By Andrew Gough
As the owner of a coffee roasting company, one of the most rewarding parts of my business is getting to consult with prospective customers and cafe owners. I get to use my real-life experience to help a dreamer shop owner predict their own future. How many covers each day? Average ticket size? Need help building a menu? No problem. I got this. But do I really? Although I desire to help people realize their dreams, I have come to the realization there is a lack of tools and information to help coffee roaster and retailer owners manage their business.
Before moving in to coffee—as a retirement plan employee education coordinator—it was my job to educate, entertain, and motivate audiences into making life-changing decisions about their financial futures. I thought of myself as the American worker’s retirement advocate. Even though my mission fueled me, the quest was always an uphill battle. I’ve always had a desire to run my own business, but I was working full-time for a large company and I didn’t have time to truly learn the business part of running a business.
I developed an interest in coffee and was curious to know more, so a friend introduced me to specialty coffee and I became hooked. I determined that working for myself someday was what I wanted and there was a great opportunity in specialty coffee. I went to the drawing board, armed with a subscription to an online business plan building tool called LivePlan. I then purchased my first coffee roaster with my credit card; I was a true credit card entrepreneur.
Sure, there are some books about starting a coffee business. But while they may provide some basic business advice and metrics, there really has been little to no comparative data to measure my strategy against. It was the Wild West of business planning, shooting pistols in the dark hoping to hit my target.
Now let’s be honest, owners…we have all had those moments when we desired to know where we stood in our business compared to our friends and competitors. I know, I know—it’s never nice to ask someone how much money they made (or cups they served or pounds they roasted). It’s just common courtesy to keep the numbers talk to a minimum and do your own thing.
But I really need to know where I stand. I work with an amazing team of coffee pros, and I stand with other amazing owners/operators at industry meetings and events. And I know we are all thinking the same thing, but just not willing to ask. How do you ask? Where do you go for data? Armed with only guesses, business owners cannot forecast with much degree of certainty. If there were a business class for coffee professionals, such as Business Planning 101, this vital information would be delivered in the first session: sales predictions, target COG %’s, budgeted labor cost %’s, average overhead %’s, etc.
Here’s a tidbit of info worth chewing on: Did you know that until a small SCA survey was completed in 2015, there was no formal study of the specialty coffee industry financials? In just about every other industry you can get great data about nearly every aspect of it. But in specialty coffee, the information collection has been simply lacking. The SCA took notice of this opportunity and after the 2015 survey results were examined, it was decided a benchmark study needed to be developed.
At Re:co Symposium in Seattle earlier this year, SCA Research Manager, Heather Ward, rolled out a new industry benchmarking study. This was music to my ears. Even though I was nearing my fourth year in business, I still had so many questions about my business. I have no personal mentor that understood the coffee business. The metrics were just made up from pushing forward through the results we have experienced.
The intention of the SCA Roaster/Retailer Financial Benchmarking Study is to allow roasters and/or retailers to confidentially submit detailed financial data for the previous year into a complex database, which enables users to analyze data and compare the results with the rest of the aggregated data. If a large enough sample is collected, you may get to see where you stand within your own region.
When I was a retirement plan educator, I made regular stops to my customer accounts to check on the employee’s progress and offer updates to support their plans. The benchmarking study works the same way. I can enter the end-of-year financials and continue to analyze and compare my results year after year. If you are reporting to your team through transparent financials or to an investor, this is a one-of-a-kind tool to use to establish goals and monitor progress.
I learned early on in my business that I needed to create and maintain solid financials. I use QuickBooks for my bookkeeping software, so it was relatively easy to pull much of the financial data for the study. After SCA 2017, I immediately begin inputting the data into the website. There are several categories of information and if you are successfully able to input 50% of the data, you will gain access to your results and the benchmarking comparison tools.
I have personally found many surprising discoveries with the benchmarking data so far. For example, I realized my retail prices for bagged coffee are quite a bit above the sample average. This may be part of the reason why I have noticed a decline in the percentage of bags sold per customer who visits my retail shop. I’ve also been able to compare my labor percentages to the sample, which provides my team with tangible goals to work towards when they run too high for a particular period of time. It should be noted that the better the data you enter, the more useful the output will be, so you are encouraged to provide as much information as possible when completing the survey.
In the book Give and Take, author Adam Grant demonstrates how “ourless givers” (as opposed to “selfless givers”) are more likely to find success. The term reciprocity means the practice of exchanging things with others for mutual benefit. In short, those who give with expectation of sharing benefit with a recipient will naturally promote a greater culture of success for all parties. It’s the win-win scenario.
This study is one that indirectly benefits us and the rest of our industry. The SCA is dedicated to the whole industry, and the research can help drive more valuable curriculum to those of us that feel our role, or at least part of it, is to run and grow the business. I have made it part of my personal mission to be an advocate for the coffee businessperson. My giving to the study is with the intention of receiving benefit from the study.
It is my hope to inspire more business owners to contribute to this important research. You may find the process complicated and overwhelming, but keep in mind there is a prize at the end. Feel free to reach out to me if you need a hand in the process. It’s that important to me that you be successful, too. After all, I gain great satisfaction in knowing I can help others.
Andrew Gough founded Wichita-based Reverie Coffee Roasters in 2013 after spending nearly a decade in the financial services industry. Two years after opening his coffee roaster/retailer, Andrew joined his team full-time and Reverie Coffee Roasters has grown into an award-winning company, determined to solve the struggles of our city through community engagement and by promoting civic pride. Oh, and they just happen to make ridiculously tasty coffee.