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Business plan: why espresso is so expensive

(the prices are being updated as well as information till 15th September) Let’s say, we open a coffee shop on the street, where we sell only espresso. How much should the price be? And what difficulties will we face when opening?

One-time purchase

  • Coffee machine¬†‚Äď 15000‚ā¨
  • furniture¬†‚Äď 5000‚ā¨
  • tools and¬†accessories¬†‚Äď 500‚ā¨
  • brand development¬†‚Äď 1000‚ā¨
  • card terminal¬†‚Äď 50‚ā¨
  • certificate and¬†legal procedures

Monthly purchase

  • Rent¬†‚Äď 1000‚ā¨
  • Electricity¬†‚Äď 1000‚ā¨
  • Employees¬†‚Äď 5700‚ā¨
  • cleaning, accountant, lawyer, insurance¬†‚Äď 500‚ā¨

Per-cup purchase

  • disposable cup¬†‚Äď 0.1‚ā¨
  • coffee beans¬†‚Äď 0.4‚ā¨
  • card commission¬†‚Äď 2%

Certification

To sell Coffee, you need approval from the state. In Vienna, it is WKO (Wirtschaftskammer Organisation, or economic chamber in English). By the way, you don’t need it if you sell beverages in cans or bottles and if you sell simple food, like sandwiches, but you can only have max of 8 guests inside of a cafe. Not our case.

Rent

We rent a¬†coffee shop on¬†the¬†ground floor of¬†the¬†shopping street. Let‚Äôs say we pay 1000‚ā¨¬†for¬†20 m2 and¬†expect to¬†have 15 customers per¬†hour on¬†average. You may also find an¬†already equipped coffee shop and¬†just pay an¬†aufl√∂sung (price for¬†the¬†furniture and¬†equipment).

If only one employee works in a coffee shop, you don’t need a toilet by the law. Baristas can work at different time and then they will be treated as one employee in WC questions.

The place should have clean water, a sink, air conditioning, heating, and low humidity. If humidity is high, the beans can become bad. If there will not be air conditioning or heating, the employee will not be able to work in a coffee shop by the law. For example, in the UK when the temperature is less than 16 degrees celsius the employee is not allowed to work. In Austria, I found only the maximal allowed temperature of 32.5 degrees. And we will have to pay the employee even though that the shop is closed.

We also need to take insurance that covers all the things inside, especially the coffee machine.

Electricity

Based on¬†https://www.statista.com/statistics/1271527/austria-monthly-wholesale-electricity-price/Statista, the¬†price for¬†1 Megawatt was 359$ on¬†July 2022, while before it was just 30-50‚ā¨. The¬†high prices for¬†electricity are compensated by¬†lower rent prices as¬†well as¬†governmental help.

Coffee machine

The¬†coffee machine is the¬†most expensive stuff inside of¬†a¬†coffee shop and¬†is as¬†important as¬†beans. There are two main brands¬†‚Äď La Cimbali, La Marzocco. both of¬†them cost from 10000‚ā¨¬†to¬†15000‚ā¨. La Marzocco is more traditional, while La Cimbali tries to¬†implement new technologies in¬†the¬†coffee machine. La Marzocco attracts coffee lovers, and¬†they are ready to¬†pay a¬†premium for¬†coffee made in¬†this machine.

read about the difference between La Marzocco and La Cimbali

Why is it so expensive? This is due to¬†the¬†pressing mechanism. By¬†the¬†way, Espresso got the¬†name from ‚Äúpress‚ÄĚ, the¬†process of¬†pressing the¬†ground coffee and¬†water flowing through it. The¬†pressure a¬†coffee machine can do and¬†the¬†boiling process is the¬†most important in¬†coffee brewing. The¬†machines are made out of¬†thick metal, which makes cleaning easy. These machines last for¬†decades (in¬†the¬†museum of¬†Salzburg I have seen the¬†model of¬†the¬†1950th that can still work well).

