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Realistic Sales Projections

jgarcia

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Mar 21, 2015
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I'm considering opening a cafe in a town of about 25,000 about two blocks down the street from a college with 5,000 students. Our concept is similar to the Australian cafes that are popping up in larger metro areas, based on a menu of high-quality, locally-roasted coffee + farm-to-table(ish) meals (basic breakfast and lunch options), in a clean, inspiring, laid-back environment.

I'm trying to determine the best approach for making a reasonable profit off of the endeavor (enough to make a decent middle-class living), while also planning for the possibility second location in the metro are we are a part of (which has a population of about 500,000)...which leads me to the following question:

Does my market (25,000 + 5,000 college students) sound large enough to expect $20-30k in revenue per month? Perhaps these are things no one can know ahead of time, but I feel like all my estimations with regard to sales forecasts are just an educated guess, at best. I'm basing these numbers on selling ~60 cups coffee/day, 10 breakfasts/day, 30 lunches/day and 10 dinners/day, which I feel fairly confident we could do, but I don't have much to back me up on that other than just intuition. Does anyone have any hard data or examples of opening in a similar market and what your sales look like?

Any feedback would be greatly appreciated.
 

mmorin08

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Mar 30, 2015
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Hi Jgarcia,

I might be able to help you here but I would need more information. You are saying that your concept will be similar to Australian cafés. Do I need to assume that you are based in Australia? If not, where are you based? How many cafés are there withing walking distance from the university? If you are going to be the only one in a country similar to Australia or the US, then the answer is yes. Conversely, if there are several cafés in the area, then the answer will be "maybe not".

Good luck!
 
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jgarcia

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Mar 21, 2015
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Yeah, I'm actually not based in Australia at all - I'm in Mississippi. I was going to post a link to an NY Times article about Australian cafes that are being started in the U.S., but the site wouldn't let me since it was my first post (apparently you have to have 5 posts before you can post a link). You can find the article by Googling "australian cafes new york".

There is one other cafe in walking distance, which is the go to shop for students currently, but presumably only because it's the only option. Their coffee is not that great and the location itself is dingy and somewhat in disrepair. In addition, they do not serve meals.
 

mmorin08

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Mar 30, 2015
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That's very interesting.

Let's make a few reasonable assumptions with what you gave me. First of all, you will occupy the medium to high end space in the café business. According to preliminary statistics available online (I can't post it because I don't have 5 posts!!!), the average american consumes 0.8 cups of coffee per day. If you only take the student population of 5000 people, it means that your market for cups of coffee is 4000. It doesn't mean that 4000 students will go out and buy a cup of coffee but rather that 4000 cups of coffee will be drank during the day.

Do you have any idea of the number of cups served by your competitor? This would give you a good idea of the market. Then, since you are dealing mainly with students, low income population, you could guestimate that your competitor will have a bigger market share for coffee than you will have. If you have a good idea of the number of coffee cups served by your competitor, we'll work out what your potential market share - and revenues - could be.

Now, let's see if you are going to make it financially. You need to know what your fixed costs and variable costs will be. Are you familiar with those concepts? A fixed cost will be something like rent. No matter if you sell 1000 cups or 100 cups a day, the rent will always be the same. Conversely, a variable cost is part of the costs that will change every month, such as electricity bills or even food products. If you don't want to list them, you can PM them to you but you'll need those numbers to see if you'll make it or not.
 
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jgarcia

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Mar 21, 2015
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This is great...exactly what I need: the rationale for my sales projections.

To answer your questions:

At the current moment, I do not know the number of cups served by the competitor, though I could easily find out (it's actually been on my list to do so).

I am quite familiar with fixed costs/variable costs. I actually have all my projected financial statements completed (mostly), I'm just trying to determine if the forecasts for sales are indeed realistic. As I mentioned, I feel like there are, I just need some data to back that up.

I'll PM the profit/loss statement to you and perhaps you can tell me if my numbers seem accurate given my description of the market.

Thanks for your help!
 
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