In the early stages of starting a business it is just as much about the people invested in its success as it is about the business. I don't have stock holders, but (hopefully) I do have a few people that want to see me succeed. So, until I do have stock holders, I figured I would share how my company did in 2016.
I'm not exactly a financial analyst, so this may be a bit basic. I am learning a lot and will keep on learning more. I want to be aware of the financial status of my company and not just assume that if I sell coffee I will be successful. That is why most shops in the food and beverage industry close in less than 3 years, and only 5% make it past 5 years.
So, in summery, I ended the year in the red, which sucks, but isn't unexpected.
The positives that came out of this year is that I sold 55 bags of coffee. That is awesome. I mean super awesome. I expected to sell only a couple of bags to my mother-in-law and that's it. The majority of my sales was family and friends. This year, I need to focus on getting my family and friends to tell their family and friends.
I'm also going to need to do some more testing to figure out how to properly use sales. My opening day sale ($5) led to more sales, but selling at my retail ($7) got me the same amount of income, with less work...but also fewer people drinking it. With only 2 months to compare, I am unable to distinguish between people just buying my coffee because I started selling it, and people who didn't buy my coffee because it was more expensive. I need more data to determine if my pricing is good or needs to be adjusted to optimize.
Two of the biggest things I learned about last year is regarding Loss and Operating Expenses. The 2 largest negative impacts to my business was inventory loss (91% of which was green coffee) and wages for roasting.
Green coffee loss was expected this year because I had to use a lot of coffee to dial in my roast and I had to share some with people to get them excited. I also had some roasting miscalculations which lead to me roasting too much coffee, so I drank the extra (a bitter sweet problem). In 2017 I should be able to reduce the loss quite a bit since I'm not testing anymore and I bought sample bags for me to hand out. That will allow me to give 50g bags to people instead of 1/2 lb bags (about 226g). My roasting method is still a little sloppy, so I hope to be able to reduce loss even more with a new roaster. Overall, I need keep a much closer eye on my green coffee loss and calculate what I give away in a marketing budget.
Operating Expenses are always going to be there and you can't build a business if you don't account for it from the start. I googled the average hourly rate for a roaster and it was $14. So I did the math to determine how much time it would take to get enough roasted coffee to fill my orders plus a little extra for set-up and tear down. It took me about 20hrs to roast 27.5 lbs. (I'm not actually paying myself right now (call it blood/sweat equity), but I need to be prepared for that day.) Which means, I really need to get a better way to roast coffee. One of my goals for 2017 is to make enough money to purchase a Behmor (about $370). That will allow me to roast 1 lb per batch instead of less than 1/4 lb per batch. It will also reduce loss (beans fly out of the popper and I spill quite a bit) and set-up/tear down time. (BUT, if I get a new roaster, I will have to spend some green coffee to dial in my roast again).
I am sticking to my debt free approach, so I will not be buying a roaster or more supplies off credit. If my monthly sales stay on par and I can reduce my losses, I should be able to get a new roaster and another big bag of coffee, sustaining and growing the business.
I want to thank everyone who purchased coffee last year. You are helping me reach my goal of one day having a coffee shop. I look forward to bringing you more Damn Fine coffee in 2017.
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