23 and own shave ice shack, coffee shop, yet stuck

[Ryan Wolf]

First off, I'm glad I found this site last night. So far, I have spent about four hours perusing through threads and posts, along with ordering the TMF book which I am stoked to read once it arrives.

My background: I dropped out of college after realizing that I learned so much more from talking to real people and reading books than I did by spending thousands of dollars on school. Although I knew that college wasn't for me, it took me three semesters before I finally called it quits.

Sometime while I was in college, I decided to buy my first business, a shave ice shack. It's been alright. The gross ROI to date is 2,937% in four summers. Decent.

I took most of the money that I made from the shave ice shack and opened a coffee shop in February of 2016. As I'm not a big coffee drinker, my only initiative was to make money and open more coffee shops. My mom, however, is a coffee fein and since I knew she hated her job at the time, I decided to let her be the manager of the shop so that she'd be happier and so I wouldn't need to worry about hiring someone else for that job. Well, it turns out that coffee shops aren't cheap to open, and aren't cheap to operate while building a clientele. The shop only breaks even, at best, which is better than it was doing but that's not saying a whole lot. The location is terrible. I didn't do enough research before opening. I can't close it down yet due to the lease, but when that time comes, it'll be a delicate situation. I guess this is why you never hire family...

I have had to move back in with my parents and deadbeat brother. My time is fairly limited as I work many hours every day in the coffee shop. I don't like serving -or drinking- coffee, though. My bank account is dwindling and credit cards are maxed out. I'm temporarily stuck. I haven't yet figured out where to go from here.

If you have suggestions, general motivation or criticism, let's talk.

 

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[ChickenHawk]

I feel your pain. A few years ago, I also opened a coffee shop with my Mom. Not good. Not good at all...

Fortunately, once you read "The Millionaire Fastlane ," you'll better understand where you went wrong in your choice of business. I had so many "lightbulb" moments reading it, and I think you will, too. One of the best things about the book, IMO, is that it helps you rule out ideas that sound lucrative, but ultimately become a job in disguise.

Happily, you're young and ambitious, and already far ahead of your peers as far as experience and ambition. That should take you far, once you find the right project to focus your energies on.

Welcome to the forum, and best of luck to you!

 

[458]

Your biggest mistake was opening a second business in a different industry. Speak to the landlord and shut it down.

 

[Ryan Wolf]

I feel your pain. A few years ago, I also opened a coffee shop with my Mom. Not good. Not good at all...

Fortunately, once you read "The Millionaire Fastlane ," you'll better understand where you went wrong in your choice of business. I had so many "lightbulb" moments reading it, and I think you will, too. One of the best things about the book, IMO, is that it helps you rule out ideas that sound lucrative, but ultimately become a job in disguise.

Happily, you're young and ambitious, and already far ahead of your peers as far as experience and ambition. That should take you far, once you find the right project to focus your energies on.

Welcome to the forum, and best of luck to you!

I am eager to read the book. In hindsight, I can see it was a bad endeavor that was cloaked in a good looking suit, but reminiscing doesn't help me right now! What ended up happening with your shop?

 

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[ChickenHawk]

In hindsight, I can see it was a bad endeavor that was cloaked in a good looking suit,

I can relate!

What ended up happening with your shop?

The shop is still running (not so much as a coffee shop, but as a different kind of retail outlet), but happily, I'm no longer involved. Because it involved family, it was complicated, as I'm sure you know firsthand.

In the end, I lost some money and time, but was able to recover in the long run and learn from my experience. The only upside is that the business was much more of my mom's dream than my own, and it wouldn't have survived the first year without both of us working so hard on it. Now, it's all hers, and she seems to be happy with it.

The biggest lesson I learned: Never go into business with family. In fact, I came away thinking I'd never go into business with anyone else, ever again. If you're smart and ambitious, giving up control in any way is a huge downside. Now, with your mom, I realize you're the owner and technically have all of the control, but in reality, I'm betting it's not that simple -- because with family, it never is.

