Opening a new business - Where to begin?

[hiten55]

Hi, i've been working on opening a new business (Coffee shop to be precise) over the last year or so and have kind of come to a sticking point. My background is in retail as I work for the family business but I feel I need to diversify and move on alone for various reasons. Coffee shops really struck a chord with me, they seem to fit in with my lifestyle etc and would be somewhere where work would be a pleasure to me rather than a chore.

So initially I started walking around London visiting indie coffee shops on various top ten lists. Just to get a feel and to make sure that was 100% the right field for me to go into and also to pick up some pointers. The next stage was to do a two day course at the London School of Coffee on coffee shop startups.

Fast forward a few months and I eventually found an ideal venue in a new build very local to me (despite looking all over London). I made a business plan, hired a consultant (he actually ran the course I attended and we both seem to be on the same page so I figured it would be beneficial. The agent was very impressed with my proposal and I left it with him. Being at least a year from the site opening I figured I may not hear back for a while. Fast forward a few months and I am now in a position where we are holding talks with the landlord. However one of the units has been handed to Costa. Although this has little impact on our offering as we will be doing hot foods, sandwiches, fresh juices etc. Over the last few weeks I have also looked at approximately 10-15 empty units per week across London but this is still the one that stands out as having the greatest ROI. My consultant agrees that we should not be scared off by the Costa threat as our offering is varied.

So that brings me to my sticking point. I know i will need funding, what I am really after is a mentor. Although I have great experience of running a multi site retail business I do not have much in terms of startup and ideally I'm after someone who can guide me along the way. Theres so much to do in terms of finding a suitable bank, funding, company setup/structure etc that Im not really sure where to begin. I've looked into angels, mentors, investors etc but to be honest I'm more confused now than I was when I started. I've just spent an hour trying again but I'm still non the wiser. Theres a lot of help for new tech startups but i cant seem to find any for hospitality. I have applied to startuploans.co.uk but im not the kind of person to rely on someone without exploring my options if that makes sense?

I'm hoping someone on here can provide me with a pointer as to which direction to go in for this kind of help?

Many thanks, sorry for the long post.

Regards,

Hiten

 

[Scott@KarmaContent]

Contact your local Chamber of Commerce. They should be able to help you and if not, they'll undoubtedly be able to point you in the right direction. I'm sure most, if not all areas have a local enterprise agency too who can advise on start up loans, securing funding and the basics of running a business.

 

[ethical PR]

You could also contact the business team at your local council to find out about the sort of support that would be available locally.

 

[Sheppy]

If you need funding you could try Start Up Loans (up to £25000) and you will get a mentor for 12 months.

 

[hiten55]

Thanks for the replies, i've already contacted Start Up Loans, they just called me back infact.

I'll get in touch with the local chamber of commerce and see what else is available. Thanks for all your help, any other suggestions are always welcome

im sure i'll be on here a lot over the next few months.

 

[Chris Williams]

Hi, Good to see that you've taken a slow and methodical approach to this. Time and time again you hear of business not succeeding due to lack of planning, lack of commitment... lack of need. My concern though, if I was in your shoes IS Costa. Big multinationals when setting up in areas will have already tested the local market for saturation of their type of products... yours not being there when this 'testing' would of been carried out. My fear is that Costa, although a massive company have regional and local sales targets as do all businesses. Will your business potentially take trade of them? if so, are you prepared for the potential 'Coffee War' that could ensue.
On a side note, the saying 'Location, location, location' doesn't always ring true.
I have a contact that helped fund a new start-up making gourmet burgers. Their location is to say the least, out of the way, but they have found great success down to their product... not location.
Wish you all the best

 

[Scoped Solutions]

This might sound like a bit 'cart before the horse', but I would suggest securing the services of an accountant first. He can then advise on the most tax efficient means of obtaining startup capital (they aren't all the same in this respect) and they may well know of a variety of funding channels that might not be so obvious. Councils, as mentioned already, can also be an invaluable source of useful and free information.

 

[colour24]

I agree with the above, but go and see several accountants as they mostly offer a free 1st half hour to meet up and check them out. Find one that seems to have the right knowledge AND that you feel you could get on with in the long run.

 

[hiten55]

Thanks for all the replies. I spoke to my accountant last week, he's given me some homework to do on my figures. I've been in touch with startup loans and they are happy with the concept so far.

I had a meeting with the landlords yesterday to discuss my plans. I took my consultant along to help alleviate any worries regarding my experience etc - that really helped. The only issue they were concerned with was my debt to equity ratio - understandable as it currently sits at 3.5%. However, the figures i gave were a year old and rough estimates - they only gave us 24hours notice and they knew the figures weren't anyway near finalised. My consultant is currently working through the plan to update the figures, which I will then look at and show my accountant.

