What do you do when your coffee shop is closing?

Javableu

New member
Jan 13, 2007
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Well, I am experiencing an emotion and situation that I hope no one else has to experience, however, I''m sure I am not the only one. My shop is closing after 3 years. I have built a lovely store, I love the coffee business, however, I have made some mistakes and have learned some valuable lessons. I chose to build my business on credit card balances, and home mortgages and was not properly capitalized. I have now felt the sting of this mistake. I also chose a location that compromized my orriginal ideas of who I was as a coffee shop. I started out as a drive thru only and grew to a walk in coffee shop in a strip mall without a drive thru. I was foolish in my evaluation of the location and now I''m stuck. I still have one more year on my lease also. I think we will be closed in two weeks.

I guess, I''m looking for some encouragement from people who understand. I believe that all the experience that I have gained will pay off eventually and the desire for the coffee shop business is still strong in my heart. I know this is not the end, but just a rest period.

Thank You in advance for your comments 8)
 

cafemakers

New member
Nov 3, 2004
576
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It's too bad that your "lesson" had to come at such a high cost; at least that means you'll take the planning steps much more seriously on your next venture. The hard lessons are best remembered.

Most successful people have a string of failures behind them; after all, no risk, no reward. Take what you learned and put it to good use.

You've probably heard about difficulties faced by some of this nation's greatest business and political leaders. I conveniently found this list of Abraham Lincoln's success and failures, here: http://showcase.netins.net/web/creative ... ilures.htm

Although there is one glaring omision in the "failure" part of this example, you'll get the point. You can have a dozen failures, but it only takes one success to be successful. You'll only "lose" when you give up or get shot in the back of the head.

Encouraging?
 

cafemakers

New member
Nov 3, 2004
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P.S.

Retain your lawyer NOW to get you out of this mess TODAY. There's no reason to sit around and watch the last of your money bleed off.

It's a little more practical than "better luck next time."
 

woc

New member
Oct 9, 2006
8
0
Iowa
Why did you use credit cards and Mortages?

I am in the early stages of planning a sit down coffee café and I am working on the premise of using about 10k of ‘my money’ with the rest coming from the bank and/or private investors (as minority silent partners). I have read many times on this site about people borrowing money against their homes, cars and personal credit cards to start their business and can not figure out why you would risk this.

If you have a good idea and plans for making it happen, there are plenty of places to get the start up money. Even if I had all the startup money in the bank I would not use ‘my’ money. Why put your personal finances and/or home at risk? Risk other peoples money.

When you go to a bank or an investor (not a family member or friend but a professional) and show them your business plans. They review them, run the numbers and; especially with banks, know better than you do what the risks are. That is their business, knowing and managing risks. They have no bias or emotional investment, they weigh the risks. They want you to succeed because then you will spend the next 30 years paying interest and they make money but if you go bankrupt, then they not only lose their investment but all the interest you were going to pay. If a bank will not loan you money to start a business you need to ask yourself why, maybe you need to rethink some or all of your plans. Now just because they loan or invest money does not guarantee you will succeed but at least then you know that a neutral party looked at your plan and thinks it is worth the risk you know it is.

Any Thoughts?
 
OP
J

Javableu

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Jan 13, 2007
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Yes, of course both of you are quite right. I jumped in, was impatient, and inexperienced. I kept moving forward, not willing to wait. I have had an attitude about people who take forever to make a decision and just jump in and start their 'great idea'. I prided myself on my ability to be courageous and unafraid of a challenge and risk. When several banks turned me down for business loans, I made it happen my way. I received two SBA loans at a high interest rate, used 4 credit cards and two mortgages on our home. What I couldn't seem to see quick enough, was that the payments on all this debt was too big and was sucking all potential profits away from me. Before long, I realized it had been over a year that I had not done any advertizing, because I didn't have any $left over. Now, sales have dropped so low, I cannot break even, like I had been doing all year long. The stress of this whole situation has been very heavy on myself, my husband and my three kids.

We are trying to sell the business now. I know that anyone who takes this on will do so much better than I did if they are properly capitalized and have new energy. We have an awesome product, and menu and our facilities are really nice. We still will have to take a loss and continue to pay off the debt even after we sell. I really don't want to sell my equipment, because it feels like if I sell them, then we won't ever start up again. You guys will probably tell me, to sell now, and when it is time to start up again, I will get a real business loan and buy new equipment, and have a real plan to run on.

When I started my shop, our town had only two coffee shops, one, an independent in the downtown area and a Books a Million. Now, we have two Starbucks in really great locations. The other independent shop closed down a year ago and now I am closing. Not a very encouraging situation.

I am thinking that at some point we will move to another city/state and things should be more conducive to supporting the independent coffee shop owner. Not driven by the hype of big name.

The banks I went to for a loan three years ago, couldn't hardly conceive of the possibility of a successfull coffee shop. Maybe now, that we have two Starbucks, they can see it really is a profitable business.
 

