When Is The Right Time to Quit a Business?

oztite on 29/09/2017 - 13:02
Last edited 02/10/2017 - 13:07

Hi, seeking some public opinions here. When is the right time to quit a business? A bit of background:

Business: small coffee shop at the ground floor of a fairly isolated business building in a Melbourne south east suburb. Only customers would be workers in the same building.

Business model: people working in the building would buy coffee from me. Based on the number of people working in the building, there should be about 50 customers per day. Don't expect customers from elsewhere given its location.

Closest competitor: about 7-10 min walk down the street, established coffee shop where the workers of the building seem to go to

Lease: 3x3x3

Rental: $8,000 per year

Running cost including staff salary but excluding my own salary: $45,000 per year

I still hold my old job, and only work there two days a week, using my salary from the other 3 days to fund this business.

Problem: no one is coming through… we are getting about 5 people through per day at most and it has been just over 3 months now since we opened. All the people in the building have seen the shop but just not coming through.

Question: when should I quit given this unique situation? Advertising is not an issue because we are only there to serve the building, and people have to walk past the coffee shop to get to work.

EDIT:
Better fit-out, increasing range of food, hiring better baristas are all good suggestions but they all cost more money. For a big cafe it may be ok, but for a small coffee shop it is difficult unless I blow all my savings…

EDIT 2:
Missing a pretty, attractive, flirty, sexy extrovert in the cafe and run a free coffee day/ week seem to be popular advice.

EDIT 3:
Thanks everyone! So many great advice here, too many for me to respond to one by one. Really appreciate everyone's input and in hindsight I was ill-prepared for this business. Lesson learnt and will try some more promotion before closing it down/ selling it for a token. Hopefully some wannabe cafe owners out there have gained some experience from this too.

Poll Options

  • 189
    Shut down tomorrow, bad business model to start with
  • 30
    Give it another 2 months with more promotion
  • 4
    Invest more on fit-out, food range, barista quality etc. Get rich or die trying.
  • 3
    Cut cost even more, reduce opening hours, try and ride out the lease
Financial

Comments

  • kiwijunglist on 01/10/2017 - 11:41
    +6

    Change to a soup kitchen.
    Come up swith a cool name.
    I have a couple if really good soup recipes.
    You need minimal equipment on site.
    Also sell coffee.

    People love soup especially if healthy and yummy.

    A realty good soup to try is

    Fry 3x big onion minimal oil.
    Then Add 3x cauliflower 4x carrot
    Ham bone ends (get from supermarket cheap)
    Add vege or chicken stock to cover
    Cook for ages
    Take out bone
    Blend the shit out of it.

    • ankor on 02/10/2017 - 09:07

      I think this is quite an interesting idea. Stuff the coffee, but compete on something else entirely.

  • kiwijunglist on 01/10/2017 - 11:45
    +2

    Also the barista at my cafe in the hospital knows everyone's names and order without asking. Just have to nod.

    • hell0 on 01/10/2017 - 11:48
      -7

      Sounds like a busy-body to me.

      Once staff start treating me like a friend I know I go there too much and stop going.

  • drfuzzy on 01/10/2017 - 13:15
    -1

    You sell mediocre product
    from a mediocre location
    with a mediocre plan
    your results are mediocre as are many small businesses

    If you want to be exceptional you should do something exceptional.

  • TheRealCher on 01/10/2017 - 13:27
    +1

    From a customer's perspective, you're selling weed in a heavily over saturated dank part of town. People like weed. But people go to someone and somewhere they trust to get that weed. You mess with their weed, you mess with one of the few parts of the day they can control. Also, it sounds like people want to walk for their weed. It's a reason for them to be out of their office.
    What I would need to switch dealers is some amazing experience and incredible dope…
    And you can't seize control of the market and eliminate your competitors, ozbargain bikies notwithstanding. From what it sounds like, there's not enough money in the banana stand to make remodelling a good idea and you don't want to or can't get a new bunch of kids fresh out of high school and hook them while they're playing on their phones.
    It's not your fault: saturated market, old business model, strange building which seems nightmarish to me but hey, one Cher's battleship is another man's destroyer….
    Also what's in it for you? Is it the chance to do something interesting and meaningful for people, to meet others, to make lives better? Because coffee should be that… All drug sellers need to remember that. You're a dealer.
    If it's to make money in the side, find a better gig. Find something that gives you joy because all work sucks and it's not going to get easier. Find something that makes you feel like you've made a difference at the end of the day, if it requires you to sacrifice control/money/life fluids to survive.
    Ps all I know about this is what I learnt from Mary Louise Parker. And I am not recommending you get married to a cartel owner….

