How to Open a Successful Retail Bakery Business?

Setting up a successful bakery requires a lot more than hard work and your grandmother’s secret recipes. You’ve got to have experience in running a business, and need to plan your new startup very carefully before opening up.

If you intend to open a regular bakery and sell to walk-in customers, the first thing you should note is that you’re going to be in the retail business.

As such, a lot of your research and planning should be done accordingly. There are many issues to consider that can literally make or break your new business, and you may be surprised to learn that most of them are not related to baking.

1. The Right Mindset

Having the right attitude is the single most important thing needed to confront, tackle and overcome the challenges when starting a new small business.

From not being disillusioned by a ‘open up and they will come’ attitude, to doing countless hours of pre-planning and learning about the industry, a right frame of mind is vital in getting you off in a suitable direction.

Owning a bakery may be your life-long dream but it won’t be a walk in the park. You’ll have to put in lots of hard work and deal with plenty of unforeseen events that will test your limits.

Unless you’ve worked in a bakery before, you’ll probably not have dealt with over 80% of the issues that will crop up, so have an open mind and be willing to address any hiccups in a positive way.

And even if you have experience as an employee in a bakery, chances are, you won’t have come across the majority of business related matters so you’ll have to tackle them for the first time when you run your own shop.

2. Detailed Market Research

The best bakeries usually offer something that people want and need in the community. The core focus may revolve around certain specialties that the owner is passionate about, but in order to succeed, you have to give the market what it wants.

In other words, don’t try pushing highly priced gourmet cupcakes that are targeted at yuppie moms in a low to middle income neighborhood that can’t afford it.

Once you’ve confirmed the area where you intend to set up your bakery, start by making a list of every single bakery in the vicinity and make it a point to visit all of them.

Be prepared to invest time and money in purchasing their goods, testing their recipes, observing their customers, and noting as many positive and negative elements about their businesses.

You should write an in-depth review of the leading ones if possible. This may seem a bit extreme but it will force you to do your homework thoroughly and enable you to chart out the master plan for your own business. These are going to be your competitors, so you should know as much as you can about them.

List down all the things they are doing right. Identify areas where they’re weak. Figure out what you can do that’s better. Take note of what you think customers like about their stores.

By doing this research properly, you should be able to see where the opportunities lie for your upcoming bakery. Ideally, you want to complement the other bakers in town and not try to put them out of business.

There are areas where you will directly compete for their customers, but you should try to differentiate your offering wherever possible. You don’t have to go head on and make enemies, or copy someone else’s ideas outright.

3. Available Opportunity

Get creative with your business ideas, and think out of the box. Try to carve your own niche and be unique.

Let’s take sandwiches as an example. Are you only selling bread, or do you offer sandwiches too? If so, do you only have a limited range of premade ones, or will you go the distance in providing made-to-order choices. How many choices of breads will you offer? How about unique quality fillings?

There are various ways for a retail bakery to broaden its reach with complementary businesses. Clearly, having a sandwich bar is one. And so is a café where customers can dine in as well.

Both of these add-ons will allow you to widen your reach, increase your revenue, and enhance your shop’s overall appeal, so give them some thought in your planning phase.

Let’s consider another area – cakes. What’s your plan? What are the other bakeries doing? Are you going to compete on price, quality or some other angle?

Are you going to have a wide selection on offer? Will they all be made fresh everyday? Do you offer custom made birthday cakes? Do you sell them by the slice? What if customers only want half or quarter of a cake?

Just by answering some of these basic questions, you can already see that there are lots of things to think about. And every decision you make will affect the amount of work that needs to be done, the costs in the business, and the resulting customer experience.

In trying to figure out what you should do exactly, always consider what the other bakeries are doing. If one of them is already dominating the market in high quality birthday cakes and specialty cakes for special occasions, it may not be wise to try competing against their long-established reputation and strong client base.

Try to offer something that’s not currently available. If none of your potential competitors are offering quality homemade pies, then add that to your list, even if you didn’t initially think of having them on your menu.

Remember, don’t limit your bakery’s offerings to what you had in mind originally, or what you know how to bake. You’re about to start a business, and the first step is to work out what the market wants. After that, you can figure out how to give it to them.

4. Quality Business Plan

Most new bakery owners are intimidated by having to do a business plan. But they shouldn’t.

It’s not hard, and it shouldn’t be a chore. It’s simply documenting your dream business down on paper, so that you can review it, amend it, improve it, and refer to it when things don’t go as expected.

There are so many ad-hoc decisions to be made when opening a bakery that it is easy to forget certain things if it is not written down properly.

For example, a lot of people often start by imagining their bakery will only sell baked goods for take-out. But once the idea develops, they add on a small café for dine-ins to help boost the daily takings. This inevitably increases the setup costs, and the size of the premises required. And as a café, perhaps more items need to be added to the menu.

Before long, what began as a boutique bakery to sell a few cakes and cookies has mushroomed into a mid-sized café. And all this is before the business has even begun.

