Your pastries are a huge hit in your community and now you’re considering opening a bakery. That?s a great idea and we are here for it! We know a thing or two about starting a bakery business and want to support your efforts on your road to success.
Turning your talent for making delectable cupcakes into a revenue-generating business is a process that should be carefully planned and nurtured. From planning to execution, we?ll share with you how to mix your talents, business acumen, and existing community reach to bake a rising business.?
1. Choose the type of bakery you want to open
This goes without saying. You either fail to plan or you plan to fail. Of course, you will have speed bumps and obstacles along the way that may divert your plan. However, you?ll be able to stay on track if you initially make careful decisions about what type of bakery you?d like to open, available budget, and goals you?d like to achieve. While you?re making important decisions about the kind of pastry you want to specialize in, it’s a good idea to have several individuals providing you feedback on industry trends, location demographics, and local competition.
Also, what kind of shop do you plan to have? Will it be online, counter service, specialty service, or dine in? Knowing your budget and your current business strengths will help you make the right decision for you.
2. Create a business plan
Having a business plan is absolutely essential to small business success. If you are looking for investors, this is a great way to define your startup costs and provides a clear picture to those who are lending the funds. Writing a business plan encourages you to take a big picture and comprehensive view of your business that includes identifying your customer base, identifying your competition, and listing your expenses.
Running a small business is not an overnight success. Addressing your break-even point is an important way to indicate when you will start making a profit. This will help in planning your long term financial outlook.
3. Research your space
Be sure to scour your resources to compare prices on available space for your bakery. Starting out of your home will keep your overhead costs low. Another low-cost option is an online business. If you are familiar with how to start an online bakery, this is a great alternative.
However, if you want customers to come and dine in, you?ll need a formal space where they can walk around. You can also choose to rent out a commercial kitchen. There are also training and mentor programs available that may allow you to use the facilities at a discounted rate.
Whatever options you chose, remember to check all legal boxes like licensing and other legally relevant to your state. The USDA is a good resource for guidelines that will help you pinpoint what legalities apply to you when owning a bakery.
4. Learn How to Price Baked Goods
This is one of the most challenging aspects of starting a bakery so we?ll spend the most time on it. Pricing your beloved baked goods is more than including the cost of the ingredients of your masterpieces. Your price should include packaging, marketing, and cleanup. One of the challenges of pricing is including the hidden cost of time spent on the creation of your bakery product. Both new and veteran bakery owners struggle with this but it does get easier over time. A simple rule of thumb is to make sure that your food cost percentage is lower than 40%. Any more and you may not make a profit. Once you?ve gained the confidence in the quality of your baked goods and see that your customers are willing to pay the price, you?ll realize that your products are reasonably priced.
Consistently undervaluing your skills will undermine any progress you make in owning a bakery business. Customers are coming to you because they don?t have the time or skills to produce the baked goods you can. You entered the bakery business because it comes naturally to you. If they are spending money with you, they appreciate the service and convenience that you provide. If you bake, they will come.
Another challenge to avoid when pricing your baked goods is miscalculating the time you?ve spent in producing them. As mentioned previously, the time spent making your sweet treats is an important component of the price. You don?t want to lose out on significant amounts of profit by miscalculating your efforts. In particular, special orders are unique in creation and design. They should be priced as such.
Cash flow issues can wreak havoc on your pricing and financing. Always keep a close eye on your numbers, overhead costs, direct costs, and variable costs. Your profit margin should complement and maintain the way of life you are accustomed to. If not, you will have to take a step back and rethink your business model and make changes or consider a price increase.
Direct costs can be tracked effectively using a POS system. It is an efficient way to reduce the amount of time spent on managing staff and inventory while saving money in the long run. These costs include ingredients, and labor, all of which can be monitored through a POS system.
Variable costs such as packaging materials and supplies will impact the base price. Although many of these items may be inexpensive initially, the cost will increase as the volume increases. Items like boxes and tape can be purchased in large quantities at a reduced price, which can allow you to set aside more money in your budget for unexpected expenses.
Always prepare for the unexpected when starting a bakery business. A malfunctioning kitchen appliance or faulty food processor can bring your business to a complete halt if you aren?t prepared. You can plan for these events and don?t have a crystal ball to predict when they will happen. However, you can be ready for incidents like this that may divert your plans and be in a better position to address them quickly. Your budget should always be flexible enough to absorb unexpected events that may be otherwise detrimental to your business growth.
5. Clarify friends & family ?hookup?
Once you formally start your business, your friends and family that have been enjoying your baked goods free of charge or deeply discounted may now have the same expectations. After all, they were the ones who?ve been encouraging you to go into business and start selling your cookies to the masses. That was ok when it was a simple side gig but not now. You are in business to make a profit and too many freebies can impact your bottom line.
Those individuals who love and support the work your doing will understand that they will have to pay for your baked goods now. It is still ok to offer a small discount but it must remain consistent. Especially, while you are just getting your newborn business off the ground.
6. Keep a support system
Being a business owner can be isolating and challenging. Long days and long nights can be hard for nonbusiness owners to relate to or understand. Having your own personal cheerleader can help keep you stay encouraged and emotionally supported. If you are fortunate to build a support system with a business mentor, colleague, or spouse, you?ll have someone in your corner that you can turn to.
This is a quick synopsis on how to open your own bakery and there?s much more. For now, this is a great start and should get you moving in the right direction and asking the right questions. Knowing how to start a bakery business is half the battle. Now, it?s time to take action. For inquiries on how our baking supplies and ingredients can help fuel your business, give us a call today. Until next time, happy baking!