Opening a business requires an investment that can run from ú.50.000.000 to ú.500.000.000 (U.S.$30,000-$300,000)--depending upon location, space size of premises, business potential, type of clientele, and rent. Therefore, before making any decisions, it is necessary to determine how much capital we want to invest in the enterprise and how much it will cost to get that amount. Without a doubt, this is the first step because it could reveal huge obstacles that could crush our entrepreneureal dream. For the entrepreneur who has access to liquid capital, the most advantageous solution is without a doubt to buy the premises outright, remembering, however, that commercial contracts (especially in this sector) normally consist of putting half down in cash and paying the other half after two or three years, without interest. Therefore, if we have ú.100.000.000 (U.S.$60,000) in cash, we can easily buy a license with a market value of around ú.150.000.000 (U.S.$94,000). However, if the business potential seems to be extremely interesting and special, we can opt to rent a business. With this type of contract, we will not be buying the business with its start-up costs, licenses and interior decorations, but we will be renting it. Obviously, this choice changes the investment that in the outright buying option carried fixed costs.

The initial organization of the store is the factor that will determine the success of our business. For example, one would never think of opening a bar to attract a youthful clientele in an area where 90% of the residents are elderly and vice versa. There are, however, diverse factors--location, experience and capital--that can maximize the position of our new activity.

- Location
Obviously, the location of our business affects how we run it since it determines the type of clientele whose needs we'll have to serve. For example, if our business is located in a residential area of a city, our average client will have different needs than clients who go to a coffee bar located in a commercial area. In addition, location determines whether clients are just passing through or are "regulars". When clients just pass through, it's because the coffee bar is in a convenient location. No owner-client loyalty develops and if another bar is opened in an even more convenient location, the client often changes stores. This category applies to practically all bars in central locations with high daytime traffic and low nighttime traffic. This means that this type of bar relies heavily on its image to attract passers-by. When clients become regulars, it's because the person working behind the counter is personable, because the bar becomes a place for old friends to congregate or because of other similar reasons. In this type of bar, the client-owner/client-employe relationship and the make-up of the clientele are the predominant factors.

- Experience
Our business experience is another important factor entering in our choice of the general tenor of our business. If, for example, we have worked for three years in a bar geared to the youth market where we have learned the organization, the type of products to sell etc., it would not be a good idea to shift gears and move into a classic coffee bar situation. That's because each type of bar requires specific capacities and organizational structures and different types of behavior on an everyday basis.

- Capital
The capital available for buying and renovating the space substantially affects the choice of the store and its characteristics. To get around this obstacle, we can:
a) rent it as a business;
b) try to find partners with capital who believe in our abilities and our project;
c) get a loan from an outside party (a bank), but we strongly advise against this step because the high cost of loans would eat into our management capital.
To begin this activity, especially when the start-up costs are high, we must allocate at least 50% of the cost of getting the license, the cost of renovation and a small reserve for the first few months--the most problematic months--after opening. Therefore, for example, if we decide to buy a 100 square-meter space that has a value of ú.200.000.000 (U.S.$125,000), we must set aside at least ú.100.000.000 (U.S.$62,500) for the purchase, ú.30.000.000 (U.S.$18,750) for minor internal renovations (required by the Department of Hygiene, signs), and ú.30.000.000 (U.S.$18,750) more for the first few months of the business.

Another aspect to consider when buying and setting up a business is determined by the competition. In this case, it is easy to evaluate what we must face at the time of the opening, the competition's character and level of threat since our activity and market are geographically very limited.

We must consider, therefore:
- the number of bars present in the area;
- the character of their clientele;
- their volume of work;
- the kinds of set-ups that already exist to be able to pinpoint niches not already filled.
By analyzing all this data, we can with surety evaluate the potential of what we're about to buy as well as the tenor that we should give to the new business.

Generally, bars are managed by business partnerships and consequently at the moment of purchase sales projections and profits are not necessarily based on objective criteria. We can however use some reference parameters to deduce with a certain amount of reliability the real potential of the store.

The criteria that we must consider are:
- monthly coffee consumption;
- the average number of receipts per working day;
- average purchasing power.
In sum, for a bar to become an interesting commercial investment, it must generate at least ú.500.000 (U.S.$300) a day: If the figures are lower, the sale price of the business must be low and the payment terms decidedly stretched out over a period of time.
Two other factors that can affect substantially the assessment of the business are its location and its rent level. The difference in potential of one location over another changes substantially its market value: The ratio that could exist between a central area and one in the suburbs could be 4 to 1 (ú.400.000.000 for a business in the center, but costing maximum ú.100.000 in the suburbs). Recent rent levels have had a rise in the impact on sales from 3% to from 7% to 10%. Therefore, a low rent, long-term contract could make a space very attractive even though it could produce fewer profits than another identical space that has a short-term contract.

If the holder or designated holder of a commercial operating license is not an accountant or has not worked in the field as a steady employee for two years, he must pass an exam at the Chamber of Commerce and become registered. This exam should be taken before buying the business space as it is a prerequisite for getting any license.

A medium-sized bar can be managed by the owner with the aid of a good barman and, eventually, a part-time worker during the busiest hours. This is the minimum personnel structure that we can propose to both cover effectively the entire work schedule and to ensure top quality service to clients. Until our work becomes stable in terms of earnings, it is always better to rely on part-time help to fill unexpected needs and busy periods and to avoid strains on the financial structure.

For the first four months, sales will hover around ú125.000.000 (U.S.$80,000), equal to a daily intake of ú.1.200.000 (U.S.$7,500). This amount can be arrived at easily from the moment of the opening, provided that all the above advice be followed meticulously. It should be noted that our hypothesis is based on dynamics in a medium-sized provincial city (50,000-80,000 inhabitants). Opening our store in smaller or larger areas would change the absolute value of sales as well as, proportionately, the costs. Therefore, there shouldn't be too much difference in the figures. If, for example, we were to open our store in a city of 30,000 inhabitants, our daily sales would be around ú.700.000 (U.S.$450), but the rent probably wouldn't be over ú.15.000.000 (U.S.$9,400) a year and the license wouldn't cost more than ú.5.000.000 (U.S.$3,125) each quarter.

The Capoccetti Office of External Relations with its years of experience, is ready to solve any problem.
Contact:

Capoccetti S.r.l.
Office of External Relations
tel. : +39 (0)761 251158
fax : +39 (0)761 251629
e-mail: espresso@capoccetti.com