ElPugDiablo

New member
Jul 16, 2004
991
0
Hartford and New Haven, CT
Re: Why did you use credit cards and Mortages?

woc said:
I am in the early stages of planning a sit down coffee café and I am working on the premise of using about 10k of ‘my money’ with the rest coming from the bank and/or private investors (as minority silent partners). I have read many times on this site about people borrowing money against their homes, cars and personal credit cards to start their business and can not figure out why you would risk this.

If you have a good idea and plans for making it happen, there are plenty of places to get the start up money. Even if I had all the startup money in the bank I would not use ‘my’ money. Why put your personal finances and/or home at risk? Risk other peoples money.

When you go to a bank or an investor (not a family member or friend but a professional) and show them your business plans. They review them, run the numbers and; especially with banks, know better than you do what the risks are. That is their business, knowing and managing risks. They have no bias or emotional investment, they weigh the risks. They want you to succeed because then you will spend the next 30 years paying interest and they make money but if you go bankrupt, then they not only lose their investment but all the interest you were going to pay. If a bank will not loan you money to start a business you need to ask yourself why, maybe you need to rethink some or all of your plans. Now just because they loan or invest money does not guarantee you will succeed but at least then you know that a neutral party looked at your plan and thinks it is worth the risk you know it is.

Any Thoughts?

Most banks will not lend you money to start a new coffeehouse. They will want collaterals, i.e. house, stocks and bonds....Even with SBA loans, many banks require some collaterals because government only guarantee 80% of the loan, so at the very least they want to protect their 20%. Other peoples money don't come by that easy, and there are always strings attached.

JavaBleu said:
What I couldn't seem to see quick enough, was that the payments on all this debt was too big and was sucking all potential profits away from me. Before long, I realized it had been over a year that I had not done any advertizing, because I didn't have any $left over. Now, sales have dropped so low, I cannot break even, like I had been doing all year long. The stress of this whole situation has been very heavy on myself, my husband and my three kids.
We are trying to sell the business now. I know that anyone who takes this on will do so much better than I did if they are properly capitalized and have new energy. We have an awesome product, and menu and our facilities are really nice. We still will have to take a loss and continue to pay off the debt even after we sell. I really don't want to sell my equipment, because it feels like if I sell them, then we won't ever start up again. You guys will probably tell me, to sell now, and when it is time to start up again, I will get a real business loan and buy new equipment, and have a real plan to run on.

When I started my shop, our town had only two coffee shops, one, an independent in the downtown area and a Books a Million. Now, we have two Starbucks in really great locations. The other independent shop closed down a year ago and now I am closing. Not a very encouraging situation.

I am thinking that at some point we will move to another city/state and things should be more conducive to supporting the independent coffee shop owner. Not driven by the hype of big name.
JavaBleu. I am very sorry about you closing your shop; for what it is worth here are my two cents.

First, you need to preserve your capital, this means sell the business and/or all equipment to payoff as much of your debts as possible.

Second, if you plan to try again, you need to know why your sales dropped. Had your sales not dropped you would at least cover your debt payment, right? So in your case it is not only high debts but also lost of business. You need to be very honest with yourselves about this because you didn't maintain and increase business this time you need to know how to do so next time. If your town have Starbucks in really great locations, then you need to pay attention when selecting location. If you can't compete against Starbucks now, how are you going to compete against them in the future? While there are places that are more likely to support independents, you still have to compete against other independents. In my opinion, compete against Starbucks is easy, but compete against a good an indie is very very tough.
 
OP
J

Javableu

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Jan 13, 2007
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Diablo,
Thank you for your encouragement and comments. I have thought alot about what I would do different the next time. First, I would pay more attention to staying consistent in my menu, (because I kept changing what I was offering for lunch) my customers, I know, got tired of never knowing if I was going to have certain items that they wanted. I didn't want to do lunch, but quickly found out that I had to offer it in order to increase sales. It always seemed like such an inconvenience to me. I wanted to be just a coffee shop and serve hot and cold drinks, which I love, not to be a cook.

Second, I invited a baker into my shop, who ran her own business, she did not work for me, she split my overhead expenses. Her desserts were terrific and added such a great atmosphere to the shop. However, she got mad at me and moved out, and then moved into the space next door to me and opened her own cafe. She became my biggest competition. So, secure your dessert vendor.

Next, continue to be active in promoting your business. I got caught in the vaccuum behind the counter. After awhile, the days and months went by and I was serving customers happily, but not creating a buzz or excitement about the shop. I became bored and felt trapped. We must take time away from the kitchen to get out and meet the people and actively seek new customers and services for them. I have learned that the owner is the most effective person for this job and must not lose focus. When this happens, it is far too easy to only see the negatives about your situation.

None of these things has anything to do with money, however they directly effect the bottom line. With time, these mistakes I made became crutial to our current situation. So, I do not have any deep feelings of poor me, I count it all gain.

By the way we are in Northeast Alabama in the middle of an old strip mall, that was promised to me by the owner that the exterior of the mall would be completely updated, soon. :roll:

Still Smiling!
 
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