Blue42 Guides · Making the financial case

Coffee shop pro forma: does your business plan actually make money?

Matt Powers· Calioh CoffeeTen years operating · more than fifty locations assessedUpdated October 2026

I've seen business plans where someone starts with how much money they want their coffee shop to make and works backward until the numbers look good.

That's not a business plan I'd be comfortable investing in.

A pro forma is really just a financial picture of what you think your business is going to do. It's useful for a lender, sure. But it's even more useful for you, because you're the one who's going to be paying the bills if those assumptions don't work out.

Don't start with a made-up sales number

When I look at projected revenue, I want to know where it came from.

How many transactions do you expect per day? What's the average order? How many days are you open? How long does it take to build up to that volume?

At its simplest:

Daily transactions × average order × days open = revenue for that period.

Then you account for the ramp during the first months.

Your transaction estimates should come from your site feasibility work. Your average order needs a basis in your menu and concept. And your ramp should be something you can explain, not a smooth line going up because the spreadsheet looks better that way.

If your revenue estimate can't survive a few basic questions, the rest of the financial model doesn't matter much.

Here's where the money goes

I group the operating costs into three big categories:

• Cost of goods sold: Coffee, milk, food, cups, and the products you use to make each sale.
• Labor: Wages, payroll taxes, and related labor costs based on an actual staffing plan.
• Operating expenses: Rent, utilities, insurance, software, repairs, marketing, and the other expenses required to keep the doors open.

Cost of goods plus labor is your prime cost. It's one of the first things I'd look at because those two categories can consume a huge portion of revenue.

Operating expenses are different. Your landlord isn't going to reduce the rent because you had a slow Tuesday. That's why the early months of a new business can be so challenging.

If you're borrowing money, look at the deal from the lender's side

A lot of new coffee shop projects use financing, including SBA-backed loans.

For SBA 7(a) financing, equipment and working-capital loans commonly have repayment terms of up to 10 years. Under the SBA rules reflected in this planning example, startups are generally expected to contribute at least 10% of total project costs, but lender requirements and program rules can vary or change. Verify the current terms directly with your lender.

The lender is going to want to see that you have money invested, that your assumptions make sense, and that the business should generate enough cash to make its loan payments with some breathing room.

But I'd ask an even more important question: would I still want to do this deal if sales came in below my forecast?

That's where running a conservative case becomes valuable. If the business only works when everything goes perfectly, that's a pretty uncomfortable place to be.

A profitable business can still run out of cash

This is one of those lessons that's easy to understand in theory and a lot more interesting when you're the one looking at the bank account.

Your P&L tells you whether the business generated an accounting profit. Your cash flow tells you whether there is enough money in the bank to pay the bills.

They're not the same thing.

For example, the principal portion of a loan payment is cash leaving your bank account, but it isn't an expense on your P&L. Depreciation works the other direction: it's an expense on the P&L without being a new cash payment that month.

A simplified way to bridge the two is:

• Start with net income from the P&L.
• Add back depreciation, since it isn't current cash leaving the business.
• Subtract loan principal payments, since they are cash leaving the business.
• Then account for other cash movements as applicable, such as inventory, payables, capital purchases, and owner distributions.

That's why you need a cash flow forecast alongside the income statement. A shop can look profitable and still have a cash problem.

Look past the first year

Everybody wants to know when they'll get their money back. Fair question.

But payback calculations are only as good as the cash flow assumptions going into them. And I'd be looking at the tougher years of the lease, not just the first year when the rent might still be relatively low.

Escalating rent, higher wages, equipment replacements, and financing can change the picture. I want to know whether the business still works when those things happen.

No pro forma can tell you exactly what the future looks like. What it can do is show you which assumptions have to be true for your idea to work, and how much trouble you could be in if they're not.

Any tax assumptions in a planning model should be reviewed with your accountant for your specific business.

This guide and the Blue42 tools are operating tools, not financial, legal or tax advice. They organise the questions and run the arithmetic. Confirm code requirements with your local building and health departments, and financing and tax treatment with your lender and accountant.

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