Equipment as an Investment

For any cafe or coffee shop, the equipment used to make the coffee is considered an asset which depreciates over time. This may be technically true in accountant-speak or from a resale value standpoint, but I would like to challenge this concept from the point of view of an equipment repair technician who is also an avid coffee aficionado. While my idea may not help you around tax time, I believe that thinking of your coffee equipment as an investment will help your business in ways that are not always directly measurable in an accountant’s book.

I propose that while the purchase of coffee equipment is a depreciating asset, it can be an investment in your business as well. While on paper every machine may be worth less over time, the quality of the product, the efficiency that it provides, and the overall experience of ownership vary tremendously from one machine to the next. One machine may create decent coffee that gets the job done, while another may be capable of producing incredible results that are noticeable to the customer. I believe that these machines are the difference between an asset and an investment. Let me explain further.

From the moment you decide to open a coffee business or to make changes to the equipment in an existing cafe, there are many choices that have to be made. I often see internet forum members ask the question, “What is a cheap espresso machine?” Owners asking this question are considering the COST of an espresso machine, while not giving any thought to the VALUE of the machine. Cost and value sound like similar metrics, but they are drastically different. 

The cost of an espresso machine is determined by the amount of money spent to acquire that machine. Cost is not a description of what you get in return for that money, other than a list of features. While I agree that cost is one of the most important considerations in making an equipment purchase decision, it should be weighed against another metric; value. Many times, the lowest and most appealing priced machines hold very little value relative to other options. They are often considered “disposable” equipment after a short life cycle. 

Value is a metric that is more difficult to determine, but is extremely important in the decision making process. Value describes a balance between the cost of a machine, and what that machine has to offer. One of the more challenging aspects of value is that it requires insight to the equipment itself. This requires understanding the long term reliability, ongoing costs of maintenance and repairs, life cycle of the equipment, its features, and a host of other items. Value is essentially asking in a holistic manner, “What exactly am I getting for this money?”

From a technician’s standpoint, I tend to see coffee equipment in terms of value as the primary indicator. This is likely because I have seen too many instances of cheap machines breaking down and costing a cafe lots of money. Often, the extra money spent on unexpected repairs, labor, and down time adds up to more than the cost of the more expensive (but better value) equipment. This customer is then stuck with a larger expense over time, and lower quality equipment. 

It is for this reason that I often try to prioritize a better value proposition, even if it is a more expensive machine up front. Over the life of that equipment, the cafe is often much happier with the equipment performance as well as the coffee itself. While a cafe’s equipment budget is a limiting factor in purchase decisions, sometimes opting for the equipment that has a better value makes the most financial sense in the long term. A lower cost of ownership, greater reliability with less down time, and a greater retained value over time all contribute to a better value.

There is another layer to the value considerations that is often overlooked when buying coffee equipment. I believe that a lot of weight should be placed on the importance of the quality of coffee that a machine can produce. Consistency of coffee from one brew to another is one of the most important qualities in a coffee machine. The value comes not from the ability to brew coffee, but from the consistency and quality of the drinks that your cafe serves to its customers. 

A better and more consistent coffee machine will certainly cost more up front, but the value that it provides to your customers can be brand loyalty, repeat visits and more word of mouth referrals. There is a reason that certain coffee machines are present in many of the best and most quality focused coffee shops. Those businesses rely on the dependability and repeatability of quality coffee products. They realize the value in the equipment they choose, from an ownership standpoint, as well as from a customer experience. 

The best way to look at making an equipment purchase for your coffee shop is to consider value, budget, and cost (probably in that order). The most important part of any coffee business is the ability to make good coffee, and the priority for investment should be in the equipment that makes your business possible. Most cafe customers won’t care about the gorgeous tile backdrop, or tin ceiling that you bought. They certainly will care about the quality of the drink they receive. I encourage all of our cafe partners to make the coffee equipment the primary focus of their cafe, and to make sure that it meets their needs and provides a great value for cost.