

Lessons From a Coffee Entrepreneur - kirillzubovsky
http://www.geekatsea.com/lessons-from-a-coffee-entrepreneur

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jpadvo
> 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.

In my mind, this is the highlight of the article. If you carry out your
business in a friendly and unique way you can win customers _and_ do things
that are very difficult to pull off otherwise.

~~~
earl
I miss NYC so much; SF is just such a disappointment as a city.

My bodega 2 doors down in the upper east side was a full deli with fresh
chicken, turkey, and pork everyday; $6 huge sandwiches made fresh; coffee; and
they were open 24 hours a day. Plus they took credit -- once the people at the
register recognized you, you could could run a tab up to a couple hundred
dollars and pay on the first of the month. It was wonderful to go downstairs
with just the keys in my pocket and have someone who remembered what I wanted
for breakfast, that I like my eggs fried (unlike SF where they normally
microwave in a plastic bowl), and that I take coffee with just a hint of cream
and no sugar. Plus, from their perspective, I paid the tab every month in cash
so no fees. I've never found anything like this in SF.

I mean, Andy at Que Tal recognizes me, but it's not the same :(

~~~
donw
Eggs cooked in a microwave...? That's sacrilege. This is how you cook eggs:
<https://www.youtube.com/watch?v=dU_B3QNu_Ks>

(As a side note, any decent sour cream sold in the US has roughly the same
consistency and flavor as creme fraiche.)

~~~
kirillzubovsky
"... then give it to him in bed! for breakfast :) " - it's amazing how a
conversation started on lessons leads into a delicious breakfast. That egg
looks sooo good!

~~~
donw
I make those all the time, and they are fantastic, especially with a bit of
fresh-chopped bacon and a bit of Cotswald cheese.

------
jonnathanson
An important side lesson here is not to take common industry practices at face
value. (In this case, it was the conventional wisdom that 'All coffee shops
are expected to have baked goods, and they sell baked goods at a loss').

In any business, big or small, tech or otherwise, there are hundreds of
strategic and tactical levers we can pull on a daily basis. Many of these
levers we don't even realize exist, because we're so used to thinking of them
as fixed in place.

~~~
true_religion
> An important side lesson here is not to take common industry practices at
> face value.

What do you mean?

He still sound donuts and sold them at a small loss.

~~~
jonnathanson
I'm going off of this line in the article: "With the bread, cookies and
donuts, John was now operating with virtually no loss on the baked goods."

Seems to me like a pretty significant turnaround from what his situation had
been prior to the switch on sourcing methods.

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scottporad
"accepting...I.O.U.'s"

One of the coffee shops I frequent also accepts IOUs, plus they do one other
thing: you pay as you leave, not when you get your coffee. Now, this has two
benefits:

First, means that the barista has to keep track of things...they have to
actually have a relationship and interaction with the customer. That's very
positive.

Second, it means that I often go get a second cup, or a pastry, because I
haven't closed out my bill yet.

~~~
zem
one consequence of labour being so much cheaper here in india is that even
some of the large chain coffee shops have waiters and a pay-as-you-leave
policy.

------
railsjedi
Nice post that reminds us that customer development techniques are not new to
the tech community, and we can learn a lot from watching traditional brick and
mortar stores use these same techniques to enhance their business.

~~~
kirillzubovsky
Indeed, isn't that great! We read all these popular books on how to make
startups better, while sometimes all we need to do is open our eyes and watch
others.

~~~
mikeleeorg
Some of the most memorable business advice I've gotten is from a restaurant
owner.

He told me stories about how he's had to declare bankruptcy twice (he's not
proud of it and tried to avoid it, but ultimately had little choice); how he's
had partners who nearly ruined the business; how he's had to deal with changes
in accounting practices; how he's had to deal with "local issues" (such as
police officers, nearby merchants, etc); how he's had to manage relatively
uneducated employees to build them into an efficient team, etc.

~~~
kirillzubovsky
I have no doubt. We, in tech community, take a lot of things for granted. It's
easy to sit at home, in underwear, and write code. Yes, the code might be
hard, but it is not the same experience as the one would get at a kitchen
table, chopping potato all day. Props to all the hardworking folks!

------
haberman
I have bought these donuts before, and definitely did not care that they came
from Fred Meyer (I remember him mentioning it, slightly apologetically).

------
colson04
Good article, but the most interesting part of the story (for me) was casually
summarized in one sentence. What amazes me is that he decided to start his
first business at the age of 61 - wow! Major kudos to this guy for finally
deciding to take a leap at an age when others are merely contemplating if
their savings will be enough to fund retirement - that takes serious balls.

Sure, John made some great changes and saved his business, but that's what
good entrepreneurs do - adapt and move on. He certainly deserves the credit
for that, no doubt.

------
aviel
His deck is also the best place to work in the Summer in Seattle IMHO.

~~~
JackDanger
Agreed. If you visit Seattle on a sunny day this is where you need to set up
work for the day. I think I'll head over right now, actually.

~~~
kirillzubovsky
If you do, let John know that he's becoming a local superstar!

------
languagehacker
Being a cash-only business is an annoying disservice to your customers. It's a
sign that you're not interested in the value of convenience. It's a regressive
attitude to lean on cash, and oftentimes a sign that you're not interested in
keeping honest books.

