9 Ways to Improve Your Coffee Business
John Richardson and Hugh Gilmartin, authors of Wake Up and Smell the Profit, offer practical advice on running successful sandwich and coffee bars. Coffee is more popular than ever but competition has never been so fierce. Here are nine ways you can compete, succeed and thrive.
- “Be brave with your prices”. Far too many coffee shop owners are cowardly when it comes to pricing. You have to believe in the quality of what you’re offering and charge accordingly. Trying to be the cheapest will likely put you out of business. Charge at the higher end of the market. Some ways you can charge more: have better coffee, better food, better customer service, better atmosphere and seating, clean bathrooms.
- “View the business every day as if you were an employee”. Whilst many operators know to see their business from the eyes of the customer, few consider it from the perspective of their employees. Good employees are your early warning system to problems, inefficiencies as well as knowing ways to improve your business that you may not have considered. Do your best to keep good employees – they will help you attract more customers through good service, grow your business and save money by avoiding costly re-training.
- Smile. It’s incredible how few coffee shop owners can even muster a friendly hello and smile for their customers or register a flicker of recognition for their regulars. It’s a competitive business and if you don’t make the effort to show you appreciate your customers choosing you, they won’t be around for long.
- “Create food stories about your star products and sell, sell, sell”. Tell stories about your best products: maybe it’s granny’s lost recipe; perhaps your coffee beans finance a school in Bolivia or it could just be a story about you sitting down with friends and family concocting new snacks. Find the story. Many people are interested in what goes on behind the scenes and stories are a subtle but powerful way to communicate to others the quality of your product and how much you care about your business.
- “Work out your lifetime customer value”. If a customer buys a coffee from you every day for the next three years, how much are they worth to you? About £4,400. That should give you a different perspective on how you treat that customer, how your staff treat that customer and how much you should be prepared to spend to attract and keep them. If a customer is unhappy about something, do all you can to put the situation right with good grace. If that means a free coffee and muffin, do it. Protect the lifetime customer value.
- “Beware staff attitudes towards business ownership”. Toxic employees can bring down your business. One rotten apple spreading dissent and resentment amongst your team will undermine your best efforts. Take it personally and act quickly to get rid of them. Prevention is the best cure. Take employees on a trial basis, follow up on references, ask other colleagues what they think of them, watch how they interact with your customers. The better your staff, the better – and more profitable – your business will be in the long-run.
- “Post the utility bills”. Let staff see the bills, the invoices and tax demands. The authors describe a powerful technique to educate staff how much goes into running a business. Take a muffin and knife and say, “Whenever we sell a muffin, 30% of it goes to the tax man.” Proceed to cut and discard 30% of the muffin. “50% goes to wages”. Cut away 50% of the muffin. “And 20% goes to rent”. Cut away. “And 25% goes to inventory…” Cut. “What we’re left with is this one small piece of muffin. This is our profit. After all the time, effort and risk we put in to run the business, this piece is our reward. It’s true of everything we sell. Only a small part of it is profit”.
- “Know your food cost for every single item”. You need a good grasp of the basic numbers. Know how much each item makes/costs you. A good spreadsheet can be your ultimate business adviser. It will show you your bestsellers, which products you should drop, the biggest areas of waste, how often you’re buying a particular item, how profitable a product is and so on. Numbers don’t lie but you do need to track them carefully if you are to glean any useful information from them.
- “You can’t deposit percentages in the bank”. The coffee business is attractive because of the high-profit margin of coffee. Margins are great but don’t forget, you can’t bank margins. Absolute profits matter. A cup of coffee may have a 40% margin and a more expensive panini may only have a 15% margin but what really matters is what you have left at the end of the week that belongs to you.