By having a detailed business plan, every single decision should be meticulously justified and quantified. Is that state of the art espresso machine really necessary? Do you really need to have an extensive drinks menu? Should you try to appeal to the Starbucks crowd? Is it necessary to offer free wifi?

There are plenty of resources on the Internet to help you put together a basic business plan outline. In fact, you can even choose a template that has specifically been designed for bakeries and cafes already. Just fill in the blanks and you’ll be halfway there already.

Don’t worry too much about the formatting, structure, intimidating words, financial formulas, and anything else that you’re not familiar with. Just focus on the details of your business and try to have an answer for anything. Don’t leave any stone unturned. Think about everything, and how you intend to deal with every tiny issue.

In general, the financial part of the business plan should make it clear how much you need to invest to start the business.

This should cover everything from capital expenditures to buy equipment and furniture, all the way to the amount of working capital required to pay for operational expenses in the months while you’re setting up the bakery and don’t have any revenue yet.

Once you’re open for business, the financial projections in your business plan should cover how much revenue you hope to make, and how much you need to spend on purchasing all the ingredients and everything else necessary to produce the items for sale.

And once you calculate your gross profit by subtracting all these direct costs from your sales revenue, you will need to deduct all the fixed operational expenses (ie overheads) such as rental and payroll, in order to come up with how much you’ve made or lost each month.

That’s all there is to the financials of a business plan. The other part is mostly concerned with marketing and how you intend to generate the revenue that has been projected.

5. Great Marketing Strategy

An effective marketing plan is essential in helping any new bakery to succeed.

It helps you decide what products to make, how to position them in the market, how to price them properly and how to get customers coming back for more after trying them out.

Work out a good promotions strategy and use freebies to introduce customers to products they haven’t tried before. The goods in a bakery are perishable, so it’s often better to spoil your regulars with extras instead of throwing out stuff that won’t keep till tomorrow.

Some bakeries hold half price sales towards the end of the day to clear out the day’s produce so that everything is made fresh the other day. You may want to consider a similar approach if it’s suitable.

Having free tasters is another way to entice customers to buy something that they may not normally consider.

Especially when you’re new and just making a name for your business, be liberal with your freebies and promotional giveaways. As a bakery, that’s probably the best way to spend your marketing dollar anyway.

Have little treats ready to give to kids. It may be one-off mini packs of cookies or some new item you’re promoting. Once you keep the kids happy, and hungry for whatever you’re baking, you’re sure to get their parents coming back again and again.

Your bakery’s marketing plan should always be evolving. Be bold in testing everything. Keep what works and continually improve on the rest.

It’s unlikely for you to get it perfectly right the first time so don’t bother. You can’t predict what customers are like until you open up and actually interact with them.

Above all, always listen to your customers and try to get feedback and suggestions from them. Ask them what they like, whether there’s anything you can improve, and if there’s anything else they would like but that you don’t currently offer. You’ll be amazed at what you can learn just by asking.

There are plenty of marketing and promotions activities you can try. Depending on what you want to achieve, you can vary the timing, attractiveness and appeal of the promos.

6. Well-Managed Operations

Managing a bakery business is hard, especially if you’ve never done it before. That’s why so many bakeries end up going bust.

As the owner, you really have to know every single thing that is going on, and be able to do it yourself if necessary. Do not leave anything to assumption, or hope that any problems will sort themselves out. They won’t.

If there are holes to be plugged or inefficiencies to address, do it straight away and deal with it yourself. You should always be on the lookout for areas in the operations that can be improved.

You need to be on top of every part of the bakery – this includes the actual baking, recipe control, inventory purchasing, accounts payables, storage, cleaning, equipment maintenance, security, garbage disposal, cash management, customer service, marketing, staff safety, taxes, and absolutely everything.

Yes, it will be completely overwhelming at the start. It will all be new to you, and you will have countless other things to do, but you need to have a solid working knowledge on how your business works.

In order to manage the operations well, you need to know what needs to be done. Only then can you figure out how to do it properly. Once you’re able to do it yourself, you can delegate to other team members.

Successful bakeries, cafes and restaurants always have an active owner who is intricately involved in most of the important parts of the business.

There’s just no substitute for a stakeholder when it comes to caring about every dollar spent in a business, or every dollar foregone due to lost sales.

It’s your money involved, and you’re paying for all your team members to be working in the bakery, so you need to know what everyone is doing and how they’re doing it.

7. Outstanding Customer Service

To give your bakery the best chance for success, you should make sure that the customer experience you provide to anyone walking through your doors is nothing short of outstanding.

Yes, everyone knows that good customer service is necessary. Everyone starts their business will the same goal of treating customers really well. So what’s the big deal?

The truth is, when things are going smoothly, it’s easy to be courteous and serve with a smile. But the true test comes when you’ve got a very difficult customer who is causing a ruckus, or when you’re short of staff and it is extremely busy, or when a multitude of things has all gone wrong on a bad day. That’s when the same level of customer service brilliance still needs to hold up.