If you're not willing to pay what is almost universally accepted as an
operating cost in modern society, you're setting yourself up to be left in the
dust, and quickly. People are about to start paying for everyday transactions
using their phones! If you have a problem with payment processors biting into
your margins, then pass the buck onto your customers (even as a credit card
usage fee), but never take away a payment option.

~~~
furyg3
Credit card usage fees are a good way to a) make your customers mad and b) be
blacklisted by your CC processor (possibly sued).

Nearly every processor agreement stipulates that this is a no-no.

~~~
epochwolf
Then how do universities and state licensing locations get to charge 5% fees
on all credit transactions? Do they have separate deals?

~~~
lsc
it's funny, I mean, many of my suppliers of bandwidth and rackspace accept
credit cards. No fee, usually.

I'm amused at this thread because I woke up this evening to a bill from a
provider that I recently did an especially good job negotiating with, and the
guy wants a 3% payment processor fee on top of the negotiated amount.

(I'm going to leave an envelope with a cheque at the co-lo for him; gotta go
anyhow.)

------
wyclif
There's a typo: "Steady" not "stead" under Lesson 1.

EDIT: Actually, this piece has quite a few spelling errors and typos in it.
This needs a once-over by an editor.

~~~
kirillzubovsky
I absolutely agree (the Editor) ;)

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sib1013
Good story about the power of experimenting an making decisions quickly.

------
bluekite2000
My lesson as a coffee entrepreneur: hire cute asian waitresses with big boobs
(working exclusively on tips) and have them wear nothing but pasties
[http://www.ocregister.com/articles/says-126730-nguyen-
coffee...](http://www.ocregister.com/articles/says-126730-nguyen-coffee.html)

------
adaniali
I like to have an IOU iphone app.

~~~
ctdonath
Ycombinator, get busy.

~~~
kirillzubovsky
Might work, but most likely wouldn't. IOU isn't about the transaction, it's
about the human connection between the buyer and the seller. People don't
trust technology, they trust people. my 2c.

~~~
gregpilling
an IOU app that integrates with Facebook then?

~~~
thebooktocome
Facebook makes a shitty web of trust.

------
napierzaza
Sounds like his business is dying as he cuts parts away. If he could get the
right amount of pastries ordered, why would he not make money? You sell half,
so order half. It just sounds like he wasn't paying much attention when he
wasn't in financial trouble.

Sounds like a pretty reactionary guy. I might agree that credit companies
exploit small businesses, but a bakery too? Everyone is out to get this guy.

I just hope he doesn't get his own ATM in his business instead of taking
credit cards.

~~~
jpadvo
It is probably more subtle than that. You have to have a surplus of goods so
there is selection. There needs to be enough pastries on display so that
people will be able to find something they want.

And when money was flowing, he could afford to sell pastries at a loss to keep
his customers happy. When he couldn't afford it anymore he was forced to
change. Perfectly normal. What is out of the ordinary is how he reexamined his
assumptions and created a better solution -- instead of hamhandedly cutting
pastries altogether.

------
redrussak
The Seattle tech community rocks!

------
vnorby
Are we sure these are lessons we want to take? Forcing a user to pay with
currency (let alone foreign) makes accounting harder, and renders their shop
useless to compete with other shops that do have card readers for a very large
percentage of people. Then he moved the cash only sign inside instead of
realizing that customers want to pay with their cards and adapting to his
customers' needs. Lastly, he decided on taking the easy, low-quality route
with his baked goods. Is that really future proof? I don't think he's
acquiring any new customers by reselling boxed donuts - and his margins are
very low. Why is he getting into the competitive baked goods market in the
first place? Why not partner with a local bakery that produces high quality
food stuffs as a barter?

~~~
fr0sty
1\. He only loses to other shops in the case where customers dan't or won't
pay with cash (this is a subset, and probably a minority, of customers). In
return he saves money on a computer kiosk and the merchant fees on his
transactions.

2\. If he does not take plastic, then people who only pay with plastic are not
his customers. Their needs are consequently irrelevant.

3\. the $.25 donut is a loss-leader to sell the $4 cup of coffee. Or you could
look at it as a bonus of sorts. Compare: "Buy a $4.25 cup of coffee" with "Buy
a $4.25 cup of coffee, get a free donut."

~~~
vnorby
For 1, I guess we need to know what % of consumers use credit cards/would
prefer to use credit cards vs. cash only. With 600m CCs in circulation in the
US, I do not think it's fair to say that customers who pay with credit/debit
cards is a minority. For 2, like I said, by moving the sign inside, he may get
a customer once who pays with cash, but who knows if they will return to pay
with cash a second time knowing that they don't accept a CC? 3rd, the donut
being a loss leader is a well taken point - depends what his target market is
though. My point in raising these concerns is just that we shouldn't look at
these lessons blindly, they need real economic analysis and probably some
financial data to understand how well they are working vs. other options the
owner could have taken.

~~~
kirillzubovsky
According to John, the customers always returned. This coffee shop is not
located in the center of downtown, but rather sits nicely next to the ship
canal in Ballard. The people who come through are very often locals and they
value their ethics and reputations, thus return to pay back. A buddy of mine,
who lives 30 minutes away, once forgot his wallet and had to pay $2.50 with
the IOU. He returned a week later and payed back. This approach would never
work in Manhattan, but Seattle folks are much friendlier and value small
businesses over large chains.

In terms of baked goods, they weren't low quality, they were just home baked.
John used to work with a local bakery, but no one particularly cared to get
their slightly above average quality.

~~~
lurker14
Poster above claims Manhattan takes IOUs but SF doesn't.