 

[Ryan Wolf]

@ChickenHawk

I've told her that I plan to close the shop down if the numbers don't improve dramatically by February 2017. She always retorts with what customers are saying and how the customers think that business will pick up. People mean the best, but numbers don't lie. That said, I'm not sure what to do with the shop. I'll most likely sell the shop or sell whatever equipment I can, but I've also flirted with the idea of just giving her the shop. I'll know for sure in a few months...

Yeah, I'm done working with family after this!

 

[MJ DeMarco]

First off, I'm glad I found this site last night. So far, I have spent about four hours perusing through threads and posts, along with ordering the TMF book which I am stoked to read once it arrives.

My background: I dropped out of college after realizing that I learned so much more from talking to real people and reading books than I did by spending thousands of dollars on school. Although I knew that college wasn't for me, it took me three semesters before I finally called it quits.

Sometime while I was in college, I decided to buy my first business, a shave ice shack. It's been alright. The gross ROI to date is 2,937% in four summers. Decent.

I took most of the money that I made from the shave ice shack and opened a coffee shop in February of 2016. As I'm not a big coffee drinker, my only initiative was to make money and open more coffee shops. My mom, however, is a coffee fein and since I knew she hated her job at the time, I decided to let her be the manager of the shop so that she'd be happier and so I wouldn't need to worry about hiring someone else for that job. Well, it turns out that coffee shops aren't cheap to open, and aren't cheap to operate while building a clientele. The shop only breaks even, at best, which is better than it was doing but that's not saying a whole lot. The location is terrible. I didn't do enough research before opening. I can't close it down yet due to the lease, but when that time comes, it'll be a delicate situation. I guess this is why you never hire family...

I have had to move back in with my parents and deadbeat brother. My time is fairly limited as I work many hours every day in the coffee shop. I don't like serving -or drinking- coffee, though. My bank account is dwindling and credit cards are maxed out. I'm temporarily stuck. I haven't yet figured out where to go from here.

If you have suggestions, general motivation or criticism, let's talk.

I'm gonna guess you are the type of entrepreneur who will really get a lot of value out of TMF -- in other words, you'll end up KILLING IT in something CENTS focused. Your early successes (and tries) are commendable -- I wouldn't be too worried about them as you're racking up tons of experience points.

 

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[Ricardo's]

Keep your head up. Thanks for your story about working with family, it's something that I've contemplated so I will keep it in mind.

 

[Andy Black]

Thanks for sharing your story.

The book is great on audible too. Well worth listening to MJ as well as reading it.

 

[TonyStark]

Beware the sunk cost fallacy....

 

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[Fox]

First off, I'm glad I found this site last night. So far, I have spent about four hours perusing through threads and posts, along with ordering the TMF book which I am stoked to read once it arrives.

My background: I dropped out of college after realizing that I learned so much more from talking to real people and reading books than I did by spending thousands of dollars on school. Although I knew that college wasn't for me, it took me three semesters before I finally called it quits.

Sometime while I was in college, I decided to buy my first business, a shave ice shack. It's been alright. The gross ROI to date is 2,937% in four summers. Decent.

I took most of the money that I made from the shave ice shack and opened a coffee shop in February of 2016. As I'm not a big coffee drinker, my only initiative was to make money and open more coffee shops. My mom, however, is a coffee fein and since I knew she hated her job at the time, I decided to let her be the manager of the shop so that she'd be happier and so I wouldn't need to worry about hiring someone else for that job. Well, it turns out that coffee shops aren't cheap to open, and aren't cheap to operate while building a clientele. The shop only breaks even, at best, which is better than it was doing but that's not saying a whole lot. The location is terrible. I didn't do enough research before opening. I can't close it down yet due to the lease, but when that time comes, it'll be a delicate situation. I guess this is why you never hire family...

I have had to move back in with my parents and deadbeat brother. My time is fairly limited as I work many hours every day in the coffee shop. I don't like serving -or drinking- coffee, though. My bank account is dwindling and credit cards are maxed out. I'm temporarily stuck. I haven't yet figured out where to go from here.

If you have suggestions, general motivation or criticism, let's talk.

