My Friend Is About To Make A Huge Mistake Opening A Coffee Shop. Here’s Why
In the book Unscripted, MJ DeMarco gives you the game plan to build a business.
Not a step-by-step guide to start making money with a blog or selling on Amazon.
He focuses on the principles that will get you to a working business.
One of these is the C.E.N.T.S. principle.
He claims is the foundation of a good business. And a clear guide to quickly avoid shitty business decisions.
CENTS is an acronym for:
- Control
- Entry
- Need
- Time
- Scale
From MJ’s own words:
The purpose of the commandments is to improve your probabilities for creating a business that can change your life forever through RAPID WEALTH ACCELERATION, both income (business profit) and net worth (business valuation.)
Let’s go over each one of them and explore why a coffee shop might be a bad idea.
Control — He’s building someone else’s brand.
In any franchise, the people who make the most money are the ones selling the franchise. Not the ones buying it.
Why? Control (and scale… more on that later).
They control everything.
- Prices
- Branding
- Supply chain
- Sustainability
- Cut from your sales
And my friend? He can control who he hires to work. Location. And… that’s it.
Branding, marketing, and prices are all decided hundreds of miles away from his store.
If you own a business, have as much control as possible over it. Otherwise, you’ll be hoping and praying other people make the right decisions.
Entry — It’s too easy to buy a franchise.
Being an entrepreneur means solving problems.
The easier it is to solve a problem, the less money you’re gonna make. And the easier it is to attract people looking for get-rich-quick schemes.
Want to start a coffee shop? There’s a lot to figure out:
- location
- Store design
- Branding, etc
- where to buy coffee from
A franchise is attractive because you don’t have to deal with any of that. It’s all sorted out for you. It’s an easy step-by-step into your next business.
You don’t need knowledge. You just need money.
Money is still an entry barrier. But it doesn’t mean the market won’t get crowded.
If you still want to go that route, MJ says there’s only one solution for the low entry barrier: execution excellence.
If you want to succeed at something that is easy to start, be ready to do what others are not willing to do. Without extraordinary action, you won’t get extraordinary results.
Need — Is there a need for coffee in a really hot city?
I’ve been out of Brazil for more than half a decade.
During this time, there were huge shifts in the Brazilian society.
People think, act, and behave differently.
When I was there, Starbucks exploded in popularity. Now it’s bankrupt.
So the question is: Is there a need for coffee shops in Brazil?
When I asked him, one of his reasons was “This franchise in the South is becoming very popular. I wanna start a business. So this might work.”
MJ talks about many ways you can improve the “need” of your brand.
If he can make it seem like this coffee is better than anything else out there, then he has shifted the relative value. This means:
- More clients
- More money
- More popularity
But this is only possible if you have control.
Before pouring money into something, make sure there’s a demand for it. If there isn’t, make sure you disrupt the relative value to create the need. (only possible if you control the brand).
Time — can the business survive without you spending all your time on it?
The goal of a business is so you can divorce your time from your income.
If your business needs your constant input to make a profit, then it’s a red flag.
Of course, it doesn’t mean a business is bad if you can’t move to the beach and sip margaritas from day 1.
The beginning is always hard. But if in 5 years you’re still working 16 hours a day to be profitable, something has gone very wrong.
In the case of a franchise, it demands constant input. Managing employees. Dealing with suppliers. Going over the numbers to make sure nobody is robbing you.
This might eventually work for my friend if he can find someone he trusts to run this business. Otherwise, he’ll invest in another 9–5 job on top of his 9–5.
Find a business that will make you money. Whether you’re there or not.
Scale —How many people are your potential clients?
A franchise is as good as its location.
But even if you find the best location in the world, you’re still reaching a limited number of people each day.
My friend can’t sell coffee to someone in another city, state, or country.
His clients are office workers trying to survive the day, passing by his coffee shop.
Suppose 99% of people walk in. Can he sell 1,000 coffees? Sure. 10k? Don’t know. 100k per day? Doubt it. 1M? impossible.
This doesn’t mean physical businesses are bad. If you’re selling a franchise, you can scale to the moon. But not if you’re buying.
Don’t worry too much about scale in the beginning. Start with a single customer. Master the art of providing value. Then worry about scale and how to impact millions.
Bottom line
I haven’t started a business.
So I might be completely wrong here. My friend might go on to make millions of dollars and quit his job.
But if a guy who’s actually made millions is saying this is a bad idea, I prefer to believe him.
Every week I send 5-min emails to upgrade your life. For free. Subscribe here.