Barista Magazine

DEC 2018 - JAN 2019

Serving People Serving Coffee Since 2005

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Page 98 of 107

99 B: Taxes The T-word. No one likes to hear it, and it can incite massive headaches for shop owners due to the long list of taxes businesses encounter: income tax, payroll tax, employment tax (Social Security, Medicare, etc.), sales tax, estimated tax, etc. However, shop owners do not need to tackle taxes on their own. In fact, they should not. Consultants and shop owners alike all recommend hiring a C.P.A. for this taxing task (pun defi nitely intended). PRO TIP: DON'T OVERLOOK THE VALUE OF A C.P.A. Partner with a C.P.A. who knows small business, as opposed to an attorney. Attorneys usually cost more and do not specialize in the tax fi eld. (Note: Attorneys can provide critical insight into lease agreements. If accessible, an attorney may save a business from getting locked into an adverse fi nan- cial agreement.) When it comes to taxes, a good C.P.A. will become a major asset to your business. C: Reserved operating capital Operating capital is the money needed to cover all expenses required to run a shop (i.e., the expenses listed above plus a little extra). Since busi- nesses rarely create profi t within the fi rst few months, capital reserved in the bank is crucial to cover these costs until the business can pay for itself. Consultants suggest new shop owners obtain 6 to 12 months worth of op- erating capital prior to build-out. This number will fl uctuate based on (sur- prise, surprise) the business's location, brand, and priorities, as well as the shop owner's personal pre-profi t income needs. Nationwide, the average recommendation for reserved operating capital falls between $30K–$50K, with $15K as the lowest number and $100K as the highest. PRO TIP: AVOID THE ONE-MANY-ARMY APPROACH! Partner with others a) to pool resources and b) to utilize each individual's strengths. Though a partnership requires a split of profi ts, it also creates a checks-and-balances system, thus building a healthier business and likely greater revenue in the future. Though the expenses of opening a coffee shop appear to grow exponen- tially, new shop owners can control the cost required to open their space. The cultivation of a brand and a steadfast commitment to priorities will create healthy boundaries in which new shop owners can exercise creativ- ity, independence, and excellence. It will require sacrifi ce, patience, and in- genuity, but the hard work will foster a strong business that attracts quality employees and loyal customers. The reality of the cost and the romance of the dream can make amends and join forces. Don't wave the white fl ag of surrender quite yet. The author thanks Xavier Alexander, Metric Coffee; Matthew Stein- brecher, Metric Coffee; and Darko Arandjelovic, Caffe Streets, for their valuable insights in her article research.

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