This might seem like super basic advice but I will give it anyway. I managed a coffee shop for about 7 months with 30 staff while the owner took time off. I would look into more desserts and ice-cream/gelato. We always only broke even on the coffee side of things but the real money earner was people ordering that "little" snack to go with their coffee. If you can make your ice cream on location you will make 500%+ on it. Super simple to make and it can sell really well with some good flavors and combos. Same with desserts.

Maybe that is the most obvious advice ever since you seem quite clued in but just some small insight in how we made our money.

Welcome to the forum and as others have said you will get huge value out of the book. Solid first post.

 

[Ryan Wolf]

@Fox

Very interesting. Although I had thought of adding ice cream, I never thought about making it in house. I'll look into that for sure. As for other desserts, I do sell a lot of other options but most of them are only keystone markups, nothing like a 500% margin.

I really appreciate you sharing your experience with this.

 

[Fox]

@Fox

Very interesting. Although I had thought of adding ice cream, I never thought about making it in house. I'll look into that for sure. As for other desserts, I do sell a lot of other options but most of them are only keystone markups, nothing like a 500% margin.

I really appreciate you sharing your experience with this.

Another sneaky thing he did was everything in the cafe was non-matching. Every chair, table, cup and knife was different. His logic as it was super cheap to maintain since he could just grab bits from wherever and add them in to replace stuff. We actually grabbed a couch once from outside student accommodation and just added it in. People loved it! He also had local artists list art for sale on the walls so he had cool pictures for free. Lots of little bits to save money and increase profits. Staff could eat food for 20% off on break too but the mark up was actually 50% already and it was deduced from their wages before payroll so even saved double ha.
I could tell stories all day, I learned a lot working there.

 

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[Ryan Wolf]

Another sneaky thing he did was everything in the cafe was non-matching. Every chair, table, cup and knife was different. His logic as it was super cheap to maintain since he could just grab bits from wherever and add them in to replace stuff. We actually grabbed a couch once from outside student accommodation and just added it in. People loved it! He also had local artists list art for sale on the walls so he had cool pictures for free. Lots of little bits to save money and increase profits. Staff could eat food for 20% off on break too but the mark up was actually 50% already and it was deduced from their wages before payroll so even saved double ha.
I could tell stories all day, I learned a lot working there.

The non-matching, that's awesome haha. Wouldn't work with what I'm doing right now but I love the idea. I actually already have art on walls from local artists that's for sale. I don't take commissions on it -- I'm just appreciative of free artwork. I also do coffee education each month and have a huge turnout for each class. That's one of the few days where the shop does really well... I need to do more of those each month...

 

[miked_d]

I also do coffee education each month and have a huge turnout for each class. That's one of the few days where the shop does really well... I need to do more of those each month...

Very interesting. Can you expand on this, open up to other groups?

Somewhat related - a local brewery has a large back room. I know at least one night of the week the room is filled with people playing board games.

 

[Mikkel]

I am in no way associated with coffee shops nor have I ever run a store - so take my advice with a grain of salt.

I believe that running a coffee shop can be successful even though it may be tough apply CENTS. This may not be your homerun business, but as MJ said, it is some great experience that you can learn from.

To go off of what Fox said, maybe you can try and add some crazy type of ice creams. I have see a couple of stores like yours on the news that have had lines out the door waiting for one specific type of food.

Example:

The great thing is that you are the only person to be making this certain type of heart attack in a cup. If you want people to come into your store, coffee works. If you want your customers to bring their friends with them... this would be the way to do it!

So my point is, try and stand out from the crowd. You can do this with any food, you just need to be creative.

Just my two cents.

 

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[Ryan Wolf]

Very interesting. Can you expand on this, open up to other groups?

Right now I'm able to do one free class each month just because that's as much as the sponsors are willing to sponsor. The shop is in a library so in order to reserve a huge room of theirs for free, I cannot charge entry and can only use the room so often (the library is a sponsor of the program). That's a major road block for many things that I have been trying to do through the shop. However, I will be first to disclose that I haven't been trying hard enough.

 

[Schwartz]

I don't know what your local market is like but in my neck of the woods there is a large college town and anyplace that has free WIFI and organic snacks is full of students.

