How to own <s>a coffee</s> any business that will make money without you working at it.

How to own a coffee any business that will make money without you working at it.

Growth and Success

Consistency is more important than Quality

In specialty coffee, like most other businesses, consistency is key to success and profits.  Whether you have two staff or twenty, whether you’re open 8 hours a day or 18, whether you use a super-automatic or manual espresso machine, you must be consistent in what you serve, how you treat customers and how your store is run. The total coffee market ranges from cheap gas station swill to the highest quality coffees , but inconsistency in any business will cripple and kill it.

An accurate and well-managed coffee bar system automates and simplifies an operation and enables you, the owner, to focus on business growth rather than constant staff oversight. Systematic staff teaching, training and then testing using all appropriate and available methods is key to consistent operations.. The larger the staff, the more critical an employee training program is. Although barista training is the most obvious training program in a coffee bar, all successful business have systems that start even before hiring.

A business is only as good as the people it employs

Getting good employees starts with hiring and hiring is a task that can be to a great degree automated. A good hiring system includes a custom application, multiple interviews, previous work history checkup and personal reference checkup. This automates much of the hiring process and narrows possible candidates to only the best.

Once hired an employee will need to be systematically trained in all areas of the business to enable them to do the job they have been hired to do. Of course someone on the staff must be responsible for overseeing the staff training program, but much of the actual work can be delegated. New employees need to be taught everything from where to hang their coats and purses to how to properly answer the phone. Anything not covered by a training program risks being done incorrectly.

Obviously some training items are more important than others, but thorough and complete training has multiple benefits: staff consistency, employee empowerment, employee knowledge, quality operations, ease of correcting employee behavior, eliminating problem employees, and most important – customer satisfaction and a profitable operation!

Don’t miss this CRITICAL step!!

It is a must that you set the tone of the business from the start and determine what you want done and how you want it done. If you delegate that responsibility, don’t be surprised when your store doesn’t act like you had intended it to. No one can be the master copy like you can. The key to long term success and profitability is to document and systematize everything you do so that your staff does it the same way.

When I opened JP’s, everything that needed to be done in the store I did. I came in early and turned on the lights, brewed the coffee, baked the muffins and then opened the doors. I worked the bar, worked the cash register and cleaned tables. I placed the orders from our coffee roaster, tea supplier and food service supplier. I did it all and then as I hired new employees I trained them how to do it.

But, even when I trained an employee how to do tasks exactly the way I did I still hadn’t systematized the process. A system requires I document the process, train the employee in the process, and then test the employee to insure they know how to do it correctly. Once that is done I can delegate the responsibility of training to a manager or staff member with the confidence that if the training is correct and the employee learns and does it correct, everyone will do it the way I intended.

Work on your business, not in your business

I always teach my staff that when there is an issue with an employee in our business there are only one of two reasons for it. First is a problem employee, second is a problem system. If the system is at fault we change it. If the system is correct, the problem is with the employee and they will need to change or leave. When employees do what the system trains them to do, everything is beautiful. If the employee doesn’t follow the system, the system identifies them and dictates a course of action (i.e., policy violations require a written warning, 3 written warnings require employee termination).

I know some people open a coffee business because they love to be the barista. That’s cool, but that isn’t most people…at least not for the long haul. Most people who open a coffee shop eventually, and rightly so, want to step back from the day-to-day operations and “become the owner”. If you don’t ever get there, you really haven’t entered into business ownership, you’ve only bought yourself a job. I opened JP’s and worked the store for a while, but at some point I wanted to have employees take over. When you have good systems in place with good people to oversee and be responsible for them, you’ll be able to work on your business and not in it.

It is not a small task to create systems for everything in your store, but it is a critical step to growth and profit. In the book The E-myth Michael Gerber shows how to apply the lessons of franchising to any business, whether or not it is a franchise. The point of his book is not to franchise every business, but that a franchise contains the key to creating a successful store without the original owner being there? How is that accomplished? You got it, systems.

If it makes money without you, it has value when you sell

Let’s say you own and operate your coffee business for 10 years and then decide to sell it. If you are a critical piece of the daily operations of the business, the sale price for your business will be much lower than if you need not be there for it to operate. Let’s look at JP’s as an example. If I decided to sell my business, but I was essential to daily operations, any buyer would assume a big piece of JP’s value is that Jack is the reason for it’s success and without me much of that value would be lost, and consequently the sale price is dramatically reduced.

If on the other hand I could show a buyer that I could lay on the beach or golf all day and the business still makes a profit, now I have something of much greater value. Adding together my salary and the net profit of the business would show a new owner real dollars that will be theirs and a predictable return on investment without them having to do anything. And even more if they want to become the manager of the store.

Of course the reality is that a good business owner doesn’t abdicate their business, but they also do not need to physically run the store to have a great operations and make money.

Systems are not optional, they are required

Creating and maintaining solid business systems will bring real value to your coffeeshop in all aspects of business ownership: consistent day-to-day operations, hiring and retaining a great staff, maintaining quality products and services, being profitable, being an owner of rather than an employee of your business, and the eventual return on investment when you sell it.

Lack of systems will cost you money every day you are in business, and could cost you your total investment if you fail.

5 Comments

  1. I knew this was related to an E-Myth read! Great book and fantastic post, Jack. You are right on!

  2. Thanks Teresa, it is near and dear to my heart and one of the main reasons we have been successful for the long haul.

  3. Kmal:

    Thanks for valuable article
    Where we can find ready system for coffee shop?
    There is any other book you recommend

    • I answered this similar question on another post. Here is a repost of it:

      As each person is unique, each coffee shop is unique. There are some good resources out there, but not a “follow this plan and you’ll have everything you need” book.

      First choice is whether to select a franchise or to go on your own. For that you can read here (http://bit.ly/uMkP2R).

      Second is to read and learn as much as you can about coffee and about business. A couple of good books on that are “Growing a Business” by Paul Hawken and “Coffee: A Guide to Buying, Brewing, and Enjoying” by Kenneth Davids.

      Third, if you want a system to operate a coffee bar, that is a product we offer through our business. It is the Coffee Bar System and you can click the link (http://bit.ly/1gar2fQ) to find out more about it.

      I hope that helps.

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