Therefore, the¬†price of¬†the¬†used coffee machine is still high. For¬†example, a¬†woman sells La Marzocco Ep for¬†5900‚ā¨, that she bought in¬†2017 while the¬†new costs¬†‚ā¨11900. Ps., this model is not¬†produced anymore, and¬†I found only one seller. For¬†such a¬†price, you may buy better models of¬†La Marzocco.

To¬†count the¬†price of¬†usage of¬†a¬†coffee machine or¬†depreciation, we subtract the¬†selling price from buying price, for¬†example, 15000‚ā¨-10000‚ā¨= 5000‚ā¨, and¬†divide the¬†years that we use the¬†machine. Let‚Äôs say, 5 years. 5000‚ā¨/5 years = 1000‚ā¨, or¬†83‚ā¨¬†per¬†month.

additional coffee machines

Some people like Moka, the 50$ pot with 2 separate levels: water and ground coffee on the lower level. The pot is boiling on the stove. The brown liquid goes to the higher level, which is Moka coffee. When the higher level of a pot is full, the coffee is ready to be served in cups. I, personally, don’t like such a coffee due to the lack of foam and too huge amount of water per gram of coffee. Italians love it and drink it every breakfast instead of tea.

Coffee beans

  • Price of¬†arabica¬†‚Äď 40‚ā¨¬†per¬†kilo
  • 10g for¬†each portion, or¬†0.40‚ā¨

For coffee shops, we use the finest coffee beans. Usually, they are not sold to households, but to coffee shops.
For each espresso, we need 10 grams of ground coffee.

Coffee beans can be kept 4 months after roasting, later they lose their taste.

Tip: Portuguese love espresso that is made of¬†ground coffee that is left after making the¬†first espresso. They think that there is less caffeine inside this coffee. They ask to¬†pour the¬†coffee into the¬†second cup. For¬†the¬†barista, it costs just a¬†second cup (0.10‚ā¨) and¬†hot water. The¬†used ground coffee will be anyways in¬†the¬†bin. You may either set a¬†small price for¬†such coffee or¬†even give it for¬†free to¬†get loyal customers.

We don’t count sugar and cinnamon, they cost just a cent per cup.

Cups

We don‚Äôt have sitting places. We could use the¬†bar table as¬†in¬†Italy, but¬†we have only disposable (1-time use) cups for¬†simplicity. The¬†average price of¬†bio cups is 10 cents. If you want to¬†have your cups, use 10 cents as¬†the¬†price for¬†cleaning, and¬†use of¬†a¬†cup, which includes the¬†price of¬†buying the¬†cup (e.¬†g., porcelain espresso cup for¬†9‚ā¨¬†each), the¬†risk of¬†breaking and¬†stealing.

We expect 1 customer every 4 minutes (15 cups per hour). We are open daily from 8 am to 9 pm (13 hours per day). 13 hours * 30 calendar days = 390 hours, or 5850 cups per month.

Employees

Baristas are paid hourly. They come 30 min before opening and¬†leave 30 min after closing. They clean stuff and¬†count the¬†inventory. It is 15 hours per¬†day. A¬†person can‚Äôt work more than 8.5 hours a¬†day in¬†Austria and¬†must not¬†work more than 40 hours per¬†week (I‚Äôll check this information). We need 4 baristas¬†‚Äď 2 for¬†work days and¬†2 for¬†weekends.

Tip: the less a person earns, the less % of taxes are to be paid in Austria. This is due to the progressive taxes.

First, we pay for¬†social contributions, which is nearly 18%. If a¬†person earns 18000‚ā¨¬†of¬†earnings, then an¬†employer pays 3500 of¬†social contributions, you pay 21866$ gross. We pay taxes from income¬†‚Äď contributions, 18000-3500 = 14500. Then we deduct 11000 of¬†non-taxable amount 14500-11000 = 3500 and¬†take 20% of¬†taxes which is 700‚ā¨. But¬†taxes are deducted from the¬†income of¬†a¬†person, not¬†from your payments. The¬†real income of¬†a¬†person will be nearly 17300‚ā¨.