 

[Ryan Wolf]

@Mikkel

Wow! I would LOVE to be able to have servings like that! I am confined by lack of space and strict rules in my current location but I may start doing something like this in the new shave ice shack that I am building for next year. If I open a coffee shop elsewhere, I have some major ideas on how to stand out from everyone else. I've always been somewhat of a show off though ha

 

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[Ryan Wolf]

I don't know what your local market is like but in my neck of the woods there is a large college town and anyplace that has free WIFI and organic snacks is full of students.

I'm in a hipster town so I have a large offering of vegan and gluten free options. I'm also in a library so there is plenty of wifi for everyone.

 

[AgainstAllOdds]

Speak to the landlord and shut it down.

What happens if you tell your landlord you can't pay rent? And that you'll pay for another two months but that will be all the money you have left...?

 

[Ryan Wolf]

What happens if you tell your landlord you can't pay rent? And that you'll pay for another two months but that will be all the money you have left...?

Not sure, to be honest. I'll review the lease. My landlord is the government ha

 

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[GeoffP]

Right now I'm able to do one free class each month just because that's as much as the sponsors are willing to sponsor. The shop is in a library so in order to reserve a huge room of theirs for free, I cannot charge entry and can only use the room so often (the library is a sponsor of the program). That's a major road block for many things that I have been trying to do through the shop. However, I will be first to disclose that I haven't been trying hard enough.

It sounds like you're saying that your shop is located inside a library. I had a client who was working with a major food service company on something similar.

Presumably your hours are tied to the library, correct? Also, do you have a separate entrance or do you have an entrance off the library? Does the library have any control over your menu, pricing, or sourcing? Are you just offering coffee and baked goods or something else as well? What would you say is hurting you more right now, dollars coming in the door or dollars going out the door? How negative is negative?

 

[fhs8]

I don't buy the bad location excuse unless you're on the 2nd floor of a small strip mall. What you're paying for in rent is usually near market rates so if you had a better location you'd be paying more in rent. The likely problem is that your coffee shop sucks. The logo, marketing, prices, what's being offered, quality, etc... I've seen hole in the walls with lines out the door. There's food trucks especially in LA where people will DRIVE 10-20 miles to a deserted trashy parking lot with homeless and wait in line for 30 minutes just to order. There's Starbucks in most Barnes & Nobles and they seem to be doing fine.

How did you figure out pricing? Do you know if your coffee/lattes are any good? How nice is the menu board? There's so much to fix that I would just close up shop.

 

[MJ DeMarco]

This might seem like super basic advice but I will give it anyway.

Could make the difference between break even and profit.

Rep++

 

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[Mikkel]

How did you figure out pricing? Do you know if your coffee/lattes are any good? How nice is the menu board? There's so much to fix that I would just close up shop.

So just close up shop because there is too much room for improvement? That seems like the most backwards thing I've ever heard.
If all of these problems could be improved on, it sounds like he would have a profitable company. If he is currently breaking even now, then imagine what would happen when he implemented some true business innovation.

I'd say quite the opposite. Stay open, unless there is nothing you feel you can improve on with your business. If you are at your max capacity and you can't grow your business anymore due to a lack of innovation, then I would back out.

As I said before, I don't think this will be your home run business, but it will be a great learning experience if you can figure out how to take a break even business to a profitable business.

 

[Ryan Wolf]

@GeoffP

Yes, my hours are closely related to the library, though I have a walk up window so we open an hour before the library. We've tried opening much earlier through the window but that was definitely not worth it. Most people either want a place to sit in the mornings or to just sit in their cars at a drive through. I don't have a separate entrance and the library won't let anybody in until the library is ready to open. I have complete control over everything else though. We have a few different bakeries that supply us with amazing food, pastries and sandwiches. I order small but move through that inventory almost entirely each day (took a few months to figure out how much of what sells, and when). I just implemented a new rewards program so I'm hoping that makes a difference in sales. As for the last two sentences, I'm not sure I understand them well enough to give you a satisfactory answer.

@fhs8

Based on customer feedback and speaking with my friends who own coffee shops, the location is a major issue, primarily because people don't know that we're here. Here are some key points:

The morning commute is on the other side of the road
There are many people who come into the library that don't even know we exist (in a corner, away from entrances)
We are not allowed to have any signage on, in or around the library
People think they have the wrong address because they're at a library instead of a coffee shop
People are afraid to talk because it is in a library (silly, but we hear that concern often)
The only school even close to the library is an elementary school (not my ideal clientele)
As I stand here right now, there are eleven people inside the library other than the librarians.

Yes, the marketing could be -and will be- improved. I don't see the logo being an issue. Prices are very close to Starbucks. The quality is super high. The majority of customers are from referrals. My mom and head barista were trained and certified by the one of best coffee schools in America. With their knowledge is how we found our coffee roaster. Our selection is good but we don't sell fake drinks (made famous by Starbucks) such as frappuccinos or iced cappuccinos, etc. Our pricing was set by my coffee mentor (a guy who owns 8 coffee shops).

Honestly, thank you for bringing all of that up because thinking through it all was a good reminder of how I got to here, and what could possibly be issues.

 

[GeoffP]

@GeoffP

Yes, my hours are closely related to the library, though I have a walk up window so we open an hour before the library. We've tried opening much earlier through the window but that was definitely not worth it. Most people either want a place to sit in the mornings or to just sit in their cars at a drive through. I don't have a separate entrance and the library won't let anybody in until the library is ready to open. I have complete control over everything else though. We have a few different bakeries that supply us with amazing food, pastries and sandwiches. I order small but move through that inventory almost entirely each day (took a few months to figure out how much of what sells, and when). I just implemented a new rewards program so I'm hoping that makes a difference in sales. As for the last two sentences, I'm not sure I understand them well enough to give you a satisfactory answer.

I'm trying to get at the magnitude of the monthly loss and where it's coming from. There are two general things to look at from a financial standpoint. The first is cash coming in the door from customers, which it sounds like you're confident about the pricing. The second is cash going out the door to suppliers. Do you know your margin per item, i.e. I buy X of these for $Y and sell Z a day and Z-X is waste and (Z*Y-Z*X) is my daily profit per type of item sold? It may be you have unprofitable items you're selling, especially if you're selling hipster or fad based options. Why did the library let you rent the space if they won't let you advertise?

 

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[Ryan Wolf]

@GeoffP

Thanks for clarifying. I thought that's what you meant but wasn't positive.

It's primarily that I need more people in the door but obviously more customers with lower COGS is what all businesses want. But yeah, I need more people in the door. When I hit a certain point it is very profitable. I just always hit that number very near closing time so it's just breaking even for the day.

I do a weekly analysis so I do know that the margins are good. Last week, the smallest margin on an item was 30% (bag of chips) but the average was around 68% (all items). As for the library, it's just written in their rules. I have a meeting with them later this week to discuss that issue. The things I wish I had known prior to signing the lease and opening shop... Hindsight, it's 20/20 ha

 

[GeoffP]

@GeoffP

Thanks for clarifying. I thought that's what you meant but wasn't positive.

It's primarily that I need more people in the door but obviously more customers with lower COGS is what all businesses want. But yeah, I need more people in the door. When I hit a certain point it is very profitable. I just always hit that number very near closing time so it's just breaking even for the day.

I do a weekly analysis so I do know that the margins are good. Last week, the smallest margin on an item was 30% (bag of chips) but the average was around 68% (all items). As for the library, it's just written in their rules. I have a meeting with them later this week to discuss that issue. The things I wish I had known prior to signing the lease and opening shop... Hindsight, it's 20/20 ha

It's a shame, but I have to agree. On the plus side, you're ahead of 95% of small businesses because you know your margins and know what's biting you.

Three recommendations I will make:
(1) Do something about that lease. Figure out what the library's incentive for renting the space is and be prepared to get creative as you renegotiate the rent. You may want to call a commercial broker up if you know one and figure out what market rent is for the location you have or for a new location so you have some stats. Be solution oriented and not problem oriented.
(2) Look at finding another location to hold the classes in. You may be able to find free space at a community center you can use to run more classes and generate more buzz.
(2) Really dig into the Commandment of Need when you read TMF . The whole book was eye-opening for me, but Need in particular was a valuable chapter.

Good luck and may the odds be ever in your favor!