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How To Start A Coffee Roasting Business
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How To Start A Coffee Roasting Business in 2021: 10 Things To Consider
Have you ever thought about starting a Coffee Roasting business?
What are things that you would need to do to get things up and running?
Well, first things first…
Did you know that the pit of the coffee cherries is actually what you would call coffee beans?
In their raw state, coffee beans are green, hard, and inedible. Coffee roasting businesses roast green coffee beans at different roast levels to ensure they can be brewed.
Coffee professionals can sell their coffee directly to customers or through coffee shops and other retailers.
This post will help you learn how to start a coffee roastery. It covers everything you need to know: starting a business plan, startup costs, and standard business licenses in the coffee industry.
Towards the end of this article, you’ll find answers for some of the most frequently asked questions on how to start a coffee roasting business and other online alternatives.
But most importantly, you’ll be shown a system that several others have used to build their own business to over $40,000 a month in mostly passive income.
Table of Contents
Start A coffee roasting business by following these 10 steps:
Now that you’ve found the right business idea, it’s time to get on to the next steps. It is not enough to register your business with the state. There are many other aspects of starting a business. This is a simple guide on how to start a coffee roasting business. These steps will help ensure your business is adequately planned, legally compliant, and registered.
Step 1: Create A Business Plan.
For entrepreneurs to succeed, a clear business plan is crucial. This will allow you to map out your business’s details and uncover some hidden opportunities. Here are some important points to remember:
What Are The Startup Costs Involved In Opening A Coffee Roasting Business?
There are substantial startup costs involved in opening a coffee roasting shop. A business owner must also buy commercial space.
- A coffee roaster, which can go up to $25,000 per year, is a costly investment.
- Green coffee costs about $3.00 to $4.50 per kilogram, but it can be purchased in large bags such as, e.g., 50-kilogram (110-pound) sacks)
- Packaging supplies (a few pennies per bag/box)
- A POS System
- Labels (a few dollars each)
- A heat sealer could cost as much as $30-$300.
- A coffee grinder could be between $500 and $1,000.
Companies will also require a computer with internet access and a delivery vehicle.
If you have limited capital, there are two ways to reduce your startup costs.
First, owners of businesses have the option to “contract-roast.” Contract roasting involves paying a rental fee for access to a roaster’s facility.
The roaster may also be part of the roasting process. The roasted coffee can be sold under the rental roaster’s label, regardless if another roaster is involved.
This helps reduce startup costs because you don’t need to purchase a coffee grinder, heat sealer, roaster, or roaster.
Or, roasters could start with cheaper equipment. Driftaway is a commercial coffee roaster that first roasted commercial batches with a Behmor 160 — a roaster marketed to hobbyists that typically sells at a fraction of a thousand dollars. It’s also possible to buy less expensive heat sealers, grinders, and other equipment for your business.
What Are The Ongoing Expenses For A Coffee Roasting Business?
If you want to roast coffee as a business, the following are the ongoing expenses that you need to consider:
- Purchasing green coffee
- Purchase fuel for the roaster (using propane, natural gas or electricity, or any other fuel source).
- Packaging supplies
- Rent and utility bills
- POS System monthly/annual fee
- Wages for employees
- Shipping and delivery charges
- Service calls for equipment
Who Is The Target Market?
The ideal customer for a coffee roasting company sells specialty coffee. A lot of coffee is often consumed by coffee shops, grocery stores, and boutiques. Wholesale customers are more stable than retail customers, even though they don’t pay the same as individual customers.
How Much Can You Charge Customers?
For 12-ounce bags of roasted coffee, retail prices range from $12 to $20. The wholesale price is usually $6-12 per pound. One of the major factors affecting where roasters’ prices fall within these ranges is the quality of coffee. (Some roasters may have prices that are not within these ranges.
While many roasters offer retail bags larger than 12 ounces, most roasters only use 12-ounce bags for their main retail packaging. This is because 25 percent of the green coffee’s weight goes through roasting, which results in approximately 12 ounces of roasted espresso. The reports from the POS system can help you to determine the price. The product price may increase if there is high demand.
How Much Profit Can A Coffee Roasting Business Make?
The number of outlets that a coffee roasting company can obtain its coffee depends on its profit potential. Coffee roasters that have coffee at many retail outlets can earn thousands or even millions of dollars each year. Many roasters make less, but many earn tens to thousands of dollars each year.
How Can You Make Your Business More Profitable?
Coffee roasting businesses can increase their coffee sales and generate additional revenue streams by opening their own coffee shops.
What Will You Name Your Business?
It is both crucial and challenging to choose the right name. Opening a business under a different name other than the owner’s personal name is possible under a sole proprietorship.
When registering a business name, experts recommend that you do thorough research on the following:
- The business records of the state
- Registers of trademarks at the federal and state levels
- Social media platforms
- Web domain availability
Step 2: Form A Legal Entity.
The types of business structure that are commonly used are the following:
- Sole Proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation
A legal business entity protects the business against being held personally responsible if the coffee shop gets sued.
An LLC can be set up easily by anyone with only minimal state LLC fees. Alternatively, an LLC service provider can do the job for a small, additional fee.
It is necessary to choose a registered agent for the LLC. A free annual registered agent service is often included as part of any LLC formation packages. The owner can act as the representative or opt to avail of the benefits of a registered agent.
Step 3: Register For Taxes.
Before opening the business, the owner will need to register for various state and federal taxes. To register for taxes, an EIN is required, which is a straightforward process and completely free!
The EIN can be obtained free of charge through the IRS website, fax, or mail.
Small Business Taxes
There are many options available for taxation of the business depending on how it is structured. An example of this is an LLC that could be taxed as an S corporation(S corp).
Below are some guides about small-business taxes that are worth checking out:
- LLC taxes
- Sole Proprietorship vs. LLC
- LLC vs. Corporation
- S Corp vs. LLC
- How to start an S Corp
It’s important to note that specific state taxes and franchise taxes may apply to the business.
Step 4: Open A Business Bank Account & Credit Card.
For personal asset protection, it is important to use dedicated business credit accounts and banking accounts.
In the event of a lawsuit, personal and business assets such as the home, car, and other valuables of the business owner, become at risk if they are mixed. Business law calls it “piercing the corporate veil.”
Additionally, building business credit can be a way to obtain credit cards and financing under the business name and better interest rates and credit lines.
Step 5: Set Up Business Accounting.
To better understand the business’s financial performance, it is essential to keep track of all of the expenses and income. It is also easier to file annual taxes if detailed, accurate records are kept.
Step 6: Obtain Necessary Permits And Licenses.
Failure to obtain necessary permits and licenses may result in heavy fines or even complete business closure. Below are some points to remember when obtaining a business license and permit for a coffee roasting business.
State & Local Business Licensing Requirements
The local health department randomly inspects all establishments that work with food. Inspections are conducted to verify compliance with local laws and regulations, usually related to contamination prevention. These tips will help you succeed in a health inspection.
Certificate Of Occupancy
A Certificate of Occupancy (CO) is required for businesses that operate from a physical address. A Certificate of Occupancy (CO) confirms compliance with all building codes, zoning laws, and government regulations.
- If the owner is looking to lease a property:
- It is usually the landlord’s responsibility to obtain a CO.
- Check that the landlord can obtain a valid CO for coffee roasting businesses before leasing.
- A new CO is often required after significant renovations. It is good to add language to the lease agreement that states that lease payments will not begin until a valid CO has been issued if the facility is being renovated.
- If the owner is looking to buy or build a property:
- It is the owner’s responsibility to obtain a valid CO from the local government authority.
- The coffee roasting business can apply for a CO to comply with all local building codes and zoning requirements.
Fair Trade Certification
To be eligible for a Fair Trade certification, the company must undergo fair trade supply chain audits and pay fair trade price premiums to ensure the quality of the bean supplied.
Step 7: Get Business Insurance.