In¬†our example, we pay for¬†7-hour work for¬†each worker. All of¬†them work for¬†the¬†salary for¬†barista, which is 12‚ā¨¬†per¬†hour. It totals 7*12 = 84‚ā¨¬†per¬†day or¬†1680‚ā¨¬†per¬†month for¬†work-day baristas and¬†672‚ā¨¬†for¬†weekend baristas.

We pay 2040‚ā¨¬†and¬†816‚ā¨¬†to¬†baristas. In¬†total, it is 2040*2 + 816*2 = 5712‚ā¨¬†per¬†month.

Count

Fixed costs per¬†month: Rent (2000‚ā¨) + cost of¬†use of¬†the¬†Coffee machine (83‚ā¨) + Salaries (5712‚ā¨) + other costs (600‚ā¨) = 8400‚ā¨¬†approximately per¬†month

For simplicity, we count furniture in rent, tools, accessories, and payment terminals in other costs

Variable costs per¬†cup = beans (0.4‚ā¨) + cups (0.1‚ā¨) + terminal use.

We also need to¬†pay VAT if we earn more than 30000‚ā¨¬†in¬†profit. The¬†VAT is the¬†tax per¬†selling of¬†an¬†item, which totals 20% of¬†the¬†final price. But¬†we don‚Äôt pay so much. We deduct 20% from the¬†goods that we have bought¬†‚Äď 20% from beans and¬†cups, or¬†10 cents. In¬†the¬†EU the¬†majority of¬†the¬†goods produced and¬†sold over EU are tax-deductible, even the¬†coffee machine is tax-deductible, it is 16.6‚ā¨¬†per¬†month. The¬†same with the¬†rent, however, if you buy a¬†place, it is an¬†investment, that is not¬†tax deductible.

To¬†get the¬†break-even, 5850cups*(price*(1-terminal commission(2%))-variable cost(0.5‚ā¨))¬†‚Äď fixed costs(8400‚ā¨) = 0. To¬†find the¬†price I created an¬†online program:

I found that with the¬†price of¬†2‚ā¨¬†we are break even and¬†even make revenue of¬†141$.
We pay pay taxes from profit, 23.1%. Our profit is 108‚ā¨.

open a program. Change the number and find the best prices and amount of cups to be sold

As¬†you have seen, the¬†coffee shop cannot sell espresso for¬†less than 2‚ā¨. The¬†next time you go to¬†the¬†coffee shop keep it in¬†mind.

2022   Business and Economics   Business Plan   Coffee   english

What to read #6: Wine Investing

To invest in wine, you should learn about the different types of wine. It is simple after reading a book and degustating wine in winery shops. Usually, it is not expensive, and there is even a festival, where you can try wine for free. But first, read the book.

Wine Folly, Essential wine guide.

photos are fairly used, the information is given for describing purposes. Learn more about the fair use

240-pages book with illustrations. it describes how to keep the wine, to open it, how to drink it, what food is suitable for each type of wine, how to taste wine, and how to define the origin, age, and quality of the wine.

The book shows the characteristics of each type of wine, for example Chardonnay, or  Sauvignon Blanc, or Nebbiolo. The Book provides a bit more information.

Wine Folly, The master guide

It is an alternative to the previous book made by the same authors. The book contains more information and describes each country deeply, starting with characteristics of temperatures, a dictionary of wine names, and characteristics of each vine in such region.

WSET collection

Attention. I did not read these books, just looked through them. After careful reading, I will delete this line and write more about the following books.

