Are you thinking about opening up a new coffee shop in your town? Running a coffee shop is a great source of income when you do it right. However, many new and inexperienced coffee shop owners underestimate their costs and struggle to make their business profitable. 

The most commonly underestimated costs for opening a coffee shop are construction, labor, and supplies. Here are 4 tips for making these costs more predictable:

1. Buy a pre-designed coffee kiosk or stand

Building a new construction from scratch can be expensive and costs can get out of hand fast. Using a professional builder specializing in the drive-thru coffee industry will make construction costs more predictable. If you design your own building without having experience in the drive-thru coffee industry, you’re virtually guaranteed to get important factors wrong like counter height and equipment placement. You’ll find out shortly after opening that your setup doesn’t work and you’ll have to pay for a remodel, which will increase your cost of construction.

To mitigate this potential, find a builder that specializes in drive-thru coffee shops. There are plenty of builders out there who have done the hard (and expensive) work of designing layouts to accommodate the proper equipment and necessary work flow.

A pre-existing design makes it easier to estimate hard costs 

When you use an existing design, you don’t have to worry about estimating hard costs for construction, which typically end up being 70-85% of the total cost. Hard costs (like grading, landscaping, parking, permits, and plumbing) are already known to the builder and a proper estimate will be provided for you. 

If you can, buy a franchise of a well-known chain – you’ll have the power of a solid brand and your hard costs will be far more predictable.

Soft costs, on the other hand, you’ll need to nail down on your own. For example, inspections, loan interest, project management, barista training, insurance, taxes, and marketing are all soft costs that the builder can’t estimate for you. Soft costs tend to continue after a construction is completed. 

If you’re not sure what the difference is, Assets America explains the difference between hard costs and soft costs in a detailed resource regarding the true cost of construction. 

2. Track your cost of goods to the penny

Do you know exactly how much a 16-ounce latte costs you? What if that same drink is iced or has flavor? How much profit are you making on each drink? You need to know exactly how much every item on your menu costs. This requires dedicating some quiet hours to serious calculations, but it’s the only way to accurately estimate your costs.

By tracking your cost of goods to the penny, you can more accurately calculate the point where you’ll break even.

3. Use exact recipes that measure out every ingredient

Putting a specific amount of product (like flavor syrup) in each drink accomplishes two things. One, it creates consistency. Your customers will get the same drink each time they order. Two, it helps you estimate your cost of goods.  

You can’t accurately estimate costs if you don’t know how much each ingredient costs you. For example, if you ‘eyeball’ how much flavor syrup you add to each drink, you’re probably using too much product in each drink, which means you’re wasting product and the actual cost per drink is unknown.

On the other hand, if you use a specific number of standard ¼-ounce pumps per drink, you’ll know exactly how much flavor is going into each drink and you can estimate your costs accurately. For example, say you sell 12-ounce, 16-ounce, and 20-ounce espresso drinks. Use three pumps for the 12-ounce, four pumps for the 16-ounce, and five pumps for the 20-ounce. After calculating how much one pump of flavor syrup costs you, then you can calculate how much it costs to add flavor to each size drink.

4. Expect to pay overtime

No matter how hard you try to keep your staff scheduled so they don’t need to take lunches or work overtime, it’s going to happen. Plan for at least 4 hours of overtime each week just to be safe. There will be sick calls, no-shows, and you may need to send people home early. If you’re understaffed already, an employee could end up working a double shift.

Talk to experienced coffee shop owners

No matter how many business people you speak with, nobody knows how to minimize costs in a coffee shop better than experienced and successful owners. The coffee industry is extremely specific and the most successful business person in the world wouldn’t know all the nuances.