  • Tarnsie on 01/10/2017 - 13:35
    +3

    Same thing happened to the coffee shop downstairs. First you must be consistent with food and drink. Stories of bad coffees or inconsistently good coffees depending on barista or baristas mood spread like wildfire amongst the buildings occupants so most will likely walk further and pay more for consistently good coffee. Once they have the habit of walking to another place then it's going to be hard to attract them back. Simply asking them if they like the coffee will not help as most people will tell you it's good to your face but tell friends and colleagues the opposite.

    The customer demographic is quite different from ozbargain as most people in my work won't care about the cost. They are paying for good coffee, good atmosphere (funky and new shop) and a friendly barista with good customer service skills (knows their order, talks to them like a mate ). I doubt loyalty schemes or gimmicks like cute baristas will be the answer.

  • Tidy on 01/10/2017 - 14:24

    How does your coffee compare to your closest competitor's?

  • cockneylondoner on 01/10/2017 - 15:06
    -1

    What a stupid question to ask. You give away a business when it doesn't make money!!
    Who in their right mind would even contemplate opening a coffee drinking/eating establishment that serves just one building and with no passing trade.
    Are you honestly surprised that you only get a small number of customers.

  • JH100 on 01/10/2017 - 15:11
    +2

    The 'right time to quit a business' has passed when you are reduced to asking strangers on the internet.

    You already know this but are probably 'hopeful' you are wrong.

    I know, it's hard to leave your dream behind.

  • JimmyF on 01/10/2017 - 15:38
    +4

    I'm so confused

    Rental: $8,000 per year
    Running cost including staff salary but excluding my own salary: $45,000 per year

    So overheads are $53k per year…. or $1019 per week or $145/day (assuming 7 days, but its really more like $203/day mon-fri).

    Based on the number of people working in the building, there should be about 50 customers per day

    So each customer needs to spend $4.07c

    Your numbers are off….. if you want to make money.

  • viperxz on 01/10/2017 - 18:41

    Note: the following is just some comment from some random person on the internet who does not know the details of your business, take all of the following with a grain of salt and do your own research.

    The most important thing is going to be foot traffic, if there are no customers near you then you are always going to struggle unless you can sell something unique which will draw customers to your store.

    However if you have the foot traffic but potential customers are going elsewhere, then look at your your marketing and branding (and in this case the big draws are going to be fit out to entice customers to come in and buy, and product to ensure customers keep coming back).

    If I were running a coffee shop, the first thing I would be doing would be selling coffee made with Campos beans, and utilizing their branding (cups, banners, etc.). It's amazing what kind of following that coffee has and it can be enough to draw users to one coffee shop over another.

    Also make sure your coffee is actually good, make sure your barista is actually making a good cup of coffee and doing it consistently - it only takes one bad cup of coffee to loose a customer for good. It is going to be hard enough to get customers to try your coffee, if they have one bad cup of coffee and tell everyone else in the office that it was terrible - that one bad cup of coffee could have cost you 10 - 20 potential customers.

    At the end of the day it all comes down to numbers, I don't know what the margins and overheads are for coffee shop so I can't comment on whether as a business model it's a good idea - but at least get your marketing basics correct - price, product, position, place, people.

  • AustriaBargain on 01/10/2017 - 19:46

    A system that lets large orders upstairs be placed and be ready to pick up on a tray would be good. You could talk the office into doing coffee runs, instead of lining up like chumps during break times.

  • funkybamboo on 01/10/2017 - 21:07
    +3

    There are some good and not so good takeaways from the overall comments here (pardon the pun!). I think alot needs to be said about where you are seeking advice though, as a random bunch of ozbargainers may not necessarily be the most well equipped or business savvy to comment. Strongly agree with viperxz. Have you thought of finding a mentor or as viperxz has suggested reaching out to someone like Campos as an established brand or a coffee franchise for advice, guidance or financial support? Is there a local small business network you could reach out to locally that could give you support and advice?

    • funkybamboo on 01/10/2017 - 22:11
      +3

      Would like to add:

      First off - there are plenty of places offering barista training. Hire someone to come in for a couple of hours to up-skill your barista and give you a verdict on your coffee and how you can improve it.

      I've been on both sides having worked as a barista and also in your corporate target market. I strongly agree with what bl1027 has commented. The race or sex of your barista will likely make little difference. You want an approachable brand, friendly staff and good coffee. As for the comments about hiring some poor barista to be drooled over, I'd be interested to know where they are coming from because a cafe full of sleezey guys will easily scare away 50% of your target audience…and good luck holding onto your staff! On the flipside my old office used to have an excessively flirty barista who used to "work it" because the new business owner obviously though sexiness sells…there's a fine line. What used to be our regular 3pm coffee joint you couldn't pay any of the girls to go in there after it changed hands.