This is a¬†collection of¬†7 books that are used to¬†get a¬†diploma in¬†the¬†wine industry. It explains all the¬†processes to¬†create and¬†keep wine. You don‚Äôt need to¬†read all of¬†them, but¬†these 2: ‚ÄúWines: Looking behind the¬†label‚ÄĚ, and¬†‚ÄúUnderstanding Wines: Explaining Style and¬†Quality‚ÄĚ.

wine-searcher.com

Wine searcher explains in a blog the difference between regions, grapes, and aging.

The website has a database of the quality of a wine based on a region and the year produced for different price categories of wine. This is essential information.

If you want to keep your wine safe, I provide a service of keeping wine in the wine fridge, where I manage the temperature, humidity, and the position of a bottle based on the knowledge I have got after reading a book. The fridge is located in Vienna, Austria.

2022   english   Investment   Wine

What to read #5: Real estate investing

I usually publish lists of books about architecture that I recommend to read. All of them are important to understand the value of a house. This article suggest books, minimally required to understand value of a house.

A Pattern Lnaguage, Kristopher Alexander

read it before investing or buying a house. This book describes how the space affects our way of living: how each type of city should look like, how the houses in the neighborhood should be placed and how it affects the ways people behave with each other. Even how the shadows, floor level, density of people, age difference and green parking affects the living in a house and society.

I read the Russian translated version of the book made by ArtLebedev Studio with great illustrations. If you speak Russian, I insist reading this book. This is my favorite book that I recommend to everyone.

Real estate investing 101, Michele Cagan

A dictionary that explains most of the termins and concepts you should know to master in the real estate.

All other books will be added soon. To¬†learn more about the¬†architecture and¬†real estate, read my blog. Write a¬†keyword by¬†clicking on¬†a¬†search button and¬†find ‚Äúreal estate‚Äė, ‚Äėarchitecture‚Äė, investment‚Äė or¬†other tags that you are interested in.

Remember, I can‚Äôt explain in¬†a¬†blog the¬†same information that is written in¬†huge books¬†‚Äď the¬†books I share are written by¬†professionals and¬†scientists who spent years for¬†each book¬†‚Äď they provided as¬†much knowledge as¬†they could in¬†the¬†best way. I can only share their knowledge by¬†sharing the¬†book or¬†by¬†taking the¬†main ideas from it. Some books cost 100$, but¬†after reading such books you will learn everything you should know about this theme.

2022   Books   english   Investment

Alternative investments as a hobby

I love alternative investments¬†‚Äď they are inflation-free and¬†are increasing in¬†price due to¬†scarcity and¬†age premium. Alternative investments are more than just looking at¬†different numbers in¬†financial reports, using, and¬†analyzing macroeconomics. It is a¬†hobby.

lifestyle

When you make alternative investments, you invest in the stuff you like or something about that you want to know more about. People invest in art not only because the picture can cost 3 times more in 10 years, but because they learned that this author made a masterpiece. They read books, go to art galleries and exhibitions, and told to people who are also interested in it.

People did not just get value from keeping the picture in the collection, they have got fun. They were traveling, meeting people, who became friends. They became a part of the art society.

Any type of¬†thing can be an¬†alternative investment¬†‚Äď people buy rights for¬†the¬†music, gemstones, houses, wine, violins, and¬†cellos (that are rented out, after which the¬†price and¬†the¬†quality of¬†sound get higher), exotic cars, books with signatures or¬†even boots.

How to learn

Get knowledge by reading books, journals, and blogs. I am interested in wine, art, and real estate, and I give tips about them. All of them are interesting differently: wine is the most profitable, art is the most inspiring and risky, residential real estate is the safest, and, commercial real estate is the most expensive, but profitable and slightly riskier than residential real estate.

books to read

Risks

During the recession, fewer people are ready to spend money because they need first all solve problems with business and a family budget. Some people must sell their investments, just because they don’t have enough money to pay for the bills. Therefore, the demand falls, and the amount of people willing to sell grows. Then the price also falls.

