Cafe Entrepreneurship

Tips on how to prevent business failure

laptop with notepad and pencil

At some point in your cafe business journey, you might think you have failed. 

Failures do hurt–financially and emotionally. But don’t worry, whether that slip is big or small, the important task you have as an entrepreneur is to bounce back. 

Rags to riches and the many success stories we read online or watch on TV would always mention their own respective failures. They, too, struggled.

But they conquered. And they are where they are now because they did not give up. 

So we’re here to tell you that we’re here for you, cafe owner! Do not give up on this learning process. To help you start mapping out solutions, here are some problems you might be facing and how to prevent them in the future!

Problem: Underestimating or overestimating the market 

Are you over-filling the cup? In an overly saturated market, starting a business the wrong way might make it difficult for you. 

In this kind of market, setting yourself apart is one key to attracting customers. Your cafe should be different or extraordinary to be in the spotlight. Otherwise, it will be hard to find a specific market. The problem will be an eventual close down due to capital moving out too much but profits moving in too slowly (also known as cash flow inefficiency). 

How to prevent it:
Avoid wasting resources due to too much investment or too little research! 
Study your target market’s needs and wants sufficiently. By doing so, you can avoid instances wherein you will have to convince people to buy your product. Remember, it’s more strategic to bring in products that have a market already than to create a new one (or products that people are not generally interested in). 

Problem: Poor management (finances and leadership)

Is your focus on profit and not about cash flow or cycle? That’s good. Do you invest without researching prior to doing so? Probably not good.

For example, you want to “invest” in a new menu item that could potentially increase sales, as trends might influence customers. However, it does not address the needs or wants of your target market. You might end up having a surplus of ingredients or special packaging of something that you are about to phase out due to low sales. Worse, ingredients could spoil, while packaging or excessive furniture could be difficult to sell.

On the leadership side, do you find yourself unwilling to delegate tasks and carry out all the responsibilities? This counterproductive practice does more harm than good. What is even more horrible is to cast blame on your staff or team members. These could lead to low employee morale; and in the long run, a weak organization. 

How to prevent it:
Needing help does not mean you are not capable. In truth, it means you care. Cash flow management is not everyone’s expertise. So better to ask accounting experts. You can also utilize professional business accounting software to keep you on track and visualize the flow better.
Are investment and expansion in your area of expertise? If not, doing both can cost you more. This does not mean stop trying out new skills, though! So to balance it out, study thoroughly what you are getting into to avoid repercussions that might hurt your business. It will also help to inquire with business advisors to enlighten you about your business’ trajectory. 
Business decisions–whether day-to-day or the big picture stuff—can impact how your business will do today and in the future. Impulsivity and misinformed decisions (or lack thereof) can greatly affect your business’s lifespan. In addition, a lack of prepared contingency plans can reduce the chances of thriving along the way. 
So remember, an alternative strategy is a helpful tool.

Problem: Unclear business goals 

Vision and mission are both important in any business.

How you see your business in the future, plus the steps to reach it are important in equipping necessary resources and its maintenance.

If you do not have clear goals from the beginning and you have a lack of concrete objectives, it may lead to misinformed and tangled decisions. This may result in mismanaging at the macro-level. 

How to prevent it:
Right from the start, create a business plan! 
Make sure it fits the current situation of your cafe’s market and setting. If the plan does not solve the current situation, don’t be afraid to adjust, troubleshoot, and redirect your plan for it to be more applicable. Ensure you get reliable and credible sources when studying and creating one too!
Do you have a background in management? If none, you can enroll yourself in business management training, or look for business coaching and mentoring. You may also opt to get a business advisor, even if you have a relatively small cafe business. Their credentials and years of experience in the biz might help you!

Problem cause: Ineffective marketing

Another reason behind low sales is ineffective marketing. Maybe you’re not missing your target market.

How to prevent it:
Awareness: Make sure your presence is known and targeted to who your market really is.
Consideration: Meet your customers where they are, if they already know you, market your products in a way that will encourage them to purchase.
Purchase: Offer bundles and discounts or other needs that will boost the likelihood of purchase! (For example, offer a pastry at a discounted price for every purchase of a large drink).
Loyalty: Boost customer loyalty by rewarding your customers for every purchase.

Problem cause: Moving too fast

Too eager to expand? Make sure your business is ready. 

If your business is still in the process of bouncing back, it might not be the right time to expand. Look at expanding like it is a new business all over. Once you feel that your business is ready, then it is an opportunity to be honest in assessing what your failures were before and applying the learnings that you have acquired.

How to prevent it:
Ask yourself questions to assess your movement. Asking for feedback from your trusted team members may add perspectives, too! Here are some helpful guide questions: Is this viable? Is it too early? Is my business prepared enough? Looking at your business’ pertinent documents or income statements, do you think you are ready to expand? Be honest and receptive.

As with other things in life–falling and standing up again— it is important to regularly assess your capability at a specific point in time. 

The important thing is that you are learning. And you’ll be able to try again.

Because in the end, you know it will be worth it to not give up easily on the dream cafe that you worked hard for.

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