One of the greatest challenges is to instil this customer oriented culture to your team members, especially the part time ones who may not be with you long term, and hence may not feel the same passion for your customers. How will you get them to remember your regulars’ first names?

Bakeries are a locally focused business and unless you’re opening in a big city, return customers will generate a large part of your sales. This is why you need to have a well-oiled system in place to make them feel welcomed and appreciated.

Carve a Unique Niche and Business Segment for your Bakery

There are countless decisions to be made when opening a bakery, and some of the most important ones revolve around your menu items.

  • How many types of fresh bread are you offering?
  • Will cakes or breads be your main focus?
  • Or is it better to showcase your cupcake making skills?
  • Are you going to include cookies and biscuits in the lineup?
  • What about your delicious pies and other savory items?
  • Will you be offering cakes by the slice or only in whole?

You may have started out thinking you’ll just stick to what you know best, but as the ideas for the bakery develops, you will inevitably find this list expanding, as the extra effort to offer another one of these items doesn’t appear to be much. At first anyway.

Think Carefully and Clearly

Every single decision matters, and will have a direct impact on your costs, time, display space needed, inventory management, and so on.

Ideally, you want to offer customers a wide selection of breads, but the more you decide to do, the bigger the challenge. And with a broad range, how many units of each do you bake every day? The numbers can add up very quickly.

And with all this quantity made, what if they don’t sell out? Will you have to discard them at the end of the day? If so, that’s just like throwing money into the bin, which is not very good business.

In the same way, the spread of cakes you decide to offer will make a significant impact on your operations and bottom line as well. They cost more to make and require more effort. They’re likely to be a great revenue generator, but your costs to bake them, refrigerate them and sell them will be a lot higher too.

Everything is Related

The key to starting a successful bakery lies in the strategic decisions made before opening up. And the items on your menu is absolutely critical, as it will directly impact the size of your premises, the kitchen equipment required, the display and storage space needed, the number of staff and various other elements within the business.

It is tempting to offer as much as you can, and plenty of new bakeries make this mistake. But it is better to pick your battles and focus on selected items that your bakery becomes known for.

If this is your first bakery, it is not advisable to do it on a large scale and offer an extensive menu ranging from specialty breads and intricate cakes to gourmet pies, premium cookies and more.

Don’t opt for the throw it all on the wall too what sticks approach. Sit back and devise a more purposeful plan that leverages on a well thought out analysis of what you can do, what the market needs and where there might be a fit.

Some people have spent hundreds of thousands of dollars to open elaborate bakeries that subsequently fail, while others can be hugely successful just by baking a few items from home and selling it in a kiosk, so don’t think you need to have a fancy set up for the business to work.

By all means, have big dreams, but start small and do everything you can to know your market and customers. Test your assumptions and always get feedback. Don’t bet the barn on something that you think will work until you can validate your ideas.

Always try things out first before putting your whole foot in. Once you’ve got both feet stuck in, it’s very hard to pull out, so tread very carefully in the initial planning phases.

The Importance of Developing and Following a Business Plan

The Importance of Developing and Following a Business PlanGood business plans are an essential foundation for all successful bakeries. It is amazing how many small business owners overlook the significance of having a detailed and well thought-out plan or do not follow the plan once the business begins.

So, not only do you need to write a solid financial, marketing and operational plan for your bakery, you need to follow it. More importantly, you should improve it as you go along by refining certain parts to account for real positive or negative issues that arise in the day-to-day operations.

All too often, bakery owners have already developed a properly researched plan of action, but when some of the actual events turn out differently from the plan, they lose confidence in the initial plan and abandon it, instead of correcting it. This usually results in a lot of ad-hoc decisions that are unplanned and impulsive.

The daily operations of a new bakery can be very chaotic and extremely overwhelming, especially for someone who has never been involved in starting a small business. If most of the things that need to be done have been planned and accounted for, the tasks can be more manageable. However, when they are unexpected due to poor planning, the business could suffer greatly in the crucial first few months when it is vital to get off to a good start.

It is normally a good idea for owners to take time out from the normal operations to do business planning analysis fortnightly, weekly or maybe even more often during the initial startup period. This time should be spent on assessing whether the business “is going to plan”. It is a time to reflect on the effectiveness of the plan and to develop strategies to overcome any unforeseen challenges that may have arisen.

Ideally, this business plan assessment exercise should be done in a team where different people can offer feedback and suggestions. If you are a sole proprietor who has developed the plan on your own, you should try to do these reviews with a couple of third parties who can provide objective and constructive input on ways to improve it.

Going through the business plan with your accountant and the most senior member of staff at your bakery may be possible options if you do not have a business partner. Where possible, try not to do it all yourself so that you can get a wider perspective from others who may be able to see things that you’ve overlooked.