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George Sabados in Australia by George Sabados
Changing the Way Cafe Owners Think
Posted: February 6, 2006
Article rating: 7.6
feedback: (7) comments | read | write
Hines Cafe

Recently, I visited PT's Coffee in friendly downtown Topeka, Kansas. Jeff Taylor and Fred Polzin had organised a coffee 'Jam' session for baristas, café owners and any one interested in coffee.

My role during this event was to focus on the basics of extraction whilst others would train in other aspects of espresso coffee making. What began as a basic exercise soon turned out to be a very different affair for the recipients (who were predominantly café owners) because what they really needed was re-training in their mental outlook on what constitutes good business sense.

You see, it is very easy to be trained in the A to Z of coffee making. There are thousands of ex-baristas out there plying their skills in the area of espresso training, and whilst some subtle cultural and quality differences exist, in general, it is not difficult for a prospective café owner to find a course or two on the subject. Unfortunately, what café owners require is training in a way of thinking which will allow them to create simple procedures designed to maximise the profitability of their business. Training in how to make espresso coffees is but one very small part of the equation, not the equation itself.

What do I mean by this?

Café owners are not baristas. Whilst the both groups certainly need to know the most they can learn about the product which lends its name to the type of business, for the latter it stops there, and for the former it is just the beginning.

Running/owning a business requires owners to go far beyond the basics in order to create a business with a noticeable point of difference to the end consumer. And it is not one thing which will get you there, but rather a combination of many small points of differences which combine to create a huge point of difference in the mind of the end consumer.

All too often in my consultancy work I come across café owners obsessed with the coffee making but not the institution they operate. For example, out of over 500 businesses I have personally coached, less than 10 revealed that they bothered to put together a business plan. Fewer than a dozen had a regular training plan in place for staff, and only half a dozen could tell me their financial position immediately, at the push of a button. Yet, well over 200 knew their coffee better than they knew their business.

The onus on the café owner to understand all aspects of his/her business goes beyond the product they ply, simple because the rule of thumb for me when I analyse a business is not about how much money it is making, but rather how much money it loses every day.

Black holes in your business

Any 'black hole' in a business sucks resources and money out of the business, thereby not allowing it to reach its full potential in sales. A 'black hole' is any part of a business which has not been measured, quantified, and simplified into a replicable procedure which all staff can repeat without inconsistency.

Nearly all café businesses have areas within their structure that are performing inadequately; because of this, nearly all café businesses are underperforming - it's just that blunt. Only when these underperformance areas are shored up to the point where everyone in the business can reproduce the exact same result will these 'black holes' disappear.

From experience, what happens soon after often amazes owners. Sales shoot upwards. And each successive component of the business which is bedded down cranks sales upwards even more. I have observed many examples of owners who stood there in disbelief when their already 'successful' business, which they thought was running at maximum, suddenly experienced a 50% to 100% jump in less than 12 months.

Procedures which are simple to follow and which nobody within the business deviates from will always guarantee the same outcome. And customers out there who encounter inconsistencies in the majority of cafes they visit will desert these in droves given half the chance not to have to second guess what they are going to get every time they walk into a café. For these people, a consistent business means that they can truly take time out of their day to zone out without having to critique the products or service they receive. They will know exactly what they will get before they even walk in.

But procedures are not enough in themselves.

As I stated earlier, the biggest challenge I face when coaching café owners is getting them to change their mind-set towards business. With the café sector having grown so rapidly in the last 15 years, the reality is that a great many café owners bought into the business without any prior experience. Most had jobs. And coming from this kind of environment means that an individual is more likely to have been conditioned to think in terms of savings, cost management, and reductions rather than focusing on the key to success which is exploring ways to increase sales.

For example, when most 'business' owners look at their overheads on the weekly or monthly P&L sheet, all they see are costs. An inordinate amount of time is then spent looking at ways of reducing overheads by 5, 10 or 15%. Apart from the amount of time (which is money) spent doing this, often the results of these actions are to change to a cheaper supplier of coffee, a cheaper supplier of breads, a cheaper supplier of meats, etc. The groups which tend to suffer most during this cost cutting drive are employees, and food/drink.

The reason for this is simple: there are many overheads which cannot be reduced - such as rent, gas, electricity etc, so the categories which can easily yield an immediate saving happen to be the ones just mentioned.

I know that financial controllers within large franchise groups always think this way (and good luck to anyone who lets them dictate the way to run a business). Most come straight from university into an environment where their only focus is how to 'save' the business money. That is how they have been schooled and it is plain wrong. Whilst it is important to manage costs, it is also more important to understand which sub-categories costs fall into, and what impact cutbacks would have on the sales within your business.

A new spin on categories

When thinking about the overhead involved in the business of a café, I like to put everything into two sub-categories. I define them as costs and investments.

A cost is any overhead which cannot affect sales. These include rent, painting the shop, or signage, that kind of thing - anything that does not affect your sales.

Then there are investments. Tinkering around with the investment subgroup of a business' overheads can jeopardise growth in sales. For example, people invest in the share market with the surety that one dollar gets you two or more times return. Paring the investment dollars back means that the return becomes less. By the same token, paring back on the quality of coffee beans, on food input quality or even training costs merely to produce a saving is a rather short term view since the immediate rise in profit will be more than outstripped by the medium to long term decline in sales. It's like robbing Peter to pay Paul. If these 'costs' are viewed as a direct link to growing sales then the choice becomes simple - throw more money into it, and the return will be greater.

But of course, nothing in a business can be treated in isolation. I have briefly discussed the need for procedures, removing 'black holes' in a business, and a novel interpretation of overheads. These are but three areas of many which all combine to create or not create a point of difference in a café business.

Absolutely every decision a café owner makes has a psychological impact on the end user, which will determine whether sales grow or decline. Knowing the outcomes of any decision or action determines the type of play, what is changeable, and what remains sacrosanct.

The café owner beyond the barista

As mentioned earlier, whilst it is important for the café owner to know the A-Z of espresso coffee making, this is not the end of the story. Knowing the A-Z of business - your business - is of the most importance. Meeting with individuals who have a proven track record of achieving stellar growth for clients in retail can fast track your sales growth to triple digit percentages. Of course, anything new is something old, and if you have the time, energy and inclination you should invest in research and study into ways of growing your sales. There is enough information out there to re-train a typical café owners' way of thinking.

I know that for some individuals, what I have written here can be rather unpalatable. The notion of throwing more money behind particular 'costs' which I deem to be 'investments' may sound like an anathema. It's just not the way it is done. But if you are achieving average sales growth of low double digit percentages or less, or even struggling to make money, changing the way you think about your business is the first thing that has to give before anything else can change. For in the words of Albert Einstein, the definition of madness is: when you do the same thing everyday, but expect the outcome to be different.

George Sabados is a successful business and training consultant to the coffee industry, the former Executive Officer of the Australasian Specialty Coffee Association, and former Director of BCA. He can be contacted at gsabo@bigpond.com.

Article rating: 7.6
Posted: February 6, 2006
feedback: (7) comments | read | write
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