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Comment by fr0sty | Hacker News Reader

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."

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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.

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.

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

You missed one:

4. It's generally an (illegal, yet surprisingly common) way to avoid taxes.

Guarantee you this guy is not making money hand over fist; any business is paying far more in hidden taxes than you would expect, including taxes on all forms of energy, telecom, property taxes, etc.

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