Sodas, Costa Rica’s version of the greasy spoon, not the bubbly beverage northerners sometimes call “pop,” are about as common as pineapple in Tico-town.

A road trip to anywhere is sure to find one of these every 10 minutes. Most of these sodas sit empty and often big enough for a wedding reception of enormous size.

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I almost never have trouble getting service at Sodas, as there is nobody else dining, and it’s not because the food is expensive. It’s the cheapest food Costa Rica has to offer.

A massive plate of rice, beans, plantains, and meat, known as a “casada,” can be purchased for two to five USD. This begs the question: Why then do so many of them sit empty?

The Costa Rican Soda network, in many ways, represents a perfect example of what to avoid when starting a new business. They are the combined result of valuable assets (such as really tasty cooking or quality food), little to no business acumen, and over-generalized business direction.

The mistakes I see made by new business owners in Costa Rica often remind me of these roadsides eateries. The most common mistakes in starting a new business can be boiled down to five simple avoidable but key considerations: business plan, market research, money management, mission, and location.

Let’s start by covering the no-plan or over-complicated business plan.

If opening doors were enough for a business to thrive, then our lives would certainly bear witness the end of corporate enterprise as we know it, in no time. Thankfully, for the billions who clock in and out of awful jobs everyday, everywhere, this is not the case.

With most new business there is an initial surge of interest in the newly opened shop which continues or dies based on what customers find after investigation. It can be a head fake of comfort.

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The other side to this failing is creating an overcomplicated or scattered plan. There is a reason all the Big Business CEO’s always talk about simplification. Less moving parts means less things to fix when something goes wrong.

I learned this waiting tables at a medium sized Italian restaurant in Los Angeles circa 2000. While every restaurant in LA opened with the highest level of computer food-order tech, our leader took the simple approach: a shorthand, written, paper-based system.

We had about the same number of errors made as other restaurants I worked in, restaurants with most modern food ordering systems, but this one didn’t cost any money to purchase or repair.
It also never went down.

What about market research?

When my wife and I first shopped Tamarindo for businesses, the bottom of our list was the affordable Pizzeria for sale, PIZZA&CO. My heart was set on selling booze, an easy sale, a guaranteed solid ROI, and pizza was sold everywhere.

After investigation I learned that booze sales were not like in the states, costly to the business with Costa Rican import taxes.

After eating pizza from several of the local options we confirmed that while the market was saturated, it was not always quality, affordable and accessible. Clearly pizza was popular but it was missing something in most cases.

We bought the pizzeria, offered 5 basic pies at a price that undercuts the the other pizzerias, but still generates a good ROI, and tastes more like pizza we know from back home.

So far this is working well with consistent 5-stars reviews on Trip-Advisor and turning a profit during the slow season.

Money management through loans or misappropriation of money on unnecessary items.

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Okay this one is huge. I do not recommend getting a loan to start your first business unless you are being gifted the money from a wealthy guilt-free source. The stress alone attached to a loan can be enough to steer poor decision making when starting out.

It is often years before a new business goes into the black with up front investments, let alone with turning a monthly profit. A lack of tenacity for withstanding this pressure, or a simple lack of funds to stay afloat, are death sentences.

It would be better to start shoestring and build your business. In the long run the benefits from this are too many to list, the most important of which, is a sense of accomplishment.

As an example of misappropriation of funds we can look again at our Soda.

Very frequently the appropriation of available money is misdirected: invested into things that will not drive business. Driving, is the most important thing you will do for your business always, especially when it is new.

A business survives on growth, which is a two part plan: get new customers and keep them. Understand this is not a chicken or egg scenario. You must get customers first. Our esteemed Soda example, or new business owner, frequently opens with the “keep customers” part as their guiding light. Decisions or not divided by the “nice to haves” from the “must haves.”

As an example, our pizzeria has a few humble tables and chairs which we put outside for those who wish to stay and eat right there. While the tables are nothing to brag about: circles of glass, framed into an aluminum stand, they do the job better than their chair-counterparts.

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The chairs look cheap versions of the card-chairs my parents used to roll out on gin-rummy night. To the point, I hate these chairs and would love to replace them. We will when the time is right, but for now, as we build our reputation I am certain nobody will criticize the taste of our pizza based on the quality of where they rest their rear end.

Every decision you make about spending money should feed into one key and often overlooked factor: why.

What is your motivation?

Recently TED talks covered the subject of inspiring others to invest in an idea. This is often represented in the business’ mission statement, which if created, is often misdirected itself.

This video is a worthwhile review for any business owner considering their marketing and can be found here

The basic idea is that it’s not enough to tell people what you do but make sure they understand why you do it.

It doesn’t take a genius to understand we make pizza, that much is obvious, but for us it wouldn’t have to be pizza.
What my wife and I have come to understand about Tamarindo is that the only way one can enjoy quality is to pay top-colone for it.

We decided that quality food could be made at a price that is accessible to most everyone, which is the motivation behind our every decision, down to whether or not we replace the chairs.

Replacing the chairs would only drive our costs up to offset the pain of the new chairs but the pizza would taste the same. Investing in better quality cheese, or say, handcrafting our crusts rather than buying them, would allow us to better meet our why.

Without identifying that why, you as the business owner have no lens for making financial decisions, and no vehicle for talking about your product with others. People will be less likely to care.

Lastly: location, location, location.

This should be obvious, but I can’t tell you how many respectable people I know who have businesses in locations, with little to no upside.

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One of the businesses we initially shopped had a price-point in our budgeted range, offered a really solid product, with beautifully-designed interiors, but set in an undesirable location. Think: putting the bubble gum in the back of the grocery store.

In this case it was a coffee shop and a heart-breaker.
Genuinely I hope this place survives, but it is currently closed, and still for sale. And it is not alone in this town.

Less expensive real-estate may seem inviting when analyzing your expense line but even with the best why in the book, if the customers can’t find your soda out on the country road which dead ends at a banana tree, then you will also find your earnings line to match your spend.

Do your research on what is needed in your market, figure out how you can fill that gap and get really clear about why.

Scout the best possible location and spend your money only the things you can afford which roll into your why.

Then cross your fingers because even when you follow every bit of advice you get business gets “different.”

That said, I will take the stresses of this real-world business education over the hard-knocks of my corporate life any day.

Good luck out there and make sure you frequent Costa Rica’s sodas. You are going to need them if you want to eat frugally, at least in Tamarindo, that is unless you like pizza, in which case I know a place.

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Written by VIP Member Damon Mitchell who spent over 10 years in the fitness industry before he moved to Costa Rica in search of a better work/life balance. Currently he lives in Playa Tamarindo in Guanacaste, where he and his wife Cristina are owner-operators of Pizza&Co pizza express, located in Plaza Conchal 2.

Daily, Damon runs on the beach or works out at Tamarindo Fitness Center, keeping fit by doing a combination of old-school weight lifting, calisthenics, TRX, stability ball work and just about anything he can do to create new and fun exercises. Most recently he is learning to surf.

You can email Damon here if there is anything specific about staying fit and healthy in Costa Rica you would like him to cover in his next article.

Starting Your Own Small Business in Costa Rica. Five Avoidables

Article/Property ID Number 4413

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