Category Archives: Start Up Costs

Buy Used Bakery Equipment to Lower your Startup Costs

One area where you can save money when setting up a new bakery is by buying used kitchen and baking equipment.

While it is nice to have everything brand new just like the business, if you’re working on a tight budget and need to find somewhere to lower the capital needed to start up, you could definitely get by with some pre-owned stuff.

Mix of New & Used

It doesn’t have to be absolutely every single item. Just zoom in on the costly big ticket ones (such as the ovens) where it may be worth saving a few hundred or a couple of thousand dollars here and there.

For example, it may not make much of a difference to your staff and customers if your main oven has been used before. As long as the one you’re buying has been well maintained, and may have been properly refurbished, it should be as good as new.

Contingency Plan

The only thing you should beware of is what to do if it breaks down, especially if the warranty period is over already. Who can do the repairs, is it quick to get replacement parts, how long will it take to fix and what will you do in the meantime while it’s down?

Obviously, a totally new oven can break down as well, and you could end up in the same fix, so do your contingency planning thoroughly either way.

It’s not necessary to try and save on the smaller items such as the utensils and other bits and pieces in the kitchen. Just focus on the equipment and furniture that may cost quite a bit.

Weigh Up the Pros & Cons

And when you’re making your purchase, use your common sense to pick the ones that offer the best value. In some cases, the savings may not be much and it may make more sense to buy new and have peace of mind with the warranty.

But sometimes, there will be fantastic deals when you can buy items that have hardly ever been used for a fraction of the price. It all depends on your luck and resourcefulness in hunting for the best deals.

You definitely need to shop around and do your homework when buying used bakery equipment. Above all, you should know what items you need and stick to them.

All too often, inexperienced bakery owners try to save money by shopping in a used equipment store but end up overspending by purchasing all sorts of things they don’t need.

Getting the Right Oven for your New Bakery

A baker’s oven is one of the most expensive and important pieces of equipment. Their prices vary quite a bit, depending on the type you need, and whether you’re sourcing for a new or second hand one.

If you’re not sure what to go for, here’s a brief introduction to the different choices that are available and how much they cost.

  1. Revolving Tray Oven – to produce fairly large quantities, a new Revolving Tray Oven could cost $20,000 or more. As the name implies, there are trays that rotate in the oven, allowing you to place multiple sheet pans or product on the shelves. These ovens can be used to bake all sorts of products and are commonly used for breads and bagels.
  2. Rotating Rack Oven – alternatively, a Rotating Rack Oven allows you to roll a complete rack of product into it, where one rack can hold up to 20 standard sheet pans. This is a good solution for large productions too, and can cost $15,000 to $20,000 new.
  3. Convection Oven – for small to medium sized bakeries, a small convection oven may be sufficient. Not only are they much cheaper at $4,000 to $5,000 for a new unit, they also take up less space. And if you need added flexibility, you can consider getting a Double Convection oven that will let you bake at two different temperatures at the same time.
  4. Deck Oven – depending on what type of products you intend to specialize in, you may find the need for a Deck Oven, which has an opening for you to slide sheet pans onto the deck easily. The price for a new unit is about the same as a convection oven and they are available in Gas, Electric and even wood fired.
  5. Estimated Used Prices – the prices of used ovens for a bakery depends on their age, condition and availability. On the whole, their prices range between 40-60% of the price of a new one. So, if a new Convection Oven costs $4,250 a used one may set you back anything from $2,000 to $2,500. And if a new single electric rotating rack oven costs $17,000 then you should be able to get a second hand one for about $9,000.

Before buying an oven for your new bakery, you really must know what you intend to bake, and how much quantity you expect to do.

A large oven will not only cost you more to purchase but they will also increase your utility bills, so plan wisely and make sure you actually have a need for it. Furthermore, it will take up space in your kitchen, and could be more cumbersome to move.

If you’re unsure of what to do, consider starting out with a small convection oven and then invest in a second one if the need arises. By having two smaller ones instead of a single large one, at least you will also have a backup should one of them go down.

How Much Does Bakery Equipment Cost for a Small Bakery?

The cost of purchasing all the required kitchen equipment for a small bakery will depend on what you intend to bake and the quantities involved.

Some products like donuts may need additional equipment such as donut fryers and depositors, but on the whole, the equipment found in all bakeries is quite similar.

To give you an idea of what you may need and how much they may cost, here is a list of the essential items in a bakery’s kitchen.

  1. Ovens ($9,000) – A $9-10k budget allows you to get a used rotating rack oven or a revolving tray oven. Alternatively, you can get 2 new convection ovens. What you end up buying really depends on your specific needs and how you intend to set up your operations.
  2. Proof Boxes ($2,800) – for a small setup, you can get a brand new Mobile Proof Box for under $3k. This will hold about 20 standard sheet pans at one time, and can easily be moved out of the way when it is not in use.
  3. Dough Sheeters ($4,000) – a standard unit will cost about $8,000 for a new one, and you should be able to get a used one for $4k or less. Definitely worth the investment if you’re making products that require dough to be rolled out. Over the long run, it will save you time and labor expenses.
  4. Planetary Mixer ($3,500) – a new 30-40 quart Planetary Mixer should be enough for a small bakery. They cost $2-4k so a $3,500 budget should be more than enough.
  5. Spiral Mixer ($6,000) – for heavier doughs, a Spiral Mixer may be needed. They cost about $9-10k for a new one, and you can normally pick up a good second hand unit for $5-6k.
  6. Tables ($1,600) – you may need a maple top, stainless steel worktables, or both. Invest in sturdy and good quality tables as this is where most of your work will be done. If available, you may be able to get used ones for under $1k.
  7. Sinks ($600) – just buy second hand if there are nice ones. Otherwise, get them new. Just make sure you get the required 3 compartment sinks.
  8. Display Cases ($12,000) – budget to get 2 units, