Why you can never stop innovating in your cafe business

As a cafe entrepreneur, what would you do if another cafe with an established reputation opened up across the road?

Would you ramp up your marketing? Lower your price? Or just keep doing what you’ve always been doing.

Here’s the story of what one café owner did. Unfortunately, this story doesn’t have a happy ending.

One man and his café

Sam opened his cafe in a busy inner city suburb of Melbourne. Like many café entrepreneurs, he started it from scratch. And he invested a lot time and money in growing his business.

Sam’s idea of a successful business was one that made enough money for him to pay the bills on time. And he had a simple idea for developing his café business: He’d open the doors each morning, people would come in and buy his coffee, and then those people would recommend him and his café to their friends.

Sounds reasonable, right? But rather than having a plan for future growth and expansion, Sam was happy to just let his business grow naturally and gradually.

And then the competition moved in

One morning, as Sam was writing up the specials board, he noticed a permit going up on the vacant land across the road.

He immediately felt sick to his stomach.

Within a month, there was another coffee shop across the road. But while they may have been new in the area, they were a well-known and established market leader. It wasn’t long before Sam had to contend with not only the new coffee shop, but also its large Instagram following and the smell of freshly roasted coffee beans.

For Sam’s business, it was like getting smacked in the face with a snowball.

His customers were soon heading across the road to see what all the hype was about. And they weren’t coming back.

Sam was already fighting a losing battle with cash flow, which crippled any chance of getting aggressive. And so his profits, which weren’t that big to begin with, quickly became losses.

Unable to make a move against his competition, Sam had little choice but to sell his café business and make a loss on his investment.

What Sam could have done differently

So what went wrong? Quite simply, Sam’s business wasn’t doing enough to survive long term.

Successful café entrepreneurs are always innovating—something Sam wasn’t doing. The amount of research and development café owners do is amazing, and unless you’re consistently evolving your products you’ll quickly be left behind.

One such innovation is for cafés to roast their own coffee beans. But Sam wasn’t doing that, and that’s one of the differences that gave Sam’s new neighbours the edge.

Successful cafes also have a loyal tribe—a group of dedicated people who share a common value. They’re not followers, but rather protectors who will work with and around it. And it’s this tribe that helps a café expand and conquer.

Sam’s business could have survived if he had the right tools, such as the finances to grow his café business. But having survived the first year, Sam probably thought his business was immune to running out of money. Unfortunately, innovating and growing a business takes a vault of capital and constant cash flow.

The moral of the story

In our story, there was no David and Goliath battle because the new café had won the moment it showed up.

You will always have businesses competing with yours. Businesses that are finding new ways to market themselves and steal your customers. Businesses that are developing products to make yours look like yesterday’s leftovers. Businesses that are different, and telling everyone why they’re better.

So never be complacent about your café business. Always be thinking of ways you can make it better for your customers. Because in the end they will become your loyal tribe, and help protect your business both now and into the future.

If you’ll be in the city for the Melbourne International Coffee Expo (MICE), come and say hi as I will be speaking at the Australian Speciality Coffee Association (ASCA) on Monday the 27th of March. It would be great to see you there.