Be Sure to Consider Cash Flow over a 12-Month Period!
And more advice from Jonathan Rubinstein, Founder & CEO of Joe Coffee. Joe has 20 cafés in New York City, employing 300 people and a new 4,000-square-foot roasting plant in Long Island City. Their mission is to serve high quality, unique coffees, and to create welcoming spaces for their communities.
1. Be sure to plan for cash flow over a 12-month period!
Be sure to be capitalized to get through the beginnings of a new business or a new version of a business. For us, in the early days and even in the more recent days, having working capital is vital. Between opening and ramping up and paying the bills, it can be difficult. Also, you need to understand the seasonality of the business and cash flow. We opened in July 2003, and by the end of October, we were able to pay the bills. We didn't understand that January, February, March are slow months. We thought we didn't have to worry every day about paying vendors, but then we were in an emergency situation for three months. We have learned over the years that our business is incredibly seasonal. We have two very strong periods a year and two weak periods; summer when everybody goes away and January and February when it is cold and rainy. Customers don't want to go out at 3 o'clock to get a coffee in lousy weather. Now we have learned to plan for the slow periods as far as cash flow but also in the way that we spend, schedule, purchase, invest in, and market the company. We are very much planning in October for what is going to happen in January.
2. Step back and look at the big picture.
Stopping to see the forest for the trees in running a business is essential. It is so easy to get caught up with what is happening day to day and not stepping back and saying "what's happening with our brand, what's happening with our opportunity, what are customers saying." Now we have 20 stores. We try now not to get caught up in the daily minutia of each location and step back and look a little more holistically about growing the business. It took us a long time to do this. We now try to do a mini-summit once a month with our VP of Operations. We also now have a board of directors. One of the benefits of a board is that it forces you to prepare for board meetings and look at all the critical elements of the business. What is working and what isn't. You do not solely focus on did the milk come in, or did this person smile at the customer. You want to care about the details, but also you need to take stock of the bigger picture.
3. Research markets before expanding.
Knowing a market before you go in is key. We were in Philadelphia for almost seven years. We went into that market thinking, "we are New York; we have won all these awards." We are going to say to Philadelphia, "Hey, look, you are going to get New York's hottest coffee bar," and Philadelphia said, well, we have our brands that we grew and love and who are you to tell us we are lucky? We didn't market. We didn't get to know the communities in the right way. We didn't understand the differences, and that was ignorance on our part. I don't know what would have happened if we approached the market differently. We had years where we made money and years where we didn't make as much money. We decided to close the Philadelphia locations. It was a hard decision because we don't like to fail, of course. Philadelphia took a lot of time and energy, and there was not enough of a payback. When we are looking at cities now, it is with a much more careful, calculated study.