Apart from that, we have a company being registered, branding is also being done, we have equipment lists for the kitchen and a potential loan from Startuploans.co.uk which is a personal loan.

im looking to asset finance the Kitchen, epos, and part of the fit out - depending on final cost estimates.

The landlord suggested they would be happier if we downsize and they have another operator next door that offers food but im not happy with that as we would loose sale space and open up an opportunity for competition. Plus this will only work if we do what we have proposed - food, pastries, coffee, smoothies, cold drinks etc.

Im now looking into angel investors, which I had always looked at doing anyway, but after the lease was signed. i think they bring more value than banks and it helps minimise risk to have someone with more experience on board.

Any thoughts on the above would be much appreciated as always

-Hiten

 

[SugarCubeProductions]

If you talk to the North London Credit Union, they are one of the start up loan company sellers. They provide lots of mentoring and support with the loans and should be able to help you.

 

[namesweb]

My concern though, if I was in your shoes IS Costa. Big multinationals when setting up in areas will have already tested the local market for saturation of their type of products... yours not being there when this 'testing' would of been carried out. My fear is that Costa, although a massive company have regional and local sales targets as do all businesses. Will your business potentially take trade of them? if so, are you prepared for the potential 'Coffee War' that could ensue.

As someone who used to work for a large coffee/sandwich chain of 100+ shops in London (direct competitor of Pret A Manger), there is an argument to be made that if Costa are moving in theres a reason, probably because its a good location and will bring good business. They've invested in the market research, and there is nothing wrong with piggy backing off that.

The company I used to work for literally just used to (and still do to this day) wait for a Pret to open, then open one within 100 yards. It leaves them with not as great locations, but the volume of sales they sacrifice they make up for in lower cost of research & acquisition as they're targeting exactly the same custom. Though it was frustrating to see them sacrificing longer term growth.

Just make sure the costa isn't being opened just for shop visibility, as some chains (like the one I used to work for) are happy breaking even on units or even taking smallish losses if it helps their brand strategy/brand visibility in the high street in the long term. A day sat in their shop should roughly answer that seeing as you know roughly the unit rental cost, and can make estimations of labour spend, waste, and other running costs.

For the coffee war, don't skimp on hiring a top class barista. Hiring a better than average barista with a pleasant personality will win customers, as they'll need to be serving quickly during peak times of the day (morning rush, and lunch time rush), and small differences such as knowing what a cortado is, or making sure a latte doesn't have too much foam etc will be what brings repeat custom. Even a basic like a smile was so often forgotten in our shops and it just left you with a sour impression of the business.

An experienced barista will also be adept at dealing with the pressure of delivering the right drinks to the right people at good quality and quickly during peak hours. Any ability at doing latte art will send customers away with a really good image of what your standards are about and they'll return, allowing you to reflect the additional quality over competitors in your margins, which will typically be about £2~ on a 30p~ cup of coffee (incl the milk/sugar)

As for your food offering, make sure you are absolutely bang on the money in terms of quality and don't be afraid to innovate new products - ham and cheese sandwiches are all well and good and may well form part of your core offering, but smaller batches of seasonal or trend following items are good margin generators if produced in the right volumes to offset your waste.

Eventually the company I used to work for have begun innovating, but its taken the best part of 5-10 years for them to be really pushing the market forward (instead of just copying Pret).

I'm innovating a complementary product for coffee shops/grab and go restaurants that would work fantastically as a point of sale product, but eventually hope to turn the company which will supply INTO these shops, into a chain of grab and go restaurants of its own.

If you have any specific questions about how the co i used to work for was run feel free to drop me a PM.

 

[Chris Williams]

The landlord suggested they would be happier if we downsize and they have another operator next door that offers food but im not happy with that as we would loose sale space and open up an opportunity for competition. Plus this will only work if we do what we have proposed - food, pastries, coffee, smoothies, cold drinks etc.

Im now looking into angel investors, which I had always looked at doing anyway, but after the lease was signed. i think they bring more value than banks and it helps minimise risk to have someone with more experience on board.

Sounds like the Landlord is feeling you out for increase of rates to be honest. Stick your ground and see if he/she makes anymore advances in that line of communication.

In terms of investment, there are heaps of companies that would offer assistance for this start-up. I wouldn't just look towards 1 either. You may have opportunity to engage with multiple. Perhaps offering a small percentage of company share holding for return to reduce the payback rate? If that is an option then look at something like Kick Starter? offer a percentage share in your business for £xxx or (tongue in cheek) free coffee for life.