Hi, everyone.

How are we doing today?

Thank you very much for joining me here so we will get stuck into some questions at the start of all of this kind of House rules, I will do my best to answer everybody's questions.

Last time there were just way, way too many questions and I couldn't get to everyone.

And I'm sorry about that.

Shot out Thio.

Michael, Who's helping me today?

Try and run through all questions you give me cause I lose track in the chap really easily.

It's kind of intense.

Eso What kind of grab?

A few as we go on and yeah, uh, onwards we shall go.

So I have some questions here.

Uh, digs questions.

Hey, how many customers a day?

Does a cafe need to be sustainable?

Um, that is a good question.

That that is a really tricky question.

There's no right answer here because it really depends on your your financial model and kind of your rent.

Now, we said it was a business one today, right?

So I guess let's get stuck into some some some kind of hard core business.

See?

Stuff?

Way.

All.

Okay.

If I just go straight into this Something you need enough consumers that your rent is really like 10% less of your net revenue.

All right, so if you have a rent or kind of, ah, rent rates or rent whatever you pay a 50,000 year, then you need at least half a 1,000,000 off of net revenue coming in for a year.

Now you can divide that down by how many days a week you open.

What's your average ticket?

What's average transaction gonna be?

And that's gonna tell you how many customers you need through the door.

But you won't get the same people in every day.

I still subscribe to Kevin Kelly's idea that you need 1000 true fans, right?

And that's what you're an artist, whether you're a musician, whether your whatever, like if you have 1000 people who think you're great and we'll come and support whatever you do, you'll be fine.

They won't come every day like very rarely does a couple shop have some halvah regulars that come every single day.

They might come 34 times a week, but it's not gonna be every single day.

So in terms of how many of how many customers you need me at least 1000.

How's that?

Like you need, I think realistically need 1000 people who see themselves as being, you know, regulars at your cafe.

All right.

Jonathan Gifford asks the question, which is something no one really talks about is how to get funding for a coffee shop.

We're getting into some questions straight away, huh?

Um, okay.

How to get funding from copy shop.

Okay.

It depends on what you want to do with the copy shop.

Now.

Traditionally, coffee shops were, um, pretty pretty low on the returning scale, right?

Like like coffee shops don't produce enormous amounts of money.

So, you know, that narrows down the number of places willing to lend you money or invest money in you.

So, typically for years and years and years, banks, banks with the places to get funding for businesses like coffee shops because they didn't really worry about low returns, they had that fixed interest rates.

They were gonna be fine.

Whatever.

You know, post financial crisis banks don't really lend any more.

Banks aren't super interested in that.

They are deeply unhelpful.

So it's meant that people have had to look for alternative sources.

Now, there are obviously different types of investors out there that you could go on approach.

But if you're going to approach someone, then you need to have a pretty good answer off.

When am I gonna get my money back?

And how much more money will you give me in that same time frame?

You see, in the sort of more aggressive VC cycles that an investor would want to put money in and see a substantial return within 3 to 5 years on a substantial return might be anywhere from 3 to 20 to 100 times the money that they put in at the start.

Now, with a coffee shop, 100 extra turn is unlikely.

I don't You know, that's just that's just not really, um, But, um, you know, you can certainly approach people if you have a pretty good idea of how you're gonna make money and pay them back.

It may be that you intend to grow your coffee shop to be a small number of businesses that you might then sell on to someone else who wants to grow their chain of cafes.

I don't really know depending where in the world you are.

There are other ways on means to raise money in the U.

K.

There's a number of tax efficient schemes out there, like E i s and S C.

I s designed to really convinced it will help you to convince friends and family to invest in businesses.

And they get a little tax break in return for investing a small amount in a business like this.

But by and large, it's pretty difficult, But it gets a lot easier when you have a lot more financial clarity around.

You know, if I'm right, if I'm taking someone's money, how am I gonna give that back?

Plus more plus how much more right?

And that the more you can give back, then the less of your company you would have to offer up in return, right?

If you can give me if you can invest a £1,000,000 with me on, I can tell it into 10 million.

I feel pretty good about giving you a very small percentage of my company.

If I'm going to give you back a 1,000,000 100.1, you probably gonna end up with a lot more of my company because my return is pretty poor.

This is an oversimplification, but I don't want to get stuck to longer.

One particular, uh, question, Johnny Hawkins asks.

I have capital to invest.

Should I do it with coffee?

Um, sure would know.

Yes, it really depends on the opportunity.

It depends on your level of risk that you're interested in your risk reward kind of ratios.

Presuming if you, if you're serious about investing, probably have a good idea of your investment risk profile.

Coffee, I would see, is being, unfortunately, relatively high risk, relatively low return, um, in comparison to tech companies that are able to just massively grow with fixed costs and therefore go from being incredibly unprofitable to being incredibly profitable.

Coffee shops don't really work that way.

You know, all of the costs.

Kind of scale up s Oh, it's.

It's a lot harder to invest and expect a very high return.

If you're interested in coffee and you wanna support business, will be become involved in business is in an area passion about for sure invest in coffee.

Okay, uh, Tim's.

I asks, where do you see the balance between customer satisfaction and quality of your own business.

At what point you have to determine one particular customer is a single case.

Okay, if I if I'm reading this right, and please clarify if I'm not.

It's the sort of the the line between, um what point do I do?

What I want to do, right?

Serve the coffee I'm super passionate about.

And then at what point should I do something that just pleases people?

Right.

