Monthly Archives: March 2012

The Different Ways to Own a Bakery

Own A BakeryA lot of aspiring bakery owners think that the only way to open a bakery is to invest a hefty sum of money and set up a new retail business from scratch. While this is often the most popular option, there are actually a number of alternatives that may be more suitable for the majority of first time entrepreneurs.

1) Opening a Brand New Bakery

The normal way of starting a bakery is to formulate a business plan, get the necessary financing for the venture, choose a name, incorporate a company, rent an appropriate retail space, renovate the outlet, purchase or lease equipment, get all necessary licenses, confirm menu items together with pricing and costs, draw up a marketing plan and open for business.

This is generally the preferred method as the entire business is brand new and will be set up according to the entrepreneur’s vision and dreams. When most people think of opening a bakery, they also regard it as starting a new business, as opposed to buying one that has already been established.

2) Buying an Existing Bakery

An alternative to starting a bakery from scratch is to buy an existing bakery that is for sale and to continue operating it without many changes, or to give it a makeover as required. Depending on the price, condition and performance of the business, this may be a good choice for first time owners who do not want to go through the risk and hassle of setting everything up themselves.

At the same time, with an existing bakery, inexperienced entrepreneurs are able to get a better picture of the level of sales that is achievable as well as the required operating costs. In short, there should be less start up risk as the business is already a going concern.

3) Starting a Home-Based Bakery

Opening a bakery that is based from your home is an ideal solution for lots of people, ranging from those who do not have the capital to open a shop, to prudent first timers who would like to get a better feel for the business before making a significant investment. In addition, a home-based bakery is suitable for anyone who wants to start small and focus more time on baking instead of trying to run a store and managing a team.

Without any rental costs and other overheads, home bakeries take a lot of the pressure out of owning a normal bakery so that you can concentrate on baking. You may not generate as much sales revenue, especially from walk-in customers, but you will certainly get valuable experience in marketing and supplying your baked goods to events, caterers and non-retail customers.

4) Investing in a New or Existing Bakery

One of the best ways to own a bakery is to invest in a new or an established bakery that is run by an experienced baker. This means that you will not own all of the business, but you will still be an owner. Furthermore, if you’re just a financial partner, you can learn all about how the bakery operates without having to do much, or if you prefer to get a real taste of the action, you could get involved as a managing partner to assist in some part of the operations to learn on the job.

Either way, you will be a bakery owner, have a greater chance of making money and most of all, if you’re new to running a bakery, you’ll acquire priceless tricks of the trade on how to run a successful bakery. The hard part about this strategy is to find a good partner who is willing to accept you as an investor and co-owner. Take your time to identify a capable partner as he or she can literally make or break your investment and either teach you appropriate or inappropriate ways to operate a bakery business.

How Much Money Do You Have to Invest in your Bakery

How Much Money Do You Have to Invest in your BakeryA bakery business may require anything from $75,000 to $200,000 or more to establish, depending on what you have in mind, and where you’ll be renting your premises.

It’s a lot of money, and it could need even more if things don’t turn out as expected, so think about it carefully and be very thorough when estimating the start up and operational expenses.

On top of all the costs needed to set up the bakery and buy all the furniture, equipment and everything else that’s needed, it is advisable to have enough money in the bank (working capital) to cover overheads for at least 12 months.

Entrepreneurs typically make the mistake of under-budgeting costs and over-estimating the revenues that can be generated in the initial months of starting a bakery. And this leads to a cash crunch that puts the whole business at risk.

In general, you will need more money to start a bakery than you initially project. Unless you’ve done it before, you may not be aware of hidden costs, unforeseen delays, and an endless list of things that can go wrong along the way.

If you’ve got a realistic financial projection of what it takes to start up your bakery, it instantly becomes clear that it requires a substantial investment.

Initially, you may have thought $75,000 could be enough, but once you go through all the details, this can easily balloon to $125,000. And that’s without having a comfortable cash buffer in the bank.

All of a sudden, the small little business that you thought could be set up affordably ends up mushrooming into a venture that needs more money than you initially planned.

Bakeries are normally self-funded by the owners as it is difficult to get a loan for such high-risk food and beverage businesses. You may have to dig deep into your savings, borrow from friends and family or even take out a mortgage to fund the new business. It’s a big decision.

Failed bakeries have bankrupted their owners before, so think very carefully before taking the leap in putting all your savings or assets at risk.

Why Do You Want to Open a Bakery

Why Do You Want To Open A Bakery

Think you want to open a bakery? The first thing you should do is to reflect on why you want to get into the bakery business. If you think it’s going to make you easy money and you’ll be rich quickly, then think again, as you should probably reconsider your decision and choose another business to get into.

Hopefully, the reason why you want to own and run a bakery is because you are interested in, and passionate about baking. You may or may not be a good baker at the moment, but the important thing is for you to absolutely love baking, as you will need a lot of dedication to make the business succeed.

A lot of people may be competent bakers who can bake really high quality cakes or cookies from recipes that they’ve done plenty of times at home. They have the ability to bake certain items very well, and lots of friends and family have told them that they should start their own bakery.

If you’re one of these talented amateur bakers, you shouldn’t jump into opening a bakery just because you can replicate Grandma’s chocolate chip cookies perfectly. Think about whether you would enjoy spending 10 to 12 hours standing in the kitchen every day, where you’ll need to bake lots of different products at speed and in great quantities. Think about how you will need to manage bakers, kitchen helpers and other staff who will all give you problems along the way. Think about what you would do if the cookies that you spend hours to bake end up not selling like you anticipated. If, after assessing the challenges of the business realistically, and you’re still keen on exploring further, read on.

In general, anyone who wants to own and run a bakery, should be passionate about baking, be competent at it, and would like to turn it into life-long career where they are committed to the job and business. Ideally, they should have worked in a bakery before in order to have a real taste of what the job entails and what it’s like to the whole day baking in a kitchen. Above all, they should be opening a bakery for the right reason, as it requires a significant investment in financial resources, time and copious amounts of hard work.

So, sit back and think real hard about why you want to start a bakery and whether you really do want to get into the business before taking the leap. Only you will know the real reasons behind your decision.

Feel free to ask any questions in the comments section below if you’re unsure about anything.