your coffee shop. Getting the capital to make that investment is possible with a café business loan from OnDeck.
OnDeck offers flexible business loans that solve a need for extra funding. Whether it’s the cost of materials, covering a cash flow shortfall or getting some new equipment for a project, OnDeck can help you.
With an easy online application process, loans of between $10k and $250k, and terms of 6 to 24 months, we make it simple for businesses to get the extra funding they need.
Apply online in minutes at www.ondeck.com.au or call our helpful team on 1800 676 652 today.
Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at January 2020. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.