Looking for quick advice from cafe owners!

[CheeseburgerWalrus]

I've heard from many folks that, when starting your own business, you should not expect to make a profit for the first two years. Does that mean that the owner(s) will not take any sort of salary? Or can I expect to at least bring home the equivalent of a few dollars an hour? I understand that each person may have a different experience, but I'm interested in hearing what everyone has to say. Thanks in advance!

:coffeemug:

 

[ensoluna]

welcome CBW.

that would be depends on what kind of business you start. if you buy existing business (which you have to pay much more than starting from scratch) that shows profit, you should be able to take home your salary plus profit.
but if you start from the beginning (lease a place, re-built inside depends on what kind of business you want, start advertising, hire people...etc), it would be difficult to show profits for .... few month or even few year. that will be depends on your business plan, marketing, advertising and how well you run your business.

if you want, you can take some sort of salary from your own shop from the first month. (heck, you can take $100,000.00 per month salary, if you really want), but that would go out from your own bottom line. so that will be meaningless.

when i started my business (well.... in Guatemala, but it is same everywhere in the world), My partner (his is Guatemalan) and I had a business plan. we had about seven month of extra capital in the bank, which means we were expecting 7 month in Red. According to his plan for Guatemala domestic coffee sales (he already had a very small local coffee sales), it would take 7 month for our new company to break even with new and bigger operation with few other employees..etc, new building rent, construction fee...etc. During 7 month, we decided not to take out any salary.

But fortunately, I was able to sell green beans to overseas two month after we opened the company (i was kind of lucky). so, from third month, we were in Black. (when we planned our business model, intentionally, we did not count on my int'l sales because we thought it would take closed to one year or more to sell (according to other exporting company informational sales), that is why we were only rely on Guatemala domestic sales to break even point. Whatever we sold internationally, we put back the profit into company to grow faster.

hope that this reply had helped you. little bit of my experience.
if you have more questions, let me know.
welcome to the forum.
alex

 

[peterjschmidt]

I've heard from many folks that, when starting your own business, you should not expect to make a profit for the first two years. Does that mean that the owner(s) will not take any sort of salary? Or can I expect to at least bring home the equivalent of a few dollars an hour? I understand that each person may have a different experience, but I'm interested in hearing what everyone has to say. Thanks in advance!

:coffeemug:

There's no good way to answer that... the best advice is to expect and work toward the best possible outcome, but prepare for the worst. IOW, write up your business plan as though you're not depending on the business to return enough profit to pay you anything.

 

[namballe]

you should take home a set pay whether or not you're making a profit. at the end of the year when you file your taxes, this will be included in your income/loss.

 

[John P]

The reality in most cases is what Peter says. You shouldn't NEED the money, but I would say plan to be successful, plan to hit the ground running, and budget a small owner's draw for yourself after the first few months. Have enough in reserve, I would say 6 months, so that you can cover your personal expenses for that time. If it takes you much longer than that, you have poorly executed your plan.

Cash flow and on-paper profit are two different things. Sometimes you will show a loss on paper and have a net profit in your account, and other times you will show a profit for the year, but have little to show for it. When all is right as rain, you will have both, actual hard cash and a profitable shop for the given tax year.

 

[CheeseburgerWalrus]

Thank you SO much for your replies. It's great to get advice from people who have first hand experience with this!
As it is, my husband has a well paying job and we don't *need* a second income. However, if I were to start up a cafe I would need to put my son in daycare for part of the week. After reading some of your replies, I think I will plan on having enough money in our savings account to support us for a few months, plus a few months worth of daycare expenses -- as much as I'd like to think my business will be fairly profitable, it's best to prepare for the worst.

 

[CheeseburgerWalrus]

welcome CBW.

that would be depends on what kind of business you start. if you buy existing business (which you have to pay much more than starting from scratch) that shows profit, you should be able to take home your salary plus profit.
but if you start from the beginning (lease a place, re-built inside depends on what kind of business you want, start advertising, hire people...etc), it would be difficult to show profits for .... few month or even few year. that will be depends on your business plan, marketing, advertising and how well you run your business.

if you want, you can take some sort of salary from your own shop from the first month. (heck, you can take $100,000.00 per month salary, if you really want), but that would go out from your own bottom line. so that will be meaningless.

when i started my business (well.... in Guatemala, but it is same everywhere in the world), My partner (his is Guatemalan) and I had a business plan. we had about seven month of extra capital in the bank, which means we were expecting 7 month in Red. According to his plan for Guatemala domestic coffee sales (he already had a very small local coffee sales), it would take 7 month for our new company to break even with new and bigger operation with few other employees..etc, new building rent, construction fee...etc. During 7 month, we decided not to take out any salary.

But fortunately, I was able to sell green beans to overseas two month after we opened the company (i was kind of lucky). so, from third month, we were in Black. (when we planned our business model, intentionally, we did not count on my int'l sales because we thought it would take closed to one year or more to sell (according to other exporting company informational sales), that is why we were only rely on Guatemala domestic sales to break even point. Whatever we sold internationally, we put back the profit into company to grow faster.

hope that this reply had helped you. little bit of my experience.
if you have more questions, let me know.
welcome to the forum.
alex

I love that you took the time to reply in such detail, thank you for sharing! I will let you know if I have any other questions