Learn the coffee shop economics needed to make your business profitable and grow successfully in this episode with Andrew Tolley, the co-founder and head of coffee at Taylor Street Baristas. You’ll also learn the value of viewing staff as an investment rather than a cost, and the best way to maintain character in your shops whilst standardising processes.
How to use coffee shop economics to run a profitable business with Andrew Tolley
Top tips and takeaways
- If you don’t have a profitable business, you don’t have a business – so don’t feel guilty about trying to make money, it’s a necessity to help you realise your vision.
- When assessing a site for your coffee shop, you should do some quick back-of-the-envelope calculations to see if you can make it profitable. Estimate your revenue, then take away costs (labour, rent and raw materials) to project your profit/loss.
- There is a tradeoff between standardising processes and maintaining character in your shops as you start to open more – but as long as you stay true to your values, you can minimise mistakes and recover from them.
- Viewing staff as an investment rather than just a cost is critical – because if you invest in their training and development, they will be more engaged at work and be more likely to stay with your business for longer, which is a key factor to long-term success.
[02:48] Andrew tells the story of how he got into coffee
[04:46] The conflict between passion and profit and why you need to view your cafe as a retail business
[06:58] What the profitability of a site depends on and how to set rough benchmarks for profitability
[09:12] The importance of forecasting revenues and costs in a financial model and the right level of granularity to shoot for
[11:19] The other non financial acid tests you need to run to assess if a location is the right fit for you
[14:06] The challenges of creating a good food offering that can compete with the rest of the market
[16:26] The importance of training and developing staff and how to do this effectively to maintain engagement
[21:04] The requirements for opening up a second site and the challenges that come with scaling
[23:53] The Taylor Street origin story and the Tolleys’ ambition for the business
[27:29] Andrew’s current coffee habits and what he’s changed his mind about in the world of coffee