Lessons From a Coffee Entrepreneur
geekatsea.com
geekatsea.com
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.
"cash only" seems unfriendly. You can get away with not being friendly as long as you are neutral and professional, but anything that gives a feeling of hostility is going to consciously or unconsciously drive away people.
I won't go to a "cash only" shop because most of the times I pay with cards and to me, it reads like the shop is asking me not to come in.
When he went for a list of currencies, rather than saying pay US dollars or don't come in, it read like we have issues with processing cards, but please do come in - we will see what we can do.
(Why did this comment from clarebear get killed? Anyway...)
I agree. Even though the vast majority of customers will never use any of those choices except cash and iou, simply having them sends the message that the shop is very open and flexible.
Any business that tries to disrupt Visa/MC/AMEX is going to have to be able to handle and reject large-scale fraud.
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 :(
They're not open 24/7 though. I miss being able to grab a pizza at 3am in NYC.
(As a side note, any decent sour cream sold in the US has roughly the same consistency and flavor as creme fraiche.)
i have found a pretty decent substitute in palo alto, but it's not the same.
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.
What do you mean?
He still sound donuts and sold them at a small loss.
Seems to me like a pretty significant turnaround from what his situation had been prior to the switch on sourcing methods.
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.
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.
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.
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.
Basically you learn to have an extra $20 on you when you're walking around certain areas of the city and it's not a big deal at all.
Nearly every processor agreement stipulates that this is a no-no.
It seems very fair to everyone I know who has ever had a merchant account; people who have not, on the other hand, sometimes think it's unfair.
Thanks!
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.)
Visa and Mastercard expressly prohibit surcharges for transactions made with their cards so that is not a workable solution.
A lot of people offering "cash discount" are technically violating their agreements with VISA/MC.
Granted, Berkeley seems to have its own notion of what it's culture should be and people don't seem to mind paying cash only. I think it's important to realize that you are projecting your own expectations onto other people's products, and in their minds they are perfectly happy losing your business so that they can focus on cultivating the kind of customer base they want.
Take Starbucks as an example of the opposite extreme, they take credit cards, drive thru, have uncomfortable chairs and loud music to discourage seating all in the effort to move as much coffee as possible. Starbucks does pretty well, but it's probably in this guys best interest not to try and copy Starbucks.
EDIT: Actually, this piece has quite a few spelling errors and typos in it. This needs a once-over by an editor.
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.
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.
Future-proofing your business is great, but if you can't hold on long enough to even exist in the future, then it's premature optimization.
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."
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.
4. It's generally an (illegal, yet surprisingly common) way to avoid taxes.
The whole point of the article is that your intuitions about what is true or false is unreliable. Instead it is better to experiment with different options and measure the results. Choose the best option based on real data rather than unreliable intuitions.
Article says it all really. Don't assume.
They were homemade for Stallman's sake!