Buying a Coffee Shop

How to buy a business

For many coffee lovers, running a coffee shop would be their ideal job. Who wouldn’t want to spend the day surrounded by the inviting aroma of roasting coffee beans, the distinctive sound of frothing milk and the sight of delicious cakes? That’s not to mention the sound of the till from all the paying customers you’d be serving.

Why would I buy a coffee shop?

Whilst starting a business might seem the more glamorous route, buying a coffee shop could be a better option. With all the struggles of a start-up business taken care of, not to mention an existing customer base, full range of equipment and necessary documents set out already, all you would need to do is buy the shop and start running it.

Freed from the cost of having to secure a property and lease, purchase all the equipment, purchase stock, ensure you’re running to correct food hygiene levels and more, you can concentrate on the actual running of the business.

Do your research

It’s a good idea to visit a coffee shop you’re interested in as a customer before enquiring further. Have a look at the premises, see how the staff interact with the customers and try the food and drink they offer. Try to see how the customers feel and how they’re reacting to the business – and if they’re likely to return. If you find the service lacking, the food not up to your standards or unhappy customers, you will need either a great plan, or to move onto the next opportunity.

You should also check out the competition. Do the same with other coffee shops close to the one you’re interested in, and see what differs between them. Does one have more selection, better coffee, more customers? Could this affect the coffee shop you’re interested in if you took it over? The internet also gives you a great opportunity to do more research. Look online for reviews of all the coffee shops you’ve visited in your research, and see if anything jumps out at you. Does one have particularly bad reviews, or one offer a considerable amount more choice than another?

Make sure you’re right for the role

The life of a coffee shop owner can be a demanding one, with early starts and long hours. You’ll also be facing customers all day, so you need to make sure you’re a people person. Being able to have a friendly conversation with your customers whilst making them their drink is essential, and will be the key to ensuring repeat custom.

Know your Espresso from your Ristretto

It should be obvious that you’ll need to know different types of coffee and how to make them. Coffee lovers can be very particular about how their favourite brew is made, so making sure you get everything right is a must – especially to keep people coming back.

Different coffee shops will use different equipment, and you’ll want to make sure you’re familiar with the coffee machine(s) you’ll be using before the owner leaves the business.

How to buy a coffee shop

1. Choose your location

Do you want to open a trendy, hip coffee shop or a traditional, quaint coffee shop? The former will likely do better in a busy city centre, whilst the latter is more suited to a smaller town or village. Think about the location you’re interested in and try to choose a type of shop that will suit it or, if you already have a type of coffee shop in mind, think about what location would suit it best and start your search there.

2. Consider your budget

A large part of your search will revolve around your budget. A lot goes into the valuing of a coffee shop, from looking at annual turnover to the cost of the assets and how much the property is worth (if the business owns it), so it’s important to bear this in mind when thinking about how much you want to spend. Shops with top-of-the-range equipment will cost more money, so you’ll have to consider whether you’re willing to (and able to) pay more for a shop with high quality machines or if you need a lower-cost option.

3. Start your search

Having decided on a location and how much you want to spend, the next step is to look for coffee shops for sale. We have a coffee shops for sale section with a wide range available. At this point you should keep an open mind and look at several different businesses, as every business is different and you don’t want to lose time on one that might not be the best option.

4. Assess the shop’s accounts

Once you’ve found a coffee shop you’re interested in, you need to look at its accounts. How much does it have coming in versus going out? Are there any glaring errors or red flags that could prevent you from taking it over? You’ll want to go through the accounts with a fine-toothed comb to make sure there’s no nasty surprises. To find out more on how to assess the financials of a business, click here.

5. Arrange a viewing

Having satisfied yourself that the coffee shop is a good opportunity, the next step is to arrange a viewing with the owner. This gives you a chance to see the property, the coffee preparation area, seating, as well as ask any questions you might have about the shop. Click here to see a great list of questions to ask at a viewing.

6. Prepare an offer

If you’re still interested having viewed the financials and the coffee shop, your next move should be to make an offer. There are a number of ways to value a business, which can be found on our business valuation page, though when valuing a coffee shop you tend to look at a multiple of the weekly takings plus asset value plus freehold value (if applicable).

The seller will then either accept, decline, or counter your offer. This negotiation can take some time, as both parties exchange offers to get the best deal. Should you both come to an agreement and an offer accepted, a letter of intent will be signed by both you and the owner. A Letter of Intent is a document which outlines the agreements both parties have made regarding the offer, and is a step towards the purchase of the business. You still won’t have bought the business at this point.

7. Undertake due diligence

Due diligence is a vital part of any business sale, and ensures you know exactly what you’d be getting into if you bought the business.

Due diligence is performed once a Letter of Intent is signed, and basically involves looking everything the business has – sales records, legal issues, financial documents and more – to determine the size of the opportunity the coffee shop presents. As hard as it may be, if things just don’t stack up at this point, you may have to walk away from the sale. You can read our full guide to due diligence here.

8. Completing the sale

Having agreed on a deal and undertaken due diligence to make sure the business is all it’s cracked up to be, the final step is to complete the sale of the coffee shop. You’ll need to involve a solicitor to deal with contracts for both parties to sign and handle money, and this legal process can take some time. Once this is completed, the final step is to take over your new business and serve your first coffee!

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