Planning To Quit Your Job To Open A Cafe? You Need At Least $100K
While I was waiting in line for what seems like forever to get into a popular cafe during the weekends. I got bored and decided to count how many people walked in to get coffee to go.
Within a span of 30 minutes, I counted 20 people who walked out with a cup of joe in hand.
Assuming that they charge $6 for a cup of coffee, the place just earned $120 in a span of half an hour! And if the cafe’s operating hours are from 8am to 6pm, they would’ve earned $2,400 a day on coffee alone! Imagine what the profit margins must be like if you included sales from food and merchandise…
This got me wondering…
What if I woke up one day, decided that I didn’t give a frappe about my 9-to-5 and want to open my own
gold mine cafe instead?
I decided to talk to my friend (let’s call him Alex since he wishes to stay anonymous), an owner of a cafe which I like a latte to find out how much it would cost an average joe like me to open a cafe (Editor’s note: ENOUGH WITH THE COFFEE PUNS!).
Disclaimer: the numbers and figures here are all based on market assumptions and estimations, so if you’re serious about opening your own cafe, you’ll need to do a little more homework.
TL;DR: Should I Quit My Job To Open A Cafe?
- You’ll need at least $100,600 to open your own cafe
- If you put aside $1,000 every month, it’ll take you at least 10 years to leave your job
- If you saved $4,000 every month, it’ll only take 2.5 years to make the dream a reality
- In reality, you’ll still need a lot more capital to keep the cafe running till you break even and start making a profit
- It usually takes months or even years before your cafe is profitable
When I asked Alex about the cost of opening a cafe. He had this to say about rent, “Rental in Singapore is damn siao and it’s probably the biggest problem you’ll face when starting out.”
Considering that our HDB flats can go for a million dollars, I’m wasn’t really surprised to hear that.
I did a quick check online for rental properties available in areas where you can find the most popular cafes around Singapore. And this is what I found out:
- Bugis (Purvis Street) – $8,000 ($8.89 psf) for a total of 900 sqft (Note: this particular property comes fully equipped with interior deco and a working kitchen)
- Tanjong Pagar (Keong Saik Road) – $11,810 ($10 psf) for a total of 1,181 sqft
- Duxton (Tanjong Pagar Road) – $13,001 ($8.13 psf) for a total of 1,600 sqft
Based on his experience, a location in prime areas like Duxton and Tanjong Pagar costs:
- $10,000 to $15,000 for a space that is around 1,000 sqft or less
- $18,000 to $25,000 for a space that is closer to 2,000 sqft
- $30,000 and up for spaces that are around 2,500 sqft
For reference, a typical 4 room HDB flat is about 1000 sqft. And while that’s not really big for a cafe, it’s probably what you can realistically afford as a new cafe owner.
So yeah… If you’re thinking of owning a sprawling space like the Clan Cafe at Straits Clan for example:
Imagine the number of coffees you need to sell a day. *shudders*
Alex added that you’ll also have to sign a lease for a minimum period of 6 months on average and put down a deposit of around two months worth of rent. And if you’re not an experienced F&B owner with friends in the industry, it’ll be hard for you to negotiate for rent-rise caps and lower deposit amounts.
Assuming you start small as a first-time owner: $16,000 for two months worth of rent.
Interior Design, Renovation, And Furniture
Everything from the interior design, carpentry, decorations, flooring, furniture, lighting, and many more can be customised to create the cafe of your dreams.
So depending on the aesthetic that you’re going for, or the “theme” of your cafe. This can be “really expensive or REALLY REALLY [email protected]#$ing expensive,” quipped Alex.
He also added that cafes like Homeground Coffee Roasters in Katong may seem minimalist in design, but it’ll still cost a pretty penny to make it look like this:
It also doesn’t help that most cafes today need to be somewhat Instagram friendly in order to attract the trendy and younger clientele. Just take a look at Merci Marcel at Tiong Bahru:
Cafe Goals AF.
And all of that’s going to cost you anywhere between $30,000 to $100,000 or more in order to create a chic spot where all the influencers and your customers will want to hang out at – hopefully – every day. Because as Alex aptly pointed out, “If people only visit you on the weekends. You siao liao.”