And where do I sit on that kind of scale?

Is that Tim?

If you're out there, Is that about what?

What you're you're thinking?

Assuming that is the case, Um, I think that if you want to do what you're passionate about for a business, then you have to understand that the potential of that business also depends on where you sit on that sliding scale.

Now, I think lots of people like really great coffee.

I don't think it's, you know, only a smaller people really, really desperately care about it.

But you know, the broader your definition of good the wind in the audience for that.

So, yeah, if you desperately want to serve, you know, pour overs with no milk, no sugar like super ts.

You know, exactly something you're very, very, very passionate about.

That's totally viable on the condition that you think you can reach on, engage with and retain enough people that feel the same way as you.

Um, is that an answer on my kind of, um, I in the right kind of area if we're getting too hard?

If I If I If I If I need to make this a little less serious, then you just tell me, uh, that, um I mean, t finish Tim's question.

You still need to be proud of what you do.

You still need to be excited about what you do, because customers com'on tell that your staff can tell your staff need to be excited about what they do, because again, it's something that people really respond well to.

So if you're if you're compromising for money, I think your customers comptel your staff Comptel and you have the vibe of a compromised business.

But I think you know there's no need to be.

There's no need to be exclusive.

I'm pro inclusivity.

I want I want to bring us many people in.

That's how we flourish and sustain us and industry long term.

All right, Andrew, you ask, How do you think differentiations Last value proposition, especially cafes, are going to change as good coffee quality becomes more common thing is a good question.

This is an interesting question to do with kind of the state over the market right now.

Um so especially copy is definitely much more available.

And I think that we now have a pretty good understanding that a great cup of coffee alone is not enough to one.

Bring a new person through the door the first time.

And to retain that person to turn them into a long term customer.

The proposition has to beam or than just one particular product or one category of products.

E cups of coffee service, I think, is gonna be a key part of it.

We're seeing already people realize that it's really, really, really hard.

Thio build a business off cups of coffee because they're very low cash valley transactions that every labor intensive and so it's It's a difficult business to scale, and so, increasingly you're seeing people reject the very pure coffee model, and you're seeing food come more and more and more.

You're seeing Bruce start to appear.

Alcohol is part of many people's kind of menu design.

So, you know, I think it's great.

Coffee is gonna become one off many pieces that things of in good businesses that people worry about.

Um, I think, you know, the world is still gonna be full of terrible coffee, and that's gonna be very available.

And if you look at the price of the sea market now, you know, low commodity coffee is still unconscionably disgracefully cheap on DSO.

I think we have to be very conscious that, you know, we're asking a lot Maur off people in terms of spend per cup.

Then they absolutely have to spend to get a caffeine fix.

So delighting them with more than the coffee with service, with the environment with design, with every single aspect of the business that they interact with, I think is key.

Um, Christmas.

Krishna asks, What do you personally think is the lowest budget to set up a good cafe?

I can't answer that with, without knowing where in the world you want to set it up and what your aspirations for that are in terms of its revenue and its profitability, however much you think you need double it.

Worst case scenario.

You won't have to work 100 hour weeks for less than minimum wage at the start of the business, and you compare yourself a reasonable wage and not hate yourself and not hate your business, as many owners do in the 1st 18 months of opening fine, large people are deeply undercapitalized.

At the start of the business life, I hold my hand up with someone who has done this.

And so you end up with this sort of, you know, buying into the entrepreneurial lie that you're supposed to work 100 plus hour weeks.

And that's the good thing, where in fact, you burn yourself out, you turn yourself against the thing that you were passionate about, and so starting with more money means that one you can staff appropriately and to you can.

You can earn a living salary.

And I think those there's a really, really key in the early days of the business, um uh, to swim tau g sapo tro.

And if I get people's names wrong, I'm really sorry, uh, manual espresso machine or high, expensive espresso machine.

He kind of asking, Do you want to cheapen manual or the fancy latest singing, all dancing super expensive thing?

It's a good question, um, without coming back to ancient oh, models and stuff.

I'm pro technology because I think that right now espresso is difficult because it's extremely labor intensive and it's extremely difficult.

And, um, cafe owners really have to spend a great deal of the money that comes in on people to make the drinks right.

Like a staff costs as a percentage of revenue in specialty coffee shops are currently very, very, very high.

I would say in most developed markets they would sit between 30 and 45% of net revenue, which is an enormous amount of money.

And that's because it takes a lot of people to make a lot of espresso drinks.

So I'm interested in technology that can reduce the burden on the cafe owner on DDE, make a individual member of stuff more productive, which means that one individual person could also probably earn more money as a result of being more productive s.

Oh, that's my kind of answer to that, Um, what if you're in a city where people used to traditional, badly prepared coffee and espresso and even after tasting it, say that they do not like third way of specialty coffee, yet not dead.

It's good question.

Um, kill them with kindness.

First.

I think this, you know, you can't tell people that what you have is better, because when you say my coffee is better, it implies that what they drink it like is off poor quality and therefore they have bad taste, and no one responds well to being told they have bad taste.

So the kind of nicer way into it is to make them feel welcome, make them enjoy coming and being inside a business and then being excited about what you like about this coffee.

Not to say that it's better than what they like, but that once they trust you a little bit because they like the space, they feel that everything you do is good value.

Then you know they're more open to experiences that are outside of their comfort zones, right?

Just coming in and what becomes kind of ah kind of high conflict, in a way, interaction, which is I've got this great thing.