Yahoo Finance Cafe owner busts ‘massive misconception’ about opening your own cafe: 'Sounds crazy'
Ruby said you need less than a month's salary to get started.
A cafe owner has revealed how Aussies can start their own coffee shop for just a few thousand dollars. Ruby Irvine Rule has been inundated with messages from people wanting to open a cafe but they feel they don't have enough money to get the ball rolling.
While one cafe owner previously told Yahoo Finance that you operate on very slim margins when selling coffee, Rule said the start up costs don't have to be that high. She said it's a "massive misconception" that you need tens of thousands of dollars to get up and running.
While the rising cost of living might put some wannabe small business owners off from kickstarting their dream, Rule explained you just need to focus on the basics at the start.
Do you have a start up success story? Email stew.perrie@yahooinc.com
"This might sound crazy to some people but you can actually open a coffee shop on less than a month's salary," she said.
Ruby owns two cafes and managed to get one started with just $2,000.
"You do not need a lot of money," she said. "I did this with next to no money and next to no clue.
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"It's just about knowing where to look and where to shop. And what to ask for from suppliers. And you can actually get yourself a really good setup."
She gave three handy tips on what should be on your hit list if you're just getting started.
The where
Location is everything when opening a small business and it can be daunting trying to find somewhere affordable. With property prices rising nearly everywhere in the country, the place where you might want to set up your cafe could be way out of your price range.
But Rule said there are options available if you don't want to buy the shop.
"Renting is a very, very acceptable thing to do," she said. "In fact in Australia, even massive companies just rent the buildings.
"There's literally nothing wrong with renting and if you can sublet, that's even better. Once you have a lease sorted out, often you'll have to maybe pay a little bit upfront but often you don't have to especially if it's a sublet situation."
The how
Okay, you've found the location and now you need to get all the equipment that will deliver coffee to the locals. Bulky, shiny, new coffee machines look expensive, but Rule said you don't have to be burdened with paying for them if you strike a deal.
"What I did personally when I opened the Boneyard Espresso, which is my first business, is I negotiated my equipment all inclusive with my coffee contract," she revealed. "That meant I had to buy 20 kilograms of coffee a week.
"However, there was a three month grace period for me to build up to that amount of coffee and all the equipment was free.
"They came and installed it, they showed me how to use it, and it was incredible."
You can also lease all your equipment as a 'try before you buy' situation if you don't want to commit to one coffee bean supplier.
The what
You've got your location and you're prepped to start making coffee, but now you have to worry about aesthetics. You might think you have to pump thousands of dollars into making the place fit your vibe or your vision, but Rule said to start small.
"Keep things simple," she explained. "You do not need to have a beautiful setup at the start. Make sure you've got nice paint on the walls and the place is clean.
"And then it's just about pumping out a good coffee because the most important thing is people walking away with a good coffee and then they'll come back and then you'll have more cash coming in."
Set your expectations around profit
Another cafe owner explained to Yahoo Finance that coffee shops operate on fairly small margins unless they're slinging out lots of food.
“Milk’s going up, it’s gone up lots in the last 12 months,” Yasmin Chung said. “Our coffee prices have gone up. It’s a lot of money and it makes it more of a luxury good as opposed to everyday good."
She runs the Sisterhood cafe in Hobart and she recently broke down how much you usually earn from each cup of coffee.
“If I'm selling a small takeaway for $4.80 … the first 45 cents goes straight to the government, and that is the GST portion that we have to give the government for all our sales,” she said.
“Next up is $1.30. That's 30 per cent And that's our COGS [Cost Of Goods Sold]. That's the coffee. It's the milk. It's the coffee cup and the lid.”
Chung said 40 per cent then went to paying her staff and their superannuation, but she admitted that was being conservative and depended on staffing levels. Then there’s 45 cents, which is nearly 10 per cent of a $4.80 coffee, that goes into insurance, electricity, repairs and maintenance.
That leaves just 40 cents profit if prices are “standard”. Chung explained that many cafes operated on a profit margin of between 5-10 per cent.
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