Most people love coffee, and you’re probably one of them. Demand for coffee is always high but opening a coffee shop is expensive. Starting a coffee roasting business has relatively low startup costs and could be a great way to turn your love of coffee into a profitable business.
A coffee roasting business roasts green coffee beans to mild, medium, or dark for different flavors. They sell the roasted coffee beans online to individuals at places like farmer’s markets, coffee shops, grocery stores, or retailers that sell specialty coffee.
According to Statista, the market size of the roasted coffee industry by revenue is $66,623.7 million in 2021 and is expected to grow 5.88% per year through 2025. Revenue generated per person averages $200.12 per year.
According to IBIS World, the rising elderly population will increase the demand for coffee in the future. The price of coffee beans is expected to increase, but that price is very volatile and changes due to climate changes and the volatility of the U.S. dollar. Trends in what customers are demanding in roasted coffee in terms of flavor are always changing as well, so it’s important to keep up with what’s happening in the market.
Your target market will be people who love coffee and coffee shops and cafes. In addition to targeting individuals, you can also consider private labeling coffee to local coffee shops.
Skills, Experience, and Education Useful in Running a Coffee Roasting Business
There are several specific skills that you will need to open a coffee roasting business.
- Experience. Experience roasting coffee in any setting will be invaluable.
- Creativity. You will need to make your product stand out, so you need to be creative in both your roasting and your marketing.
- Business knowledge and experience. You will need to have some basic knowledge of marketing, finance/accounting, and human resources.
- People skills. You’ll need to build rapport with your customers so that you retain them as customers and keep them coming back. You’ll also need to develop relationships with coffee shop and café owners.
Costs to Start a Coffee Roasting Business
Here are the typical costs you will face when you open a coffee roasting business.
- Setting up a business name and corporation $200 +
- Business cards, brochures, postcards for marketing $200 – $300
- Website setup $100 –$200 for a basic, do it yourself website, $1,000 – $2,000 for a professional site
- Coffee roaster $1,000 – $25,000 (purchasing a used roaster may help reduce your startup budget, however, a new roaster will typically come with training)
- Equipment (coffee grinder, heat sealer, etc.) $500+
- Initial supply of coffee beans 110 lb. bag $350 – $450
- Supplies (bags, labels, etc.) $500 +
- Liability insurance, worker’s comp, property-casualty insurance $600 – $1,000
- Initial marketing such as Facebook ads or search engine optimization for your website, flyers, and postcards, $500 -$1000
Steps to Starting a Coffee Roasting Business
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your coffee roasting business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.
Not only is a business plan essential to take to a bank for financing, but multiple studies have also shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Step 2: Name the Business
Finding the perfect coffee roasting business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
Related: Comparison of Business Entities
Step 4: Select your Location
The location of your coffee roasting business will probably be your home, and you can also sell your beans online. To have a coffee roasting shop would be cost-prohibitive.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Since you are handling a food product, a coffee roasting business will likely need the necessary permits and be subjected to regular inspections from their local health department.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a coffee roasting business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.
Step 8: Get your Marketing Plan in Place
People love the aroma of coffee, so be sure to emphasize the aroma, flavors, and freshness of your coffee beans.
Some common marketing techniques for a coffee roasting business include a social media presence on platforms like Facebook, Instagram, or YouTube, online advertising to get traffic to the website, as well as flyers and postcard mailers. Developing a website can be a significant expense, but it can also give your coffee roasting business greater visibility online.
Many coffee customers are interested in businesses that focus on sustainable farming practices. If this is important to your customers, be sure to look into coffee sourced from farmers that have Fair Trade certification or are Rainforest Allied Certified.
Step 9: Get Insurance
A coffee roasting business needs several types of insurance for full coverage:
General liability insurance can help protect you from third-party claims of bodily injury and property damage.
Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hiring Employees
You may need to hire employees to help you run your coffee roasting business if you grow a large customer base.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your coffee roasting business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
How Much Can You Potentially Make Owning a Coffee Roasting Business?
If you sell a pound of coffee for an average of $15, and you sell 50 pounds per week, you would make $39,000 in revenue per year before expenses.
Things to Consider Before Starting a Coffee Roasting Business
Running a coffee roasting business or any business will have its challenges. You need to be prepared and make sure that you know what you’re getting into.
Marketing and acquiring customers will be your biggest challenge and an ongoing expense. Your best bet is to try to find coffee shop or cafe partners, so a lot of business networking will be required.
You will face a lot of competition, so your marketing will need to make you stand out, and you’ll need to roast great coffee beans.
Make sure that before you do anything else, you make sure that you make great coffee. Test it with friends and family to perfect your product.
Also, keep in close contact with customers to ensure your product is keeping up with their tastes as preferences change over time. If you don’t keep a pulse on the market, they may start purchasing from your competitors.
If you have been thinking about starting a coffee shop, starting with a coffee roasting business is a lower-cost startup option. Once you build up a consistent clientele, you can open your own coffee shop with a built-in customer base.
If you can build relationships with coffee farmers, you may be able to get better pricing and be able to cultivate unique blends that your customers love.