Sales Projections or Am I Nuts?

[darkroast1]

Here's the numbers I keep going over and over and over......even in my sleep. :?
Sales Projections - Selling coffee/espresso drinks and baked goods/pastries.
Busy (for our rural area) route ~15000 cars a day, 11400 during store hours.
Small college in town, some tourist traffic - foliage, mtn bikers and skiers
Near interstate highway exit. Used a 2% vehicular capture rate.
So 11400 X2% = 228 cars captured x 1.25 average customers per car = 285 sales per day x $2.00 average selling price = $570 per day in sales.
Our area will probably start off strong on brewed sales and espresso sales will be developed as market becomes more "Espressp educated" therefore average selling price held to 2.00
Do these calculations seem reasonable to those with the experience that I lack while in the final stages of planning?

 

[Comfy Place]

Sales Projections

Here's my 2 cents worth...

First, the industry average per ticket is hovering somewhere around $3.50, last I remember seeing. Now, it's not a bad idea to base your projections on a lower number, but I think $2.00 is a bit too low. I would be looking at $3.00 or around that neighborhood. When we first started, that's where we were (5 months ago). We started adding baked items, whole bean coffee, and other related merchandise. We are routinely now around the $3.75 per ticket average, and many times higher in any given week.

My second observation is that your capture rate of vehicular traffic is too high, at least for the first 6 months of operation. I do think that a 2% capture rate is a great goal to shoot for to be at by the end of year 1, but you probably won't start out that way. I would guess that you would be somewhere around 50-75 cars per day starting out, and it would probably stay that way for a few months. At this rate, 75 cars per day X $3.00 per ticket = $225 in daily sales, which isn't too shabby, but a long way from your figure of $570 per day.

These are very rough figures, as I haven't seen the location, I don't know the level of coffee knowledge that exists among the locals, and a host of other reasons. A big factor is the ease of getting to your location and then back out again. If it is a fairly heavily trafficked route, that may make it tougher to hit that 2% of all traffic by the end of year 1, but certainly not impossible.

Something else that had occurred to me is your advertising. Definitely open your shop for at least a couple of weeks, then do a Grand Opening with specials. You work out a lot of kinks that way. Also, what sort of signage will you be able to have to draw the travelers off the road to come to you? Banners? Lit sign? Other? Also, you need the locals to frequent your location, so what sort of ads would you do in the local paper? Be sure to be continuous in your advertising, because this is what keeps bringing new people to your location, along with word of mouth.

Well, that's probably enough from me. I'm sure there are others with more advice that they could dispense to you. Feel free to drop me a line if you wish, and good luck.

 

[darkroast1]

Thanks for the response
I expected that 2% was a big stretch and suspected that my average sales price would be higher than 2.00
Marketing planned now is similar to what you have layed out with the addition of some "guerilla marketing"
Its hard to see much profitablity at such low volumes. It seems the only way to make a reasonable profit is to strike a medium of keeping investment on a shoestring budget to keep overhead down while at the same time not robbing oneself of potential customers by underinvesting with the result being a lame store.
Thanks much for the advice, I really appreciate it as I weigh reality vs dreams.
RIch

 

[Comfy Place]

Sales Projections

I'm glad that I could be of some help. The profitability for any independant coffeehouse will, in my opinion and limited experience, take a while to achieve. No one should go into this industry with the expectation that they will have a very robust business in 4 months; it just won't happen. You will have to run your numbers again with revised projections/expectations to see if your intended location is still viable, or if you need to try to negotiate/re-negotiate the terms for the location. If it just won't work, I wouldn't give up on the idea, but it means that you may have to go after alternative locations to make it work, which of course means that you'll have to re-evaluate most of your numbers for the new location(s) you are looking at.

For a perspective on the shoestring budget avenue, let's look at what we did when we opened. We started with what I will call the absolute basics: espresso drinks, brewed coffee, cold drinks (frapps/blends/whatever), and just a few baked goods. Since that time 5 months ago, we have slowly added new items: focaccia sandwiches, T-shirts with our name on them, a couple of gift items, a couple of extra baked items that we are rotating in, and a few other small snack/food items (chocolate covered coffee beans, etc.), and whole bean coffee. We have future plans to add coffee mugs with our name on them to use and sell, adding gift packs using these mugs, expanding our whole bean selection, possibly adding a few other small gift items, and heavily evaluating adding wifi access. As we are getting established, we are adding more items that complement what we started with. In our business plan, we had marked specific items/groups of items that we eventually wanted to add, and that has helped.

Definitely try to stick with what you want for your coffee shop experience, but there might be ways to accomplish what you want in a different way that costs less. Keep asking around and looking around, and you're bound to find options that will work and cost less.

 

[silverkatzchen]

Fall projections

You all seem like you know your numbers pretty well, I've done very well over the summer but seem to be slumping a bit with the cold weather. Is this normal??? I thought things might grow....

