How to Start a Coffee Roasting Business | SkillsAndTech

Are you a coffee fanatic? Do you love the smell of freshly roasted coffee? Then starting a coffee roasting business could be the right choice for you.

Coffee is the fourth most consumed beverage worldwide, with nearly two-thirds of American adults drinking coffee every day, according to the National Coffee Association. Millennials are willing to spend a bit more for their daily caffeine fix, with 70% of their coffee consumed being gourmet.

But how can you start your own coffee roasting business? The answer is to start with step 1 below!

Table of Contents

Decide if the Business Is Right for You

Before you start dreaming of coffee roasting success, it’s important to understand the industry so that you can see where you fit best.

Pros and cons

To get a balanced view of the coffee roasting industry, let’s look at both the positives and the negatives.

Pros

Growing interest in specialty drinks, brews and varieties
Easily scalable business model
Help people get going to start their day!
Be your own boss — choose your own beans and working hours

Cons

Becoming a good roaster requires training
Finding a suitable roasting location may be difficult due to the fumes and emissions

Coffee roasting industry trends

Coffee is popular throughout the world, but Americans are the most committed drinkers, consuming 517 million cups a day, according to the National Coffee Association.

A look at Google Trends shows interest in coffee roasting has been consistent over the last five years.

Industry size and growth

Industry size and past growth – The US roast coffee market is worth $74 billion, about a fifth of global revenue, according to German data firm Statista.
Growth forecast – The global roast coffee market is expected to expand around 5% annually through 2025. Demand for coffee roasters is also predicted to grow 6% through 2026 following a pandemic-driven decline, market analyst Research and Markets says.
Number of businesses – There are over 2,000 coffee roasters in the US
Number of people employed – More than 5,000 jobs for coffee roasters are expected to be created over 10 years to 2028.

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Trends and challenges

Some of the latest trends in the industry include:

Roasted coffee subscription model, with consumers getting high-quality beans shipped straight to their door on a regular basis.
Introduction of value-added coffee-based RTD and flavor-added coffee

The industry faces some challenges such as:

Short shelf life of roasted coffee
Wide use of instant coffee

Consumer spending

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Average consumer spend – The average person in the US consumes at least two cups of coffee a day, spending around $2,000 a year.
Potential customer base – 66% of Americans 18 years and older drink coffee.
Average prices – A cup of coffee in the US costs an average of $2.70.

What kind of people work in coffee roasting?

Zippia.com is useful for this section.

Gender – More than 75% of coffee roasters are male.
Average level of education – Nearly 60% of coffee roasters have a bachelor’s degree.
Average age – Almost half of coffee roasters are over 40 years old.

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How much does it cost to start a coffee roasting business?

To start a coffee roasting business, you’ll need between $15,000 and $80,000, but the average investment is about $50,000.

Let’s see what your investment gets you:

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 – $200	$175
Business licenses and permits	$100 – $300	$200
Insurance	$100 – $300	$200
Business cards and brochures	$200 – $300	$250
Commercial coffee roaster	$3,000 – $60,000	$31,500
Other tools	$700 – $1,500	$1,100
Green coffee and other supplies	$10,000 – $15,000	12500
Website	$1,000 – $3,000	2000
Total	$15,250 – $80,600	$47,925

You’ll need a handful of items to successfully launch your coffee roasting business.

Online retailer Amazon has a range of coffee roasting equipment including both basic and professional machines. Most other supplies can be found at local stores or from Amazon as well. Finding a reputable green coffee supplier is the most important part of this step. You can check out suppliers such as Benchmark and Intercontinental Coffee Trading.

How much can you earn from a coffee roasting business?

The key, of course, is how much coffee you sell and at what price. The World Economic Forum estimates that roasters typically make $0.44/lb of roasted beans. An estimated $8.73/lb cost and a wholesale selling price of $9.40/lb results in a 7% profit margin.

In your first year or two, you could work from home without any staff, bringing up your profit margin to around 30%. If you roast one 110-pound bag of coffee a day for five days in a week and sell your roasted coffee for $10/lb, you’d earn more than $280,000 in annual revenue and around $85,000 in profit, assuming that 30% margin.

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As your brand gains recognition, you could increase your capacity to five 110-pound bags a day and extend operating hours to six days a week. At this stage, you’d rent a commercial space, hire staff and invest in a bigger roaster, reducing your profit margin to 7%. With annual revenue of $1.7 million, you’d make a tidy profit of more than $120,000.

What barriers to entry are there?

While starting a coffee roasting business may seem straightforward, there are a few barriers that you should be aware of:

Finding a suitable roasting location due to smoke and fumes
The initial learning curve can be steep, from sourcing beans to roasting
Gaining brand recognition can be difficult in a crowded market
Securing relevant permits and abiding by regulations

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.

Step 2: Hone Your Idea

Now that you know a bit more about the industry let’s start refining your business idea.

Why? Identify an opportunity

Before you become a coffee roaster, you’ll need to find out who your competition is. Are they beginning roasters like yourself, or are they an established brand? Are there a lot of local roasters in your area? Who buys their beans?

Knowing these answers will help you find your unique value proposition that you can share with potential customers.

You might also be able to learn about the beans they source, their roasting process, and the equipment they use. All this information will help you to capture your market share of the coffee industry.

What? Determine your products or services

There are four color categories for roasted coffee beans, according to the National Coffee Association — light, medium, medium-dark, and dark.

Light is generally preferred for milder coffee varieties, medium for stronger flavor, medium-dark for a slight bittersweet aftertaste, and dark for pronounced bitterness like espresso.

You should consider creating a niche for yourself by specializing in one or two of these roasted coffee categories. This could jumpstart your word-of-mouth marketing within your niche market.

How much should you charge for roasted coffee?

How much you charge will depend on the products you sell and the costs involved in the process. Beans vary in price depending on their origin, weather, and supply & demand, but on average, a coffee roaster can sell a pound of beans for $10 – $15.

Ensure that your product prices leave you with a healthy profit margin so that the fluctuations in green coffee bean prices won’t erode your profits.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Identifying your target market is important because these are the customers to whom you will tailor your marketing strategies.

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Do you want to target restaurants, cafes, or even sell directly to the public? Will you target high-end retailers, or do you want to make your coffee more affordable? These are some of the questions you can ask yourself while identifying your target market.

By having an idea of who your customers will be, you can create a brand and marketing plan that will resonate with them.

Where? Choose your business premises

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In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a storefront or production facility. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed

Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “coffee” or “beans”, boosts SEO
Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
Avoid location-based names that might hinder future expansion
Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

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Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
Product and Services: Describe your offerings in detail.
Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
Competitive Analysis: Analyze main competitors, assess their strengths and weaknesses, and create a list of the advantages of your services.
Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

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Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to coffee roasting.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your coffee roasting business will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the main options:

Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

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Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.

Bank and SBA loans are probably the best options, other than friends and family, for funding a coffee roasting business. You might also try crowdfunding if you have an innovative concept.

Apply for Licenses/Permits

Starting a coffee roasting business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your coffee roasting business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You may want to use industry-specific software, such as Artisan, Cropster, or DEAR to manage your inventory, purchasing, costs, and waste management.

Accounting

Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

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Some of your business will come from the casual passerby or online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:

Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
Instagram: Same benefits as Facebook but with different target audiences.
Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now.” This can sharply increase purchases.
Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as a 25% discount on their fifth purchase.
Signage – Put up eye-catching signage at your store and website.
Flyering – Distribute flyers in your neighborhood and at industry events.
In-Person Sales – Offer your products/services at local markets, trade shows.
Post a video – Post a video about your coffee roasting business. Use humor and maybe it will go viral!
Seek out referrals – Offer incentives to generate customer referrals to new clients.
Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
Influencer marketing – Pay people with large social media followings to promote your roasted coffee. You can find micro-influencers with smaller followings and lower rates.
Create infographics – Post infographics and include them in your content.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

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You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your coffee roasting business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your coffee roasting business could be:

Offer unique coffee blends only found in your roastery
Invest in the most eco-friendly coffee roasting machine
Create an efficient coffee subscription plan
Expand your services to coffee consulting and training

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a roastery, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in coffee roasting for years and can offer invaluable insight and industry connections.

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in coffee. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

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Build Your Team

If you’re starting out small from home, you may not need any employees and roast the coffee beans yourself. But as your business grows, you will likely need workers to fill various roles. Potential positions for a coffee roasting business would include:

Coffee Roasters – handle the roasting operations
Salespeople – sell to coffee shops and retailers
Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.

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Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Start Making Money!

Keep in mind, not all coffee roasts are the same. It’s important that you know the difference between light and dark roasts. It’s also wise to determine from the start what kind of coffee roast you want to do and sell. You might want to do just the light roast or focus on medium-dark and dark roasts.

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This is how you can set your business apart from the competition and increase your chances of success. Offering your own unique product or innovating on an existing product will help jumpstart your word-of-mouth marketing.

You’re now ready to start your entrepreneurial journey with your coffee roasting business!