FEATURE NEWS
Counting beans
BeanScene looks at the financial realities of starting a coffee roastery, common mistakes people make, and how they can be avoided.
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ver the past few years, hundreds if not thousands of coffee roasters have set up shop around Australia, with lenders, co-roasting facilities, and contract roasters having lowered the bar of entry to the industry. However, the sudden rise of coffee roasters has created a competitive landscape sometimes called oversaturated, meaning new players may struggle to thrive. According to Tim Mazzarol, Winthrop Professor specialising in small business management at the University of Western Australia (UWA), Australia has many mechanisms in place to support someone looking to start a small business. “The coffee roasting and café industries are seemingly perennial, and a business can really get going if it finds a good niche and is well managed,” Tim says. “The overall climate in Australia is relatively good for small business and the ease of starting a business is better than most other countries with a fair bit of support in a whole raft of areas.” Andrew Low, Co-founder of Ordermentum, has seen the sudden rise of coffee roasters firsthand through the online B2B ordering platform, which has more than 200 roasters using the system. As former Managing Director of Toby’s Estate, he also understands the challenges
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of running a successful roastery. “The traditional journey to becoming a specialty roaster is largely through a barista pathway. They’re often an enthusiast who works on a machine, gets into home roasting, does some sample or guest work at a small roaster, or works as an apprentice for one of the big guys, then goes off to start their own company,” Andrew says. “Specialty coffee in 2010 had 10 major players and everyone else was trying to catch up. Now there’s hundreds. The number of cafés has also doubled, so the average kilogram used per venue went down and it got harder to make money off an account.” Despite the tougher climate, Andrew says it’s still possible for a well-run roasting business to turn a solid profit.
FROM THE BEGINNING
When starting a company, UWA’s Tim says it’s important to begin working on a business model and not just a plan and strategy. “The focus of the business model is largely on identifying what opportunities you can take up within this particular area and what your customer value proposition is,” he says. “You’ve got to be able to say what’s unique about your business and why it’s valuable to customers.” After the business model is laid out, a
well-considered business plan needs to be designed, factoring in how much money it will need to run. “You will always need more money than you think, so ensure you have enough working capital – money you have on hand and are able to spend,” Tim says. “If a person has reasonable resources – unless they’re trying to raise very large amounts – credit is not hard to get from banks. “I also suggest going into business with other people. It’s not impossible to do it alone, but most successful start-ups are team-based, so find partners who can share the workload, strategic thinking, and costs by putting their own capital in.” Once the model and plan are laid out, the next step is to think about the legal structure of the business. “If you’re going to be roasting coffee, you need to at least consider employment, work health and safety, and quality assurance. An incorporated business structure would be a good start and it’s not that difficult to set up,” Tim says. “You’ll need to get an accountant with business experience and register the business with a state/territory group or the Australian Securities and Investments Commission if you plan on going interstate. A lot of this can be done online.” Most importantly when starting a business, Tim says to seek out and take good advice at every opportunity.
