Question

What would be the financial challenges of opening a small business i.e. bakery/coffee shop?

Answer 1

Since many entrepreneurs lack enough capital to start their business, they are turning to conventional funding methods or alternative financing solutions. However, as their company is just beginning, it still remains to be seen how their product or service can do in the market. And while the company has great potential, if the initial sales are weak, business owners may find themselves struggling to repay the debt while their business struggles to find stability.

Not all costs are foreseen from the failure of critical machinery, to injuries or even litigation. Unanticipated expenses can endanger the budget of a company and cause it to fall into debt. Although insurance will protect you to some degree, there are still costs that can add up including payments for attorneys and sales losses.

Partners: I have seen restaurants struggle because partners aren't able to work together. This occurs mainly due to asymmetry in the contribution. The responsibilities usually aren't obvious. Some partners will add value such as a superb chef or a successful boss. But, other people do not have money, resources or ability. Make sure responsibilities are specific, and fair and decided upon reimbursement for the effort. It also helps to have a reliable advisor from outside.
System of decision making among partners: Lots of small businesses do not have a well-defined system of decision making.

Until the restaurant begins to invest so much money: This happened to us. Hospitality company has high fixed costs such as wages, leases, electricity and other facilities. You ought to provide enough capital for operating costs, and when you break even it is very difficult to predict.
Customer service: You are not selling a commodity in the house. You offer an experience. Experiences relate more strongly to human feelings than to tangible objects. For a hospitality company this is most important. Which, in my opinion, is more relevant than food taste. Customer majority prefer to try new restaurants. So, you are still getting a chance to prove yourself.