Investors say that stable cash is the¬†most expensive stuff at¬†this time because you get less money after selling your investment (image the¬†price of¬†the¬†stocks in¬†a¬†crisis). Fortunately, it does not¬†last long¬†‚Äď the¬†government makes huge inflation so that people buy more because later everything will be more expensive. If there is deflation, people keep cash, companies sell much less. Companies become bankrupt, the¬†market fails and¬†the¬†currency gets to¬†0 due to¬†the¬†printing of¬†cash for¬†the¬†social and¬†governmental sector and¬†payments for¬†the¬†state debts.

The¬†commercial real estate investment in¬†such times may lose the¬†renters because some companies close. Then you should find new renters and¬†give them 2 months for¬†free. These are renting holidays, that are given to¬†make renovations and¬†to¬†find employees. In¬†Russia renting holidays is not¬†obligatory, but¬†it is a¬†common practice. There are ways to¬†lower the¬†risks: For¬†example, my family rents out an¬†office to¬†the¬†municipal administration¬†‚Äď they are not¬†subject to¬†bankruptcy and¬†they stay in¬†one place for¬†decades. Therefore, you don‚Äôt need to¬†have an¬†administrator, who does HR, PR, and¬†finances, because you have a¬†constant client.

When to invest

The recession is also the best time to invest. If you have enough cash, just buy as much as you want. Usually, alternative investments weigh 5-15% of an investor’s portfolio (excluding real estate). I don’t recommend investing more if you don’t know too much about the sector and the item you invest in.

For¬†example, if you invest in¬†wine, you may be deceived about the¬†quality. You can also spoil wine by¬†keeping it at¬†the¬†wrong temperature and¬†in¬†the¬†sun. If you invest in¬†art, the¬†seller can sell a¬†picture for¬†double a¬†fair price. The¬†author of¬†a¬†picture may become less interesting to¬†the¬†public. That is why you should know the¬†sector by¬†reading books and¬†consulting with professionals. And¬†don‚Äôt keep all eggs in¬†one basket¬†‚Äď diversify.

If you are interested in art investment, or real estate investment, write me at daniil@koveh.com, and I will help you to make the right decision, buy the art in the EU and help with legal stuff. I will find the best real estate investment in Russia and Austria based on my experience, and the experience of my family, who through 4 generations were constructing real estate all over Russia.

2022   alternative investment   Art   english   Investment

What to read #4: Politics

Empire USA, Illegale Kriege, Danielle Ganser

Danielle Ganser is a¬†swiss historian, who analysed NATO expansions and¬†crimes. He wrote 3 main books: ‚ÄúImperium USA: Die skrupellose Weltmacht‚ÄĚ, ‚ÄúIllegale Kriege : Wie die NATO-LaŐąnder die UNO sabotieren. Eine Chronik von Kuba bis Syrien‚ÄĚ, ‚ÄúNato-Geheimarmeen in¬†Europa : Inszenierter Terror und verdeckte KriegsfuŐąhrung‚ÄĚ.
The books are available in german and french for now, but they may be translated in the time you read it.

Other books are available in¬†English: ‚ÄúNATO‚Äôs Secret Armies: Operation Gladio and¬†terrorism in¬†Western Europe‚ÄĚ. Also read some scientific papers. The¬†last one is about Russia and¬†the¬†USA in¬†the¬†Ukrainian conflict

Listen to his lectures, for example, the illegal revolution in Ukraine 2014, or Turkey revolution 1980. They are available in German and Russian.

In these lectures, Danielle explained the NATO hierarchy and its expansion. NATO became the largest military alliance that does not care about any agreements between non-allies. For example, the agreement of non-expansion to the east, which was signed at the beginning of 1990-th, was broken.

NATO is the best alliance in world history. This is because of the hierarchy: The pentagon is the center of NATO. Danielle says that the ministry of defense in the USA is more like the ministry of offense. In each country of NATO American soldier is always the decision maker, only he decides what NATO does.

The USA, and therefore NATO, like to make 2 similar nations hate each other. They do it by showing the greatness, and dominance of one nation over another. America makes people think that people from another nation are no one, that they are not even the people so that they don’t have any rights and may be easily killed. It happened in Turkey vs Kurds, Christians vs Muslims, Albanians vs Serbians, North vs South Koreans, Russians vs Ukrainians, and even Republicans vs Democrats.

By doing so, America does not need to start a war themselves and make Americans dead. Instead, they supply one of the nations with weapons (Americans sell the weapons by giving credits, that some countries can’t pay out. Therefore, America dictates a country what to do in exchange for restructuring a credit. That is what will happen with Ukraine if Ukraine does not vanish from maps). In the end, one country loses by giving up territories and being dependent on the winner, and America gets control and loyalty over the winner. (the credit idea was made by me, Danielle was not talking about it).

Danielle said, that the UN cannot force any sanctions against 5 major countries: the USA, Russia, Great Britain, France, and China. These countries have Veto rights, the right to cancel any decisions. Therefore, such countries can do terrorism, and start wars with anyone and the UN can’t do anything against it.

Danielle also argues about the 9/11 event. The government prohibits discussions about the event. Some scientists and architects dispute the way, how the third building fell. this house fell straight down, that may only happen if all metallic walls are blown. The way, that the government does not want to analyze this case and share the data makes people create conspiracy theories.

Moreover, after 9/11, all Muslims seem to Americans as terrorists and Americans demand revenge. It seems like a reason to start a war with Muslim countries. I want to remind, you that Islam is a more peaceful religion than Christianity, but at the end of the 20th century and the beginning of the 21st century, the perception of Muslims changed.

The prisoners of geography, Tim Marshall

The natural landscapes: rivers, mountains, hills, floods, and even waterfalls affect the civilisation. The location decides whether rhe countries have a war with each other of make a trade.

We will analyze 10 regions: Russia, China, the USA, Europe, Africa, the Middle East, India and Pakistan, Korea and Japan, Latin America and Arctic.

The book explains with examples how geography affects the relationships between nations. It also tells about the dilemma between Ukraine and Russia even though that the book was written in 2017.

Why are we polarized, Ezra Klein

The book tells about American society. The split between Republicans and democrats grows bigger. Before the internet time, people chose the side based on the leader of a party and based on the changes, that each party does. The democrat could choose a Republican president.

Today people are polarized. They are so polarized, that republicans hate democrats and otherwise. People are sure about their point of view and don’t want to discuss or take into account the other point of view. People decided, that there is one truth. Because people talk more with people with their point of view, they make the bias, that only their point of view is logical and right. It goes so far, that one family with different points of view on government can just split.

Ezra Klein explains how that happen, that people became polarized.

2022   Books   english   Politics

Plans for the next months

Austrian Heritage

I traveled around Austria with UNESCO. It was a 15-day trip. We visited Vienna, Graz and Salzburg, and towns nearby. We learned about restoration, world heritage, materials, and culture. Even though I have been living in Austria for 2 years I learned a lot of new things that I want to share with you.

Architecture

We will learn about the architecture of each region

We will learn about the¬†Voralberg region¬†‚Äď the¬†western part of¬†Austria. It was the¬†poorest hard accessible region. The¬†citizens Used materials efficiently, and¬†they created some techniques, that we can learn from them.

Materials

We visited the¬†open-air museum of¬†wooden architecture, where I found my loveliest material¬†‚Äď shingled wood, 30-50 years lasting tactile material.

You will also learn about the technologies used for sustainable design, such as solar panels in the window.

Restauration

How much does it cost to restore a pucture, what if you spilled a coffee on the cup, and do we need to repair the puctures, that were damaged during a war?

Finance

How to save money during a recession? What happens with startups? Do we need to invest in art and wine? In NFT and crypto? What are swaps? What does the price for futures on gas and wheat mean for us? What happens with Russian, European, American, Chinese and Arab countries now and in the future?

2022   english
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