The Hardest Business

Some time ago a client came to consult with me about writing the business plan for a new venture she wanted to start with her mother: a coffee house. Now, with the huge increase in coffee sales in recent years, and the ongoing proliferation of coffee houses, there isn’t really much doubt that you can make a relatively large amount of money selling coffee. True, the big chains have swept up much of the market, but there is still a niche for local institutions; neighborhood coffee houses that don’t look, smell, sound and taste just like 8,000 other locations throughout the United States, Canada, and Europe. The problem was that my client and her mother wanted to go into the business because their current jobs (they were both accountants) were too difficult, and they wanted to do less work.

Needless to say, neither of them had ever worked in food service before. Had they done so, they would probably have realized what everyone else who has ever tried their hand in this industry already knows: that it’s the hardest business to survive in, let alone make money. If you’d rather not take my word for it, there was an excellent article in Slate Magazine about two years ago (or about three years AFTER the consultation in question) explaining the economics of a small coffee house and why you can expect to go mad trying to make a go of one. Of course, not all locations are as demanding as New York City, but most other locations also lack the population density that gives NYC its unique mass of customers. Generally speaking, most other locations are a wash.

My clients had been expecting to start their workday every morning at 9 am, 8:00 at the earliest. I pointed out to them that this would mean abandoning all of the morning rush hour customers to whatever chain coffee vendor happened to be nearby, and suggested that they’d probably need to get in by 5 am to get ready for a 6 am opening (5:30 would be better). They both got this look, like a deer in the headlights, as they contemplated getting up at 4:00 am every morning. They had also expected to close at 6 pm, until I pointed out that this would mean giving the after-dinner, after-theater, late night and evening commute business to the competition. Closing before 10:00 pm would mean throwing away more money, and Midnight would be better. If they intended to bake their own baked goods, they’d need to get in by 4 am to get dough in the oven by 5 for a 6 am opening, and they’d have to count on another hour at close to wash dishes if they were going to serve food.

By this point, the “deer in the headlights” look had gotten a bit fixed, and we hadn’t even started on the amount of coffee they would need to sell each day in order to stay in business, the physical demands of running such a business, or the difficulties they would face in trying to get financing for such a project from bankers who would already know about all of these issues and would not be eager to advance money on a project this risky. But the worst part of the whole proposition is that even if they had managed to complete all of the preparation, overcome all of the development tasks, launch their enterprise and live with the insane hours and crushing physical demands of the work, their coffee house might still have failed. Because, you see, in food service, you don’t actually have to be selling an inferior product to lose all of your customers; people just have to BELIEVE that you do…

I’m not sure what became of my clients; I suggested they rethink the project and get back to me. They never did. Hopefully they’ve settled on some form of start up business that will allow you to work less than 8 hours each day, only 5 days per week, with no risks and no need for start-up capital – and if anyone out there knows what kind of business that would be, I’d appreciate it if you’d drop me a line and let ME know.

Because I’ve never heard of such a thing…