 

[Hulkster]

does anyone know the average or at least a reasonable forecast of number of sales in a new coffee shop? I feel like 100 people is conservative, but I really don't know for sure. My location would have a TON of passing foot traffic and would be taking the place of another coffee shop that just moved out so there is already an expectation of a coffeeshop in that space. I heard that 25% of passersby will stop for a cup, but that seems high to me. Any estimate from your experience would really help...thanks.

 

[Jackson]

If you give away a free set of ginsu knives with every cup sold, you may hit 25 percent of the foot traffic. If you do not have a great give away, plan on less than one percent of the foot traffic.

 

[tobiasknight]

Re: Sales Projections

...heavily evaluating adding wifi access...

I wouldn't evaluate. I would just do. So many places now always have wifi and it is very cheap and easy to setup. This is doubly true if you already have high-speed internet access for your own personal use in the shop (which most buisnesses do these days. Heck even my ex-g/f's nail shop had broadband for her to use during downtime.)

With the speed of broadband going up without a massive price increase (Our local cable company offers 10MBps for 30$/month here!) it's all a matter of buying a 50$ router and setting up filters for safety.

Honestly even the busiest of cafe's can't bog down a 10MBps connection.
So I say go for it. WiFi should almost be a standard in any cafe'. Especially if you encourange a comfy environment for people to relax.

(Sorry that's just what shot out at me whilst i read.)

 

[ElPugDiablo]

does anyone know the average or at least a reasonable forecast of number of sales in a new coffee shop? I feel like 100 people is conservative, but I really don't know for sure. My location would have a TON of passing foot traffic and would be taking the place of another coffee shop that just moved out so there is already an expectation of a coffeeshop in that space. I heard that 25% of passersby will stop for a cup, but that seems high to me. Any estimate from your experience would really help...thanks.

If there is ton of foot traffic and one out of every four people stop in for a cup, then why did the other shop moved from such gold mine? 2+% foot traffic is more realistic. Car traffic is 1% or lower.

 

[Comfy Place]

WiFi Access

Tobiasknight:

We've been watching our competition, who started out with it when they opened a few weeks after we did. So far, from the different times that I've been by their place and the few times that I and some other friends and family that have been in their establishment, none of us has seen anyone using their free wifi that they have.

Allow me to give a little background. Our community is a small town of approx. 3,500, with the surrounding countryside bringing the total to perhaps 5,500-6,000. Larger communities (12,000+ population) are 15+ minute drive away. Our location is very close to major highway on/off ramps.

Having wifi access is something that we had put into our business plan to add in the future, but with our competition offering it, we wanted to see how it went for them before we did it. One advantage that we have is our proximity to the aforementioned highway, and travelers who may want to briefly use the wifi to check e-mail, weather conditions, etc.. We have a few concerns with adding wifi, but some of these may never materialize, and others we could come up with a plan of action should they actually start to happen. Cost is an issue for us, as we would like to put our money into areas that give us a good return, and wifi is a more expensive gamble (in my opinion) than other areas. There is interest in wifi, as we have had a number of people ask if we have it. I guess it comes down to getting myself to investigate precisely what it would take to get it running, and how much maintenance would be required on our part.

If you have any suggestions or things to think about, I'm all ears. And thanks for giving me your perspective.

 

[tobiasknight]

Comfy:

It all depends on what's in your small area. That is I mean to say what broadband is provided. If the area is as small as you say then the wifi traffic shouldn't be enough to knock down a standard 6MBps connection. The costs would come in around 20-30$ a month and a one time investment of a 50$ wireless router. The largest cost comes in at setting it up, that is to say (i used that phrase twice =( ) if you can not set it up yourself you would have to have someone limit your upspeed and block a load of ports for you. Depending on the communication companies in your area all of this (except the setup which would be non-telco oriented no matter what they say for it) would be relativly cheap.

I used to work at a small "tech-cafe" Wifi was in regular use there and shared the same connection as the in house PCs that the patrons utilized if they did not have their own laptop. It also shared the connection with 9 X-Box live connections that were set aside in our side room. Peak times on friday night didn't even tax our load one bit so..

Well pretty much don't go out and get the fastest and best "Commercial grade access point" or a T1 connection. We made the mistake of starting off with a T1 and payed several thousand a month for something we barely tapped (we never hit the high end of it). We dropped it and grabbed a small DSL line and were happy for it.

 

[Hulkster]

If there is ton of foot traffic and one out of every four people stop in for a cup, then why did the other shop moved from such gold mine? 2+% foot traffic is more realistic. Car traffic is 1% or lower.

First, the foot traffic is def. there. I got the 25% figure from la pavoni who clearly has it in their best interest to inflate that number. I just wasn't sure by how much. Second, I've heard from a number of reliable sources that the guy who owned the place has 2 more that are about 45 min. away (in the same town) and didn't want to continue to run the business in absentia because it was too hard/annoying. I'm not sure the place is a gold mine, but I think it'll be a nice living and that's enough for me. Thanks for your more accurate figures.