Monday Q&A: On the grind with a coffee entrepreneur

Coffee shops are rough businesses. But they hold a special allure for entrepreneurs, especially ones who live in college towns. Perhaps it’s the intoxicating smell of freshly roasted beans, or a fond memory of that trip to Paris.

But the buzz wears off quickly. Although the coffee is cheap to make and the markup is enviable, a business needs to sell a lot of it. And the overhead can sink the business. Not to mention those pesky laptop-toting customers who hog seats during prime meal times.

Clay Gilbert, 35, weighed his options carefully before pulling the trigger to try and turn around a coffee shop. After selling a stake in a local beer distributorship, Clay Gilbert was looking for a business to buy. He decided to buy a struggling, dirty coffee shop on North Sheppard Street in the city’s Museum District.

In this week’s Q&A, Gilbert tells BizSense how the coffee business is like the microbrewery business, and where the profits can start percolating.

Gilbert paid $15,000 for the Black Hand Coffee Company last January. Over the past year he has been fixing up the BHCC, repainting the walls and adding counters. The new coffee bar is made from a recycled basketball court. Gilbert also moved the coffee shop’s roaster from the kitchen to the front of the store to make the roasting operation a more visible part of the brand.

BizSense stopped in for a cup of Joe and asked Gilbert why he thought coffee was a good investment at a time like this.

Below is an edited transcript:

Richmond BizSense: What were you thinking, starting such a risky business in the middle of the recession?

Clay Gilbert: I didn’t realize how deep the recession was. I bought in January, and we hit the wall in November. I was kind of like, “We are in trouble,” but we were so far down the gutter when I bought the place that, recession or not, it was going to be an uphill battle. I thought, “If I can take this year and build it up, if I stay consistent, make a good product and the doors are always open, then there is no way with all the people in the area that I couldn’t make it.”

We know people want a local place to go drink coffee that isn’t a chain.

RBS: So what did you do before buying the Black Hand Coffee Company?

CG: I owned 10 percent of Specialty Beverage and was the vice president of that company for five years. I started out in the craft beer industry in 2003. That was around the beginning of the craft beer moment, at least as far as Richmond accepting those products. I worked my way up from manager. Two years ago, I sold my interest in that company and the company has since been sold [to L. Knife and Son].

RBS: Why did you leave?

CG: I knew we had an acquisition coming and didn’t really want to be a part of that. The company had been around since 1991. When I stepped in here, it was sort of a mess and I had free rein to get it back on track. When the acquisition came around, I was not too excited to have work for someone else.

RBS: What did you do next?

CG: For about a year, I worked on some other business acquisitions. I was looking to acquire a drug testing company my friend’s family owned. It didn’t work out, which is probably a good thing, because the recession hit and if I had bought that I would have been in big trouble.

Another nine months went by, and then I came across the Black Hand.

RBS: Why were you interested in a coffee shop?

CG: I looked at the Black Hand from a couple different angels. Being able to roast coffee from green coffee beans — there is a lot of profitability there if done properly. [Many restaurants buy roasted beans locally.]

Also the branding of the Black Hand reminded me of the craft beers and small breweries and the way they presented themselves. I like the brand, and the target market of the more progressive alternative coffee drinker — someone who likes a good cup of coffee but also likes craft beers.

RBS: Tell me about the state was the business in when you took it over.

CG: This year has been a maintenance year, and I’ve been rebuilding the whole business. The doors were basically shutting down when I took it over.

RBS: Where do you go from here?

CG: The wholesale aspect of what I did in beer is where I’d like to see it go. We have a handful of wholesale accounts, and this year I am looking to expand more in restaurants. I’d like to see it get to the point where it’s on the shelves at local markets: to be a strong local coffee brand. It could be down the road, if things go well, a concept that could go to different cities.

We also want to get into more of a local type menu and do more of an eclectic-type food menu and down the road incorporate wine and beer.

Mandatory reading:
“Bitter Brew: I opened a charming neighborhood coffee shop. Then it destroyed my life.” Slate.

Al Harris is a BizSense reporter and coffee lover. Please send news tips to Al@richmondbizsense.com.