3 Lessons From a Coffee Entrepreneur

John Crosby, Canal Street Coffee

John is the owner of the Canal Street Coffee. He is sixty-six years old, and he spent most of his life being an employee. After years of working in blue collar jobs, John finally opened this cafe 5 years ago. First time in his life he was at the top, and he was learning on the fly. The business was doing well, until the recession came along and he had to lay off a few staff and get behind the counter himself. This is a story of how John turned his problems into opportunities and what you should learn from his experience.

Lesson 1. Reduce Overhead

Life was going steady, until one day the credit card processor raised their fees on the same month as the computerized register crashed. John had a decision to make - either go ahead and buy a new computer, and keep paying credit card fees, all to spend more and more money, or to drop credit and go cash-only. Just like any good entrepreneur, he made a decision quickly and got rid of the extra overhead. What do you know, all of a sudden there was no computer to worry about nor were there any feeds to the processor. That meant John could sell less every months, and still remain profitable.

Lesson 2. Increase Conversion

For the first two months, the sales plummeted. With a "cash only" sign on the door, customers would come up to the building, walk up the stairs, get to the door, and then leave. "We couldn't have that! I needed to convert them", said John. Notice, he simply gets what needs to be done.

To fix the conversion rates, John moved the "cash only" sign inside, and on top of that started accepting checks, foreign currency, and even the I.O.U's. The latter was a big surprise. Since he started this gimmick, the store actually gained more loyal customers. People haven't been skipping on payments, and have always come back. Perhaps they actually like to be trusted!

Lesson 3. It's Not The Customers' Job to Know What They Want

The store was up and running, the customers were coming, the economic situation was getting better, but not all was well at the Canal St. Coffee. When it comes to baked good, every coffee shop operates at a loss. John too used to order $70 worth of baked goodies every day, but only sell about half. One day the bakery raised their prices, and that was the tipping point.

A coffee shop is expected to have baked good, and although John wasn't sure what he would do, he was not going to pay a cent more. Shortly after, John started making home-made banana bread; John's gardener baked some cookies. What do you know? The customers ate it up, quite literally!

Although on a winning spree, John wasn't quite satisfied with the choices. Something else was needed on the menu, and so one day he drove by Fred Meyer and purchased a box of donuts. His only employee was skeptical about selling those 'manufactured' donuts, but they tried anyway.

Believe it or not, the donuts were sold out. In fact, locals started to come in just to get these donuts, while of course also buying coffee, beer, and whatever else was available. Nobody could turn down 25-cent pastry! With the bread, cookies and donuts, John was now operating with virtually no loss on the baked goods, and managed to attract more stable customers.

Conclusion.

I didn't plan this story, but after listening to John tell me about his experiences, I couldn't help it. The lessons above apply to any company: big or small, tech or not, the concepts are the same. To apply them, you don't need to be a developer ninja, or a rocket scientist, or a mad biz-dev guy. All you need is some courage to try things out. Start by making fast decisions, listen to your customers, get them in the door, experiment, and whatever happens, look on the bright side.

p.s. This post generated a tremendous amounts of upvotes and comments on Hacker News. You can find them here - http://news.ycombinator.com/item?id=2625129

p.p.s. In early 2013, John closed down the coffee shop, sold the building and went travelling. Good for him!