3 Start-Up Tips From 'Yale's Professor of Coffee Shops'
Duncan Goodall, proprietor of New Haven, Conn.-based, Koffee on Audubon, charges aspiring coffee shop owners $180 an hour for advice on whether and how they should start their own.
I think of him as Yale’s Professor of Coffee Shops.
Some of Goodall’s advice rings true for entrepreneurs of all stripes. People with blue chip educations too often follow the crowd into the highest-paying job-- regardless of whether it makes them happy. Then they wonder whether they should start their own company.
It such a common problem that I was invited to speak to the New York Society of Security Analysts about Hungry Start-up Strategy. I was told that some NYSSA members who used to work in the financial industry need help deciding whether starting their own business.
In a recent interview, Goodall explained that after he graduated from Yale in 1995, he joined two consulting firms that turned him into “a big fat jerk, literally and figuratively.” Goodall quit and bought the coffee shop where he had hung out during college.
The success of Koffee on Audubon (it now employs 16 and pays him in the low six figures) and the failure of a pair of new shops he tried to start form the basis of his coffee shop consulting gig. He does it because “I enjoy teaching, and on a deep philosophical level, I believe people are more happy and free if they have their own business,” Goodall told the Times.
Of Goodall’s 20 rules, these three apply to almost any business.
1. Find a niche.
Goodall’s first rule is to focus on a group of customers and products rather than trying to be everything to everyone. This is good advice because the only way that customers will buy your start-up’s product is if it is better than anything else on the market.
If you do one thing very well, you can build a following. If you succeed, you can expand by finding similar customers in new parts of the world.
Goodall decided to focus on “the artsy crowd.” This focus drove other decisions - such as what kinds of people to hire. For example, one of his veteran baristas Shaina Hotchkiss, became famous in New Haven for her “Wacky Wednesdays” -- for one of those she dressed as a bunch of grapes.
One of Goodall’s failed businesses, Moka, also provides valuable lessons in the important of focus. While Moka was originally going to sell only coffee and chocolate, he expanded it to a panini, crepes, gourmet salads, high-end baked goods, Internet cafe, and music location.
As he told the Times, “We made the classic novice mistake of trying to be too many things to too many people, and as a result we were nothing to everyone. We lost our identity. Our customers didn’t know what we represented, so we became just another lunch place that also served coffee.”
To pick your niche, focus on two tests: Do you feel a strong affinity for the group of customers? and Are competitors meeting their needs? The right answers: yes for the first and no for the second. An affinity for the people in the niche will make you better at guessing their unmet needs and the solutions they’ll like. And if you are not facing competition there, you could be the one to serve them.
2. Make every detail support your value proposition.
All the activities in your start-up should help sell potential customers in that niche on buying your product. If your customers want the lowest price, do everything -- including skipping expensive offices space and furniture -- to lower your costs below your price.
And make sure everyone who talks to customers - from the receptionist, to the engineers, to the customer service people know how they should behave to make the customer want to do business with your venture.
At Goodall’s coffee shop, these elements included details from the décor of the shop to advertising strategy. For example, Goodall found that TV and radio ads were far less effective than putting posters on telephone poles.
3. Cut waste.
Avoid spending on things that don’t help you get and keep customers. Skip costly long-term obligations for equipment or office space. And look for ways to streamline operations.
Goodall added another good reason for being frugal - most businesses fail. And winding down the failures is harder if you have long-term obligations. So he advises people to lease their espresso machine until the business succeeds and buy equipment offered on Craigslist by struggling restaurants.
Goodall’s beloved garbage bag story boosted his annual income by $4,000. He noticed that his three shops were going through four packages of 100 garbage bags a week - each of which sold for $35.
His baristas were using the most heavy-duty grade and were double-bagging because a single bag tore when they dragged it to the dumpster.
He told them they could use more bags but should switch to medium-grade and stop dragging them. The stores immediately went from four packages a week at $35 apiece to two packages at $25.
These three pieces of advice from Professor Goodall can jolt your start-up’s cash flow.
Strategy consultant, startup investor, teacher, corporate speaker, pundit, and author of 11 books, Peter Cohan has invested in six startups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael E. Porter.