If you work with a relatively conservative budget: $35,000
Espresso Machines And Other Kitchen Equipment
You can’t possibly call yourself a cafe and not serve coffee. And Nescafe’s not gonna cut it either.
If you’re looking at quality espresso machines like Synesso or La Marzocco, that’ll set you back by about $25,000 to $30,000. Oh, you’re going to need a grinder as well as, and those will cost between $3,000 to $5,000 each.
Just look at this enviable barista setup at Punch, one of my favourite cafes located along North Canal Road (P.S. try the poached eggs and avocado toast).
Alex recommends against splurging on the best machines especially when you’re just starting out. If you start with a mid-range espresso machine, that should cost you around $3,500.
Also, depending on what else you serve (brunch, cakes, desserts, and etc.) you’ll also need to account for other kitchen equipment like:
- Bar counter
- Cake or food displays
- Tableware, and many, many more…
Cost of equipment: $30,000 just to be safe
Depending on the size of your cafe, and whether you serve food, you’ll minimally need
- Two staff to clear and serve tables
- One barista to make drinks
- One cashier to take orders and help serve tables
- Two cooks or chefs to run the kitchen
Which works out to be at least six people on staff.
Alex also recommends adding part-timers to serve tables or make drinks, because “your staff also need breaks right”. And if your cafe gets popular, you’re going to need even more help on the weekends to keep waiting times low, and your turnover rate high.
He shared that part-timers are usually paid $7 to $8 an hour, whereas a full-time Singaporean or PR will cost about $2,000 to $2,500 a month. He also explained that hiring non-Singaporean staff can be cheaper but you’ll need to factor in stuff like the foreign worker levy.
To calculate the cost, I’m going to assume a few things here:
- Your opening hours are 8am to 6pm (with a one-hour lunch break for your staff)
- You only managed to hire locals
- You stick to a 6-man full-time team and pay each member $2,500 a month
- You supplement the team with 2 part-timers every day ($8 an hour)
Cost of salary: $19,000 a month
Unless you’re a barista yourself and can train your staff to make a proper cappuccino, you’ll need to send them to a coffee academy for basic barista training.
A basic barista course will cost around $200 per participant.
Assuming you send three members of your staff so they can split the workload, and hopefully not split after learning how to make coffee: $600
How Much Do I Need To Open A Cafe?
So how much do you need in your bank account to do this?
|Renovation & Furniture||$35,000|
Yep, and $100,600 is just the minimum you need to OPEN a cafe. I haven’t even added stuff like supplies and utilities (Or say… A liquor license if you wish to serve craft beers for example) to get the cafe running properly.
Assuming that you’re working full-time now and wish to save $1,000 every month in order to do this (I’m also not going to take inflation into account). Did you know that it’ll take you 121 months OR 10 years and 1 month in order to open your cafe?
So if you think that you can quit your job right now to pursue your cafe dreams… Well… You’ve got another think coming.
But if you upped your savings to $4,000 every month, which is close to the median salary of Singapore. It’ll take you 30 months OR 2.5 years in order to achieve this goal. However, that’s not really possible – unless you earn a five-figure monthly salary, or are lucky enough to have ridiculously rich parents – because you’ll be living on nothing.
If you’re really set on opening a cafe and have close to zero experience working in the food and beverage (F&B) industry, Alex recommends working in a cafe first to “gain experience and understand the daily operations”.
He also cautioned that Singapore’s F&B scene is “really cutthroat” and that Singaporeans can be quite fickle when it comes to what they like. It also helps if your cafe has something unique to offer.
But given Singapore’s very vibrant cafe landscape, you’ll be hardpressed to find something that you can call uniquely yours.
Even if you do manage to open your own cafe, it’ll take months or even years before you can really start earning a profit or begin to cover your costs.
So even if $100,000 is what it takes to get started, you’ll still need a lot more capital just to keep your cafe running. Till you get to the point where you have 20 people coming into your shop for coffee every half an hour.