Like licenses and permits for businesses, insurance is necessary to ensure that any business can operate legally and safely. Business insurance protects the company’s financial health in the event of a covered incident.
Many types of insurance policies can be purchased for different types and types of businesses, with various risks.
General Liability Insurance can help determine the potential risks to the business.
This is the most widespread coverage small businesses require, so it’s an excellent place to begin for a coffee roasting company.
Workers’ Compensation Insurance is another crucial insurance policy that businesses will need. The state will likely require company workers to have Workers’ Compensation coverage.
Step 8: Define Your Brand.
The brand is the company’s identity. It is also how the business is perceived in the eyes of the public. A strong brand will make any company stand out from the rest.
How To Promote & Market A Coffee Roasting Business
Cuppings are a great way to promote a coffee roasting enterprise. Cuppings allow potential customers to get in touch with roasters and learn more about their coffee.
How To keep Customers Coming Back
A coffee roasting company must be able to distinguish itself from other coffee roasters. One way a business could do this is to:
- Choose a unique kind and quality coffee from a specific region or a specific roast level
- Do coffee direct trade: Sharing the stories of coffee growers and buyers
- Support initiatives by providing Fair Trade, Organic Certified, Rainforest Alliance Certified coffee
These strategies should not be the only thing coffee roasting businesses need to do. They also need to emphasize freshly roasted coffee. Coffee loses flavor and aroma over time. Freshly roasted coffee tastes more delicious than stale coffee. Roasters often indicate the roast date of the coffee in their bags to prove that it has been freshly roasted.
Step 9: Create Your Business Website.
The next step after defining the brand and creating a logo is to create a website.
Though creating a website may be essential, others might fear it is too difficult because they lack the necessary experience.
Although this was a legitimate fear in 2015, the web has seen significant advancements over the years that make the lives of small business owners easier.
Step 10: Set Up Your Coffee Roasting Business Phone System.
Setting up a business phone is one of many ways to ensure that private and professional lives are separate.
This isn’t all. It can also help coffee roasting businesses become more automated, increase the company’s legitimacy, and make it easier for potential customers and clients to reach the company.
There are many services available for entrepreneurs who want to set-up a business phone system.
Is This Coffee Business Right For You?
People who are looking to start a coffee roasting business should be creative and passionate about it. When creating new blends of coffee, creativity is essential. You will need to combine different coffees and create unique blend names.
Furthermore, roasters must be familiar with fundamental scientific concepts. A roaster doesn’t need to hold a formal science degree but should be proficient in biology, physics, or chemistry, as roasting coffee requires each of these disciplines.
- The best way to choose coffee beans is to know the biology of the coffee bean, including its growing conditions, cultivars, and types.
- The ability to choose and set up a roaster requires a good knowledge of thermodynamics.
- Knowing how heat is applied to roasting influences the chemical structure of coffee beans (chemistry) will help you choose the right roast profile for your coffee.
It is also helpful if roasters can multitask. Roasting one batch of coffee takes between 10-15 minutes. A roaster may do other tasks to maximize efficiency. However, they must watch over any coffee that is roasting to ensure it is roasted correctly.
FAQs
Is Coffee Roasting A Profitable Business?
If you look at the numbers, roasting coffee is a profitable business venture and an avenue to grow your coffee shop’s profits. According to research by the SCA, the main problem is the high starting cost. It can be as high as $100,000.
Is There Money In Roasting Coffee?
A roaster who has coffee at many retail locations can earn hundreds or even thousands of dollars each year. Many roasters make less than that, but they still earn thousands of dollars each year.
How Much Does It Cost To Advertise In Coffee News?
For as low as $125 per year, Coffee News offers consistent advertising that includes bi-annual, monthly, quarterly, and bi-annual campaigns to market your business. Your ad will be displayed to thousands of Coffee News readers every day, seven days a week.
Is Home Roasting Worth It?
Coffee should not be roasted at home. It’s not worth the effort, especially since it’s easy to find coffee that suits your taste. It’s messy work and best done in a garage or screened porch because of the smoke.
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