The Coffee Business That Wasn’t

Landing page for Split Key Coffee

4 years ago, I thought I was going to leave the cybersecurity industry and pursue creating a business in speciality coffee. That obviously didn’t pan out, but I am often asked how the coffee work is going and why I choose to not start my own business. This post outlines the process I took, mistakes I avoided and why I didn’t see a lot of promise in going into coffee full time.

From Passion to Business Planning

My interest, and later obsession, with coffee started from a place of curiosity––tasting quality coffee triggered a desire to know more about the process. I spent years exploring coffee, learning about the beans and regions, understanding the growth process, refining my brewing methods and of course, speaking with others already in the industry.

By 2017, I started to see opportunities to apply my technology skills to solve some interesting coffee problems. More specifically, when speaking with shop owners and Q graders, there was value in refining inventory management and the quality assurance (cupping) process from farm to production. When my ideas get to this stage, I often form an LLC to track my investments, account for expenses and consider what branding could look like. Split Key Coffee was born quickly and served as a way to gather interest from the general public.

As a small scale experiment, I purchased a home coffee roaster that I could interface with code, several pounds of green beans and began writing a web-based software platform I dubbed Split Key Roast. Fun fact, I may be one of the first people to have created a roaster that live-tweeted its roasts. As I made progress on these ideas and continued speaking with others in the industry, I began to consider what it would be like to open a roasting business locally in my area.

Scaling to Create a Roaster Business

By this point in my journey, I had spent several thousand dollars on supplies and countless hours in development. This wasn’t a concern for two reasons: 1) I was passionate about the idea and enjoyed the work and 2) much of my purchases (e.g. Espresso machine) were items I’d continue to use for many years even if I decided against the business idea.

After months of research and home roasting on my own tools, I reserved a 1KG roaster from Mill City Roasters for roughly $10K and enrolled in one of their local classes in order to meet like-minded coffee lovers and pick their brains on the business end. This was a large leap for me and spending that much money on a side business left me unsettled––keep in mind, I had successfully built and sold PassiveTotal with a partner for less than $15K investment.

Doubt is not a reason to give up on your ideas, but suggestive that more research is needed to validate them.

While I waited for the in-person class, I spoke with more businesses, found others who left cybersecurity to pursue coffee or other passions, and continued to educate myself on requirements for creating a local roasting business. I maintained a spreadsheet of all the perceived costs to enter the roasting space and it became obvious that while coffee itself has great margins, running the broader business eats heavily into those profits.

Learning from Others

I arrived in Minneapolis in 2018 for the Mill City Roasters training class extremely excited, and feeling well prepared. I met hobby roasters, direct-trade distributors, those within the farming side of coffee and full-scale roasting operators. Determined to make the most informed decision on whether to start a proper business, I spent the days in class asking questions and speaking with others.

What I found most interesting, and a bit frightening, were those getting into the space with little business experience, simply fueled on their love for coffee and desire to give back to their community. Those individuals had staked real money to open a coffee shop/roastery, yet they weren’t exactly sure how to go about running it. I truly wondered whether they’d succeed long-term and used their uncertainty to further validate my decision process.

As I reviewed my own numbers on the plane ride home, I began to realize that my passion for coffee wasn’t necessarily a good enough excuse to start a business. Not only that, we were poised to have our first child and it didn’t feel responsible to pursue a business that required an incredible amount of work for it to even have the chance of succeeding.

After several weeks of final contemplation, I phoned Mill City Roasters and asked if I could cancel my order. I relayed my story to the owner and he was incredibly understanding, noting that he wouldn’t impose any costs to me as my roaster would be given to someone else on their long list of clients waiting for orders. My passion would remain just that.

Why I Passed on the Business

“Follow your passion” is a phrase commonly suggested to someone who’s shown interest in a field and is considering pursuing it in some capacity. I am not going to debate the advice, but will state that passion is not enough to build a business. I am thankful for the research I performed, those at Mill City and the roasting class I attended. Below are the more specific reasons why I decided opening up a coffee shop/roaster was not in my best interest.

Scaling coffee roasting requires a larger upfront investment. If you want to roast coffee and sell it to others, you need to ensure you have a roaster capable of roasting enough coffee at once. Home roasters can service a small amount of coffee, but do not scale. You will not only need to invest in a larger roasting setup, but also a kitchen from which to operate as coffee is considered a food.

Taxes exist everywhere. Purchasing and roasting beans is a fairly cheap process. Getting them to customers in a timely manner means you need to coordinate your roasting and ship the beans quickly. Bags, boxes, and shipping all cut into your profits and mean you’re eating them or passing it to the customer. In the early stages of business, this is going to be very chaotic until you have a consistent base of customers.

Brick and Mortar is Not SaaS. If you have a store, there’s a ton of obvious costs associated with that. Leases, materials, labor, licenses and of course your time to run it. Coming from a SaaS background where you write once, sell many, it was tough to conceive running an actual store and managing the day-to-day workings.

My Passion Wasn’t Reflected in the Market. I love coffee, specifically specialty coffee. When conducting surveys and speaking with shop owners, it became obvious to me that coffee is largely a caffeine vehicle for most people. The source, nuanced taste and quality of the beans is rarely considered. I wasn’t confident I’d be able to maintain my drive in an environment like this. Educating others is exciting, but for many, they just want their cup and they want it fast.

Coffee is a Commodity. Go to any major city and you’ll see no less than 5 coffee shops within a couple blocks. What differentiates the shops from one another? In most cases, it’s the experience and less the quality of the coffee. In order to rise above the rest, you need to invest in marketing, educate the consumer and partner with adjacent businesses (bakers, artists, etc.) to deliver a rich customer experience. This is not impossible, but not something I was less passionate about at the time.

How is Coffee These Days?

It’s great and still a passion of mine. Since foregoing the broader business idea, I’ve visited several farms in different parts of the world, created my own at-home nitro setup and continue to share my knowledge of coffee with others. I have zero regrets in not pursuing coffee as a business and in fact, later learned that at least one roaster I spent a lot of time with unfortunately went out of business. This multi-year journey was, and continues to be, one I very much enjoy.

If I had to summarize all I learned down to one simple fact, it’s this: Not every idea or passion needs to become a business.

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Founder of @BlockadeIO, PDF X-RAY, and @PassiveTotal. Partner and developer for @TheNinjaJobs. VP of Strategy for @RiskIQ. Roaster at @SplitKeyCoffee.

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Brandon Dixon

Brandon Dixon

Founder of @BlockadeIO, PDF X-RAY, and @PassiveTotal. Partner and developer for @TheNinjaJobs. VP of Strategy for @RiskIQ. Roaster at @SplitKeyCoffee.

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