      OPENING HOURS: Have you thought about 7-4pm to catch the early birds?
      BASIC FOOD: I think you could trial some basic hot food for a couple of weeks without much output. Offer quick snacks for those who have to work through their lunch or work late and can't get away for long to grab lunch or need it on the go. Toasties, soup, pasta salads. You or your staff do not need chefing skills to do this. You could do this with non-perishables that can be tinned/frozen/refrigerated. So you could literally buy a weeks worth and see how it goes down with customers (if it doesn't - well you've got snacks at home! For eg Pre-make some basic pasta and noodle salads to keep in the fridge? Basic pizza that can be microwaved to reheat. Grab a sunbeam grill for toasties (you can freeze toasted sandwhiches). A slow cooker/soup tureen for soup? You could use your appliances from home - or spend $50 or less per item new (or cheaper on ebay).

      CURRENT/FUTURE FOOD COSTS: Can you cut costs on your food production by baking your own banana bread in bulk and freezing it? Buy your fruit toast from Aldi and freezing it? Soup - chuck a pumpkin (currently $1 kg and some onions in a slow cooker for a few hours -50c a serve voila!

      All I can say is you sound like you have integrity and good on you for giving it a go! Don't give up, if this business fails keep at it and move on to the next, it's the nature of business. It's not a failure, it's a learning curve. Don't listen to the nay-sayers. If you step back, pivot and take a fresh look things just might change.

  • arbok on 01/10/2017 - 21:23
    +1

    Very interesting responses here.

    My take is that your rental is still incredibly cheap and you can still make something out of it, at least enough so that you're not losing money.

    1. 50 cups of coffee x 20 days x 12 months x $3 per cup of coffee = $36000

    Now assuming you work there full time minus your expenses, rent and you're probably looking at $10k salary a year. Is that really worth it? Probably not in my opinion, but it might be a good lesson for your next store.

    What I noticed at my work is that if they are paid professionals, people don't really care about the price of a cup of coffee, its already factored into their expenses, they just care about if its good or not. So I'd make sure its the best cup of coffee you can make and that starts with yourself or the staff making consistent coffee.

    Secondly it seems these workers just want to go for a break and get fresh air, so that's probably a really hard thing to convince people not to do. Perhaps if you're allowed, you could place some chairs outside the building? Otherwise you're going to have to offer some deep discounting to make them break their habit of going for a walk. So a buy one get one free deal for a month or so or just on tuesdays for example.

    Also consider offering packaged foods like muffins and slices that last a little longer, so things don't go stale as quickly.

    Finally go to the other shop and look at their menu and offer people something that they don't have. Could be an apple scroll or big cookie.

    And there's no way you can afford to have a staff running the shop at a loss, that's just silly. You should work there full time if you want to keep the shop going.

  • [Deactivated] on 01/10/2017 - 22:32

    1 Try advertising for a 2 for 1 day

    Better than just giving someone a free coffee - you get two people through the door and at least one pays

    2 try getting social media involved with insta and fb promos

    3 approach the companies to see if you can organise phone orders or catering

    4 you need some sort of food options

    I think you need to speak to a financial advisor to find a way to separate business money and personal money. Perhaps a family trust etc

    • [Deactivated] on 01/10/2017 - 22:33
      +3

      What is this random bold haha

  • nimnomnimy on 01/10/2017 - 23:32

    the way I see it, if you have 50 people in the building and you get all of them to come get coffee twice a day, all year round, best case you clear around $150k
    this is to account for some people buying food, you are not going to get everyone, there are holidays and such etc..

    then you take your cost which is around 50-60k and you are down to 100k
    then you have the loyalists from the other options for food and coffee and you are down to maybe half of that.
    then theres the cost of materials and wastage…

    I really don't see much being left for you at the end of it all.
    the only way I see it being viable is if you are just running it yourself without employees and do something particularly well.
    Melbourne coffee snobs (myself included) will travel 10 mins for a better mug most days of the week.

  • wtfnodeal on 02/10/2017 - 00:05
    +2

    ? If 50 cups of coffee max per day at $5 per cup your annual income is roughly $65k less rent and staff salary $53k so net profit is $12k excluding your salary. What's in it for you to begin with?

  • Mrgreenz on 02/10/2017 - 00:25
    +1

    I would invest a day counting the number of people in the building, and the number of people buying coffees.

    There may not even be close to the number of people in the building you need on a daily basis.

    50 people is a lot of people from one building going to that one coffee shop. Would be a train of people heading there at lunch time.

    You may get a seasonal boost coming out of winter.

    Do you have outdoor seating?

    Props to you candid analysis on you venture.

  • justinh93 on 02/10/2017 - 03:10
    +1

    I reckon you just need to fix your product. In hospitality it's all about your product particularly when you are relying on repeat. Avoid the big brands like vittoria even though they offer you loads of cash and free machines. Using something like axel or proud Mary's would be good if you are in Melbourne. The 80 cents will not really make a difference as it just highlights your coffee is probably not as good, especially when coffee is such a social thing.

    If you can't afford to make the changes than maybe close it. You shouldn't need to pay out the entire lease. Just make sure you start negotiating now, start paying your rent a bit late. Ask for rent reductions and then negotiate a payout, should be about 6 months rent.

  • BartholemewH on 02/10/2017 - 06:34
    +5

    I am an accountant/manager and have extensive experience with the coffee industry. You need to be doing 6kg a week to be a basic entry level cafe (that's plus offering food). This is 600+ coffees as a mixture of singles and doubles, per week, every week. A popular hipster cafe is smashing 25kg+ a week. From what I have surmised you are doing less than 500 grams with very little food to supplement your income. Cafes that are doing good kilos don't even pay for their equipment, it is provided free on loan, as well as marketing boards, umbrellas, menus, aprons, shirts, chocolate shakers, neon signs, the whole shebang. I haven't read the whole thread but have seen a lot of 'I don't have x factor', 'my staff aren't pretty', 'I can't afford a fit out' etc. etc. Very negative responses, understandably given the situation, but not what is required here. I agree with taking a few weeks off work and putting absolutely everything you have into improving the sales of the business. Offer free piggyback rides if you have to as that is the attitude that is required. If you don't see an improvement try to sell the lease as a going concern for a nominal sum.

    Also, please charge somewhere near market rates, you aren't doing yourself any favours charging less.

    • BartholemewH on 02/10/2017 - 12:55
      +1

      To clarify, by everything you have, I don't mean financially.

    • danyool on 02/10/2017 - 15:25
      +3

      Also, please charge somewhere near market rates, you aren't doing yourself any favours charging less.

      Although you might consider giving the 5 current customers a founder discount! ;)

  • Godric on 02/10/2017 - 07:03
    +2

    This guy wants more $$ without spending more $$, GG close up.

  • berger on 02/10/2017 - 09:28

    if your in a building, why not deliver the coffees?

  • onlyletters on 02/10/2017 - 11:52

    offer free coffee for a day or say pay what you like or pay us tomorrow. show them how good your coffee is. if they like it, they will pay to come back. the normal 5th coffee free concept is ok but everyone is doing it so think of something original.

  • Hardlyworkin on 02/10/2017 - 12:11
    +3

    Close up shop now! As mentioned many times above I don't know how you will make money on your business model. You are better off being your barista!

    I see so many people buying hospitality businesses without having worked in the industry before…. Many expensive lessons to be had. I think you need to befriend some coffee shop owners before your next venture, spend some time in their shop and there books.

  • Baa on 02/10/2017 - 12:47

    Close up now.

    I think unfortunately even if you make changes the damage has already been done, and without a major overhaul (without a guarantee for success) I don't think things will improve.

    While I am not a coffee drinker I will almost always go on 'coffee walks' to get some fresh air and enjoy some socialisation, with this being the case nobody I have ever worked with has use the in building coffee store for this.

  • diend on 02/10/2017 - 13:03

    interesting discussion.
    would be interesting to have a chat with @ozlite privately

    • Baysew on 02/10/2017 - 14:34
      +5

      Go to his shop and buy him a coffee.

  • aman00024 on 02/10/2017 - 18:13

    Wats da trading hours?

  • Ivan Krazy on 02/10/2017 - 18:53

    I work in a building and there is a cafe internally. I absolutely refuse to go there after a bad experience. Had South Melbourne dim sims to find a small fly on it and after eating the dim dim found multiple hairs. I demanded a refund and they gave me a partial refund and I said ‘no full refund please including the card surcharge’. Coffee is very average and now refuse to spend a cent there. So I walk down the road for 4 or so mins to get good coffee at woolies (they actually make really good coffee believe it or not). My work colleagues refuse to now do to the cafe downstairs after I told them my experience and they also really like the woolies coffee near by.

  • nikey2k27 on 02/10/2017 - 21:31

    What coffee beans are you using?

  • [Deactivated] on 03/10/2017 - 04:29

    You need to be making $3-5 profit per a customer to even break even based on the numbers you give… What's that, like 2 coffees and their lunch every day for you to even break even?

  • weee on 03/10/2017 - 12:17

    close up, I'm no biz savvy, but it's such a bleak business you have, the customer source is not desirable you are only serving one building which is located in isolation already, and you have a proper cafe not far and people keep going there, why? because the they want to go to a proper place they can order hot food and more importantly sit down and chat up a bit, you can't do that and you are going no where with your business there's no prospect whatsoever, close it now when it's not too late, next time before buying business, location! location! location!

  • misterpotatomato on 03/10/2017 - 14:46

    Also, if you did catering for your office, this could be a huge money spinner.

    Hit me up if you want a website/something for people to order catering through

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