How much to spend on a coffee machine
The investment you make into commercial coffee machines could easily be an investment that could make or break your business. If you get a machine that has a capacity lesser than the demand you get, it will limit the growth of your business. On the other hand, if you spend too much on the machine it may take too long to recover the costs. So, how can you decide on how much to spend?
Here you will find some simple calculations to help you make this decision. There are 2 things you have to decide before you use this. First you need to know, how much coffee do you estimate you will be able to sell on average. Of course, this will decide the capacity of the machine you need to buy. It would also impact the amount you can spend on the machine, as you will soon see.
The second question you need to answer is how soon you would want the cost of the machine to be recovered. As you can imagine, the further you are willing to have the breakeven point – the greater is the money you can spend on the commercial coffee machine today. This decision is tied up to the horizon on which you can confidently estimate the coffee sales. If you cannot decide how much coffee you would be selling after 6 months, better to keep the breakeven close by. In other words, longer the breakeven period higher is the risk. So, if you don’t see much risk in the estimates of your sales, you canhave a longer breakeven period.
For the calculations being demonstrated here, I would assume certain cost prices. When you do your calculations, substitute in actual values you see in the market. Let us assume that a pound of coffee costs you $8, further a gallon of milk costs you $4 and a cup with lid costs you 20 cents. Now, a 16oz latte would take 14oz milk and 2 shots of espresso to make. These raw materials will cost you 47 cents, and adding the price of cup and lid, the cost of making is 67 cents. If you can think of more costs, please add them here. For simplicity I would keep it at 67 cents. If you are selling the latte at 3$, you are making $2.33 on each cup.
Now, if you are selling 30 cups a day on an average and are comfortable with a breakeven period of 70 days, you can spend 2.33*30*70 or $5,000 of the commercial coffee machine for your restaurant. As you can see, by substituting the values you foresee for your business you can arrive at the optimum amount you can spend on the coffee machine. Then check if a machine at that price point meets your capacity requirements and purchase accordingly.