Monday, January 2, 2012

our first million dollars...what it means.

I have been meaning to sit down and write another 'year end reflection' sort of post, and haven't had the time. This isn't that post. I will write it. Soon. Pinky swear.

In the meantime...

I realized the other day while I was working on closing my books for the end of the 2011 that the cafe had crossed the million-dollar total revenue mark recently (we made a bit over $400k last year and about $600k this year). "That's pretty awesome," said I to myself. Then I looked at the profit over these years, which totals just under $0 (our opening loss in 2009 wipes out every dollar made in 2010 and 2011, and then a few more). "So that's not so awesome," thought I. And then I thought more about it. Every single dollar that's come through the front door of this cafe has gone somewhere, and every one of them has had some impact where it landed.

The biggest chunk went to our vendors - over $350k went to buy the stuff we sell; $50k went to supplies, $25k to repairs. Since almost all those vendors are local businesses, a chunk of their dollars are being spent somewhere in town, and then recirculating more.

The next biggest chunk went to our crew - we've paid out over $350k in salaries. Because almost all our employees live within about a mile of the cafe, it's a good bet that a chunk of these dollars reappear on the streets of Berklandville as well.

$70k went to rent. My landlord happens to be a partnership of guys who live in Oakland and Berkeley, so some of their dollars also go back into the local moneystream.

$5k went to entertainers. $1,500 went to charities. All local.

We've collected and paid $70k in sales tax (that's separate from the million bucks). Those dollars go to schools, police, firefighters, roads, and other useful stuff. (Granted, they do other less-useful things as well, but that's the nature of taxation.)

The rest went to things like insurance, utilities ($45k!), permits, taxes, and on and on. (Almost $20k went to credit card processing fees, depressingly.)

This constant recirculation of money is the sort of thing that people on the radio and the TV call 'the economy', but that's a bit abstract. Looking at real facts and figures helps make it a bit more concrete, at least for me. If I were a politician, I'd say that we 'created' a million dollars in 'economic activity' or 'increased the local economy' by a million bucks or some such. Since I'm not a politician, I don't know exactly how I'd say it, but certainly the fact of the existence of Actual Cafe has contributed to the movement of dollars, and the fact that we prioritize doing business in our own community means that activity happens more often in our own backyard. Of course, the nature of 'the economy' is such that streams of money flow all over the damn place in the end - there's no stopping them going literally all around the world and back.

I feel like an NPR reporter right now.



  1. Great post, Sal. NPR's Planet Money should do an episode on this very blog post.

  2. Fantastic, Sal! Good call from Tim @ SoSF, I'd love to see a larger program on this... that "follows the money" as it recirculates into the local economy. AND follow the money to things like the bank where you do business, the insurance company and cover that a bit. If it's a local credit union, most of that money would head back into the local economy through loans and wages to credit union employees... right? Much love from a big fan of Actual :-)

  3. Are you using square to reduce your credit card costs?

  4. Congratulations and many wonderful (and prosperous) years ahead! :)

  5. Maddy: I wish I could bank at a credit union or at a small local bank - I don't today, but not for lack of trying. I spent a bunch of time before we opened looking at different banks, and Bank Transfer Day prompted me to start looking again. I've interviewed several banks, and for all those I've looked at, I'd be paying several hundred dollars a year more and getting less services for it. Things like the ability to drop in and get change when I need it without ordering it in advance, get downloadable data into Quickbooks so I can run the business, online account management and bill payments, writing hundreds of checks a month and depositing thousands in cash each month make me a challenging customer for small outfits. I haven't given up - if anyone has recommendations for bay area banks and credit unions who might be able to service this business, I'm all ears.

    Travelsn: I'm not using Square, because it's actually more expensive than the credit card processor I am using, and they don't integrate with the POS system I'm using - I can't afford to have two separate systems running when one can do the job. Square is a great idea, and a disruptive business model which makes it possible for small operations to get fairer pricing on card transactions - they're also helping put pressure on other processors to lower their fees, which is great for everyone. But for an operation like mine, they're not the right fit.

    Also, while we're talking about credit card fees, we've already seen that banks and processors won't just give away their revenues - they'll find ways to move them elsewhere. As public companies, they're accountable to their shareholders for continuous growth in revenue - failure at that mission means failure as a company. We've become conditioned to use cards because they have value to us (I'm part of 'us' btw) in added convenience (or rewards, or whatever). As long as credit card transactions continue to grow (as they are doing), processors and banks won't adjust unless forced to by outside forces. Outside forces can include competition from something like Square, or regulation. Effective competition can do lots to affect change (positive or negative) - it puts companies out of business all the time. It's much easier for a startup to introduce a new (less profitable but still worthwhile) business model than it is for an existing company to adjust to a lower-margin business. Like it or hate it - it's how capitalism works.

    When I was negotiating with my credit card processors last year, mentioning Square early in the conversation made those conversations go much easier for me. Thanks, Square, and thanks, competition.

    From Between 1989 and 2006, the nation's total credit card charges increased from about $69 billion a year to more than $1.8 trillion. (Source:, April 2008).