Opening a coffee shop and losing 1.5 billion VND, the owner realized something many people overlooked.

In 2023, leaving a stable engineering job at a large company, Mr. Nguyen Van Hung (Thanh Xuan, Hanoi ) boldly invested in a coffee shop in a new urban area in the West of Hanoi. With a vision of "going ahead", he hopes to capture market share in an area with few services.

Mr. Hung's total initial investment was up to 1.2 billion VND. Of which, more than 500 million VND was a bank loan, the rest was personal savings and support from his family. This money was used to design a modern space, buy brewing equipment and create a quality drink menu. The shop has a youthful design, targeting office workers and residents around the urban area.

Initially, the restaurant attracted a certain number of customers thanks to its novelty. However, the population density in the area did not increase as expected, leading to a significant decrease in the number of customers after only a few months. Lack of management experience, combined with constant staff turnover, led to a decrease in service quality, directly affecting the customer experience.

In the first months, when the number of customers was stable, the restaurant's revenue reached about 90-100 million VND/month. However, the fixed costs were very large. The rent was 35 million VND/month, not including the cost of salaries, electricity, water, raw materials and other expenses. Therefore, even in the months of good revenue, the restaurant only broke even or made a very small profit.

w coffee dinh 4jpg 48794.jpeg — Opening a coffee shop is not as easy as many people think. Illustration: Linh Trang

The number of customers dropped sharply after only a few months, all efforts to improve the menu, communication or promotion... were like "catching fish on dry land". The average revenue was only about 50-60 million VND/month, the coffee shop quickly fell into a spiral of revenue not enough to cover fixed costs.

In the last six months before closing, Mr. Hung tried to manage to maintain, even covering losses with personal money to pay for urgent expenses. Suffering a large loss and having to "struggle" to recover capital put a lot of psychological pressure on the owner.

Including losses incurred during operations, Mr. Hung's total loss after 2 years amounted to nearly 1.5 billion VND.

Mr. Hung shared that after the pandemic, he expected the demand for gatherings at coffee shops to recover strongly. However, people's tight spending mentality greatly affected the shop's revenue.

“Many people have the illusion that opening a coffee shop is easy and gives them free time, but the reality is the complete opposite. They always have to think about how to generate revenue, and even have to serve and clean more than the staff,” said Mr. Hung.

Analyzing the reasons for failure, Mr. Hung found that the key factor was in choosing the location. Placing the restaurant in a new, sparsely populated area made all other efforts meaningless.

While the restaurant often loses money, recovering the initial investment becomes a big challenge and takes a lot of time. Besides, running a restaurant requires management skills, marketing, financial control, human resources - no different from running a business.

After all, Mr. Hung looked back frankly: "If I continued to work as a technician, earning 15-18 million per month, saving for 2 years, I would have a few hundred million left, no debt, no pressure."

It's easy to think but easy to 'lose everything'

Ms. Nguyen Thi Hue (former owner of a coffee shop) said that opening a coffee shop is the most popular choice for young people when starting a business. This is a familiar, easy-to-see, seemingly simple and profitable form of business.

However, the reality shows that starting a business in this field is very risky. According to Ms. Hue, in reality, out of 10 shops, 7-8 have to close due to lack of customers or financial difficulties.

The reason is that operating costs are high, while profits are not as high as many people think. Revenue may increase, but costs also increase from cash, employee salaries, electricity, water, raw materials to costs that gradually wear out over time such as tables, chairs, cups, decorative lights... All of these have silently "eroded" profits every day.

Many people think that just earning more than spending is enough to make a profit, but in the coffee business, that is not enough. Without a thorough financial plan and tight cash flow control, it is easy to fall into a situation where the longer you do business, the more you lose.

Ms. Hue advises that if you do not have a strong capital source and do not really understand how to operate a restaurant, consider carefully before opening. You can start with a small, flexible model or try online business first. If you do not prepare carefully, the price to pay is not only money but also time and great mental pressure.

(Names of characters in the article have been changed)