A new survey has placed coffee shops in the top ten businesses most likely to succeed for start-up businesspeople this year.   The Startups UK organisation has said that after two months’  of research, which involved interviews with such authorities as stars of Dragons’ Den, it has highlighted the ten most promising business openings for 2012.

By Ian Boughton

Apart from coffee shops, the most promising sectors in which a start-up business person might succeed were frozen yoghurt, hobby and craft products, social gaming, mobile ‘apps’, smartphone repairs, Olympic-themed business ideas, cycling, dance and fitness, and most delightfully of all, giving careers advice.

Having read the report on how to start a coffee shop, several of the trade’s most experienced consultants and trainers said that they agreed with the general theory that this is still a good time to start such a business, but are sceptical of some of the business advice offered by people who are obviously not from within the trade.

The Start-ups report included well versed observations such as crediting the TV programme Friends with having ‘introduced Britain to the delights of a casual natter in a coffee shop’, repeated some of the most frequently-questioned statistics about coffee shop usage, and suggested that ‘the gap between the numbers of independents and big-chain branches could narrow this year’. The ‘full report’ on how to open a coffee shop then concentrated on food hygiene, and omitted any reference at all to skills with coffee, espressos or baristas.

The report also indicated that: “The coffee shop market is expected to grow by 25 per cent between 2009 and 2014, meaning now could be a great time to grab a slice of the action’.

The coffee trade generally approved of the theory that opportunities exist, but no further.  “To quote the meerkat – ‘Simples’!” was the response to the guide from Peter Kirton, managing director of the Esquires chain. “If only it were!  I do not think this year is particularly better or worse than any year to open a coffee shop. There are still opportunities for those who do their homework and are not afraid to work. But finding good locations for a coffee shop will become more and more difficult with the continuing growth of the industry, particularly the bigger brands.”

The coffee trade is always critical of ‘how to’ guides written by those who have not worked in the business, and a typical response from one established consultant was: ‘this is scary stuff,  having fluff and no business grit or structure to guide the enthusiastic entrepreneurs – and frankly quite mad. It would have been better to have a link to one of the noble tomes written by a pair of Northern Irish gentlemen!”

The gentlemen to whom she refers are of course the Coffee Boys, who have in the past been scathing about some of the ‘how to’ books published in the general business market.”Dangerously superficial, is the usual problem,” agreed Coffee Boy Johnny Richardson.  “Coffee shops as a business model are something that is immensely appealing to the human psyche and media alike. They’re one of those businesses that people want to believe are simple and a guaranteed success.

“The opportunities are, as ever, still very large but the key fact is that these are businesses no different in terms of fundamentals to running a widget factory.  It requires a very strong understanding of how the business will be positioned within the market place, for the full food and beverage offer to be thought out in the light of that, and then the finance part must kick in – at a core level people must be thinking: “how will this add up?  How will I make money? What happens if it fails?”

“This means that a very strong understanding of finance, people management, operational systems, R&D, marketing, all at the core.  How will they make it easy for the customer to buy?  How will they keep the staff happy whilst serving?  How will they recruit these staff?  How will they train, induct and enthuse these staff?  What will be the expected minimum standards?  How will they enforce these?  How will they drive new customers to the business?  How will they ensure the customers spend money when they’re in the shop?  How will they ensure the customers come back frequently?  How will the business manage when they go on holiday?

“This ‘full length guide’ basically deals with location and food hygiene, with a little bit thrown in about how hard it will be to stand on your feet all day. What infuriates me about much of the advice about this market (and I include some coffee suppliers in this) is that very often they talk simply about creating a sexy environment. In spite of this – it actually is a great time to start.  Rents are low (outside London) and landlords are desperate.  The market is booming but there are probably fifty more important issues to deal with apart from keeping the food safety people happy.  And even great coffee constitutes about one fourteenth of the things that you need to have in place to ensure a profitable coffee shop.“

At the London School of Coffee, Steve Hurst has always noted that his ‘how to start a coffee shop’ course is one of the sessions which draws an increasing number of applicants. “It appears one of the favourite enterprises for the newly redundant is to start a coffee shop or artisan small roastery. Australian and Kiwi entrepreneurs have given life to much of the London and South Coast coffee scene, hustling up business with great coffees and trendy high-quality cafés – yet it is not simply a matter of putting a sign on the door and guaranteeing success.

“The more ‘differentiated’ coffee houses seem to be gaining a loyal and discerning clientele. This has been mainly focused on urban London for the time being,  but eventually I think we will see this genuine coffee house Melbourne style spreading outwards to the other large urban areas.

“While the artisan differentiated coffee houses appear to be managing this economic downturn, those without something very different to bring to the party, the Costas, Nero and Starbuck clone me-too operations, may be insufficiently differentiated to do well. Get good, get big, or get out is how I would sum it up!”

Consultant Victoria Bishop recalls speaking on this very subject at an exhibition last year: “It’s throwing all the business angles at the new start-ups which opens some eyes. I would say to any budding entrepreneur looking at opening this year in the current climate – go through all the crucial business questions, and then get someone to re-write them, and make sure you can answer them all again. Get someone to smash your rose tinted glasses!”

She did however agree with one aspect of the Startup report, which advised working in a coffee shop to gain experience. “Yes, go get a job working for another business, either openly or undercover. Then when you start up for yourself, you will know that you took on the others because they were not going to be a threat for some reason, and that you did something different, and found yourself a USP.

“It is worth getting a taste of the lifestyle – is it one you really want, and can you really sustain it – can you handle your family, do you have a supportive partner, do you like washing floors, and can you handle having no holidays? We could all go on much further… !”

For all the trade’s caution of advice from outsiders who say that the coffee-shop market is a great one to ‘grab a slice of the action’, the experts are nevertheless generally agreed that opportunities do exist – for those who research the business thoroughly and expect to work beyond the call of normal duty.

Researching thoroughly means going slightly farther than the latest work, which included this invaluable tip: “Mintel’s stats also reveal that, of those who regularly consume hot drinks beyond the confines of their home, around half favour cappuccinos, lattes and mochas. So it’s essential that your coffee shop provides each of these three staples. Hot chocolate, filter coffee and traditional tea are also fairly popular, but there’s significantly less demand for cold drinks and smoothies.

“If you want your coffee shop to fly, it’s best to keep your drinks hot.”

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