How much capital is needed to open a cafe? For those of you who are interested in opening a cafe, this is probably the first question that comes to your mind, right?
Well, when preparing the capital to open a cafe, you need to calculate fixed costs, variable costs, and the total capital required.
Let’s read this iReap article that discusses budgeting for starting a cafe, the required costs, and examples of calculations.
Components of Costs that Affect Capital
There are two components of costs that affect the initial capital you need when opening a cafe: fixed costs and variable costs.
1. Fixed Costs
Some costs that fall under fixed costs include rent, renovation, and interior design.
In addition, the need for equipment and cafe supplies is also considered a fixed cost. The same goes for permits and technology used (such as using a Point of Sale cash register application).
2. Variable Costs
Variable costs are costs that depend on the quantity of production, so the amount varies based on needs.
Some costs included in the variable cost category are inventory, raw materials, and other consumables.
There are also utility costs (electricity, telephone, internet, gas, and water), employee wages, promotion costs, and maintenance (repairs/maintenance of the cafe).
Let’s discuss each component that affects the business capital for opening a cafe in the explanations below...
How to Calculate the Capital to Open a Cafe
1. Rental Costs
One of the significant capital requirements is the cost of renting a business space. The amount of rent depends on the strategic location of the business, the size of the building, and the number of interested parties who also want to rent the place.
If you are just starting a cafe, try to find a place with a monthly rent of around Rp2,000,000 to Rp4,000,000. Later, when the cafe becomes busy, you can consider finding a better location.
Another way to minimize rent costs is to utilize an empty space or room in your own home, especially if your home is located in a strategic location.
2. Renovation and Space Design Costs
To make the cafe attractive and comfortable for visitors, you will need to do renovations. This includes lighting, room cooling, wall decorations, and other aesthetic elements.
Consider each element in detail and calculate the costs properly. It is better to start with a minimalist concept first to avoid spending too much on renovations.
3. Equipment and Cafe Supplies
The essence of a cafe lies in various equipment needed, such as coffee machines, refrigerators, ovens for warming food (if your cafe also serves food), and other kitchen equipment.
In addition, you will also need cafe supplies, ranging from utensils, furniture, to table decorations.
To minimize the use of capital in this aspect while still obtaining quality goods, for example, there are many types of espresso machines. Conduct a survey first and read reviews from other users. The price of espresso machines on the market ranges from Rp500,000 to 37 million Rupiah.
Since your cafe is just starting, try to get an espresso machine with good quality but still affordable, for example, priced at Rp1,500,000 or Rp2,000,000.
Do the same when looking for dining utensils and furniture. Conduct a survey first and choose the best ones at an affordable price.
4. Business Permits
Before opening the cafe, make sure to obtain the necessary business permits to avoid problems in the future.
Permit documents usually include business permits, business registration, health permits for food services, and others.
To facilitate cafe management, especially in terms of customer service and financial management, it is advisable to invest in a good Point of Sale (POS) cash register application and its supporting devices.
For that, read tips on choosing the best cafe cashier program first. Then prepare supporting devices such as a receipt printer, barcode scanner, and a smartphone, Android tablet, or cash register computer.
To minimize investment costs for devices, choose an affordable Android cash register application. For example, you can use the iReap POS cash register application, which costs only Rp41,667 per month if you subscribe for one year.
6. Inventory and Raw Materials
To ensure smooth cafe operations, you need to ensure the availability of inventory and stock of goods or raw materials, including other consumables.
You need to calculate the detailed production requirements based on daily sales volume to ensure a constant supply of raw materials.
Inventory can include cooking equipment, while raw materials include coffee beans, milk, sugar, snack or food ingredients, and so on.
The key to minimizing monthly expenses related to inventory and raw material costs is to collaborate with a supplier who can provide quality raw materials at competitive prices.
7. Employee Salaries
Hiring employees naturally incurs salary expenses that you need to prepare. To ensure that employees work well, you also need to provide compensation, benefits, training costs, and even rewards for outstanding employees.
Don’t forget to calculate the salary for yourself as the owner as well. The cafe’s profits may not be entirely used as your personal income. It is advisable to separate the cafe’s finances from personal finances so that you can allocate funds for future cafe development.
8. Utility Costs
Utility costs include electricity, water, internet, telephone, and gas expenses. The amount varies depending on the daily usage within a month.
9. Maintenance and Repairs
Even though you have already done renovation and design when opening the cafe, you still need to allocate a monthly budget for necessary maintenance and repairs.
So, when unexpected problems occur, such as clogged pipes or a broken espresso machine that needs repair, you already have the funds and don’t need to worry.
10. Marketing and Promotion
Allocate a budget for marketing and promoting your cafe. The goal is to attract more customers and keep the cafe busy.
A cost-effective and impactful promotion method is utilizing social media.
To understand a general explanation of promoting on social media, you can read this article: Tips for Promoting Products on Social Media. You can also read Effective Tips for Promoting a Cafe to Attract More Customers and Increase Profits.
Example Calculation of Capital to Open a Cafe
Breakdown of Capital for the First Month of a Newly Opened Cafe:
- Rent: Rp4,000,000
- Renovation + Design Costs: Rp3,000,000 (only once before the cafe opens)
- Equipment and Cafe Supplies: Rp6,900,000
- Business Permit: Rp2,000,000
- iReap POS Android Application: Rp500,004 (paid upfront for 12 months)
- Inventory and Raw Materials: Rp3,000,000
- Employee Salaries for 2 people + owner: Rp8,000,000
- Utility Costs: Rp2,500,000
- Maintenance and Repairs: Rp500,000
- Social Media Promotion: Rp500,000
Total capital required to open the cafe: Rp30,900,004.
The calculation above is just an example, and you can adjust the capital amount according to your own cafe’s needs. With the required capital, what are the opportunities and profits you can gain? Check it out here: Profitable Cafe Business Opportunities.