The Cost Factors In I-Café Business

pesosAside from the initial investment in the purchase of computer equipment, furniture, fixtures and renovation or leasehold improvement of the shop’s space which would constitute the depreciation costs of an i-café business, the owner will have to contend with some fixed and variable monthly expenses in the conduct of the business. These operating expenses are mostly fixed so the owner’s choice before the start of the business could be critical in its success or survival. A wrong choice in the specifications could spell disaster in the business so it is very important for a would-be café owner to understand them in order to make the right choice.

The fixed operating expenses are those which the business owner will have to pay every month irregardless of the volume of sales he makes. I would now enumerate them so that those who are new or just planning to engage in the business would be guided in their decisions.

  1. Space Rent – If you do not own the space in which you will establish your i-café business, you will have to pay for it to the owner of the place. A rough rule of PhP500.00 per workstation per month can be a good guide. Above this amount, rent expense could become a burden considering the current low hourly rate of PC rentals.
  2. DSL Connection – Depending on the available internet service provider in your area, the choice would be who could provide the fast and reliable connection. Except for the fixed wireless Smart BRO which costs as low as PhP999.00 for a 384 kbps connection, some wired DSL providers can be had for as low as PhP2,500.00 per month for 1.5Mbps connection.
  3. Shop Tender’s Salary – Unless you will tie-up your tender’s salary to shop’s productivity, this is another fixed monthly expense that you have to contend with. You won’t need to spend if you will do the tending yourself but I suggest that you set aside a figure for this expense account  so you will really know how much you are earning or losing as the case may be. A monthly average figure of PhP8,000.00 should be reasonable.

Now, let’s go to the variable expenses that you incur in the i-café business that you are in. By variable, we mean they will not be fixed figures like those we enumerated above. They will vary depending on the volume of sales you make in a month.

  1. Electricity – This is one big cost factor in the operation of an i-cafe nowadays. With the cost of power at more than PhP10.00 per kilowatt-hour, your choice of computer equipment (LCD vs. CRT monitors) and the operation of air-conditioning units can spell the difference between profiting and losing in your operation. As a rule of thumb, PhP800 to PhP1,000 per workstation is the average monthly expense of a fully air-conditioned i-café.
  2. Water – Although a very small amount compared to the other utilities, water consumption also varies with the number of customers you are having in a month.
  3. Equipment Maintenance – Having an all brand-new equipment in your i-cafe could save you a lot in the first year of operation due to free replacement warranty that goes with your purchase. However, an amount equivalent to around ten (10%) percent of your investment in equipment is what you will spend on your second year of operation onwards.
  4. Shop Supplies – Depending on the business model you have for your i-café, expenses on inks, paper, air freshener, etc. will vary depending on the volume of business you handle in a month. It is always best to keep just the right amount of inventory for your supplies.

I may have missed some cost factors or expenses but from what I have enumerated above, you should be able to determine the viability of entering the café business if you will compare them to the revenue figures you have in mind.

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