In 2023, Nguyen Van Hung (Thanh Xuan, Hanoi) quit a stable job at a major engineering company to invest in a coffee shop in a new urban area in western Hanoi. With a vision to “get ahead of the curve,” he wanted to capture market share in an area with limited services.

Hung’s initial investment was VND1.2 billion, including over VND500 million of bank loans and the rest from personal savings and family support. The funds were used for modern interior design, purchase of brewing equipment, and creation of a high-quality drink menu. The shop’s youthful design targeted office workers and local residents.

Initially, the shop attracted customers due to its novelty. However, the area’s population density didn’t grow as expected, leading to a sharp drop in customers within months. Hung’s lack of management experience, coupled with high staff turnover, caused service quality to decline, impacting customer experience.

In the early months, with steady customer flow, monthly revenue reached VND90-100 million. However, fixed costs were substantial: VND35 million for rent, plus expenses for staff salaries, utilities, ingredients, and miscellaneous costs. Even in good months, the shop only broke even or earned minimal profit.

The number of customers plummeted after a few months, and efforts to improve the menu, marketing, or promotions were like “fishing in a dry pond.” Average monthly revenue fell to VND50-60 million, insufficient to cover fixed costs.

In the last six months before closing, Hung struggled to keep the business afloat, even covering losses with personal funds to meet urgent expenses. The burden of significant losses and the pressure to recover the initial investment took a heavy toll on his mental health.

Hung estimated a total loss of VND1.5 billion after two years of operation. He said after the Covid-19 pandemic ended, he expected a strong recovery in people’s demand for gatherings. However, people’s tightened spending habits significantly impacted revenue.

“Many people think that opening a coffee shop is easy and leisurely, but the reality is completely opposite. You have to constantly rack your brain to generate revenue, and sometimes you even have to serve as waiters and cleaners,” he said.

Analyzing the failure, Hung said the critical mistake was location choice. Setting up a coffee shop in a sparsely populated new area made all other efforts meaningless.

With consistent losses, recovering the initial investment became a major challenge requiring significant time. Moreover, running a coffee shop demanded management, marketing, financial control, and HR skills—akin to operating a full-fledged business.

“If I had stayed in engineering, earning VND15-18 million monthly, I could’ve saved a few hundred million over two years, debt-free and stress-free.”

Losing everything

Nguyen Thi Hue, who used to own a coffee shop, noted that opening a coffee shop is the most popular choice for young people when starting a business. This is a familiar, easy-to-see form of business, seemingly simple and profitable. 

The total investment capital for a coffee shop is smaller than other types of business, and investors can take back their investment capital fairly soon.

However, in reality, starting a business in this field is very risky. According to Hue, out of 10 shops, seven to eight have to close due to a lack of customers or financial difficulties.

“Many people think that just earning more than spending is enough to make a profit, but in the coffee business, that is not enough. Without a thorough financial plan and tight cash flow control, it is easy to fall into a situation where the longer you stay in business, the more you lose,” Hue said.

“If you do not have a strong source of capital and do not really understand how to operate a shop, think carefully before opening. You can start with a small, flexible model or try online business first. If you are not well prepared, the price to pay is not only money but also time and great mental pressure,” she added.

She doesn’t agree with Hung that if his coffee shop had been well located, his business would not have been bad, saying that location is just one of the factors needed to run a business.

There are four things one must do when opening a café 1/ Thoroughly research the market before making large investments 2/ Calculate realistic costs and profits, avoiding overly optimistic expectations 3/ Choose a business location suitable for the target customer segment and 4/ Create a unique selling point to attract and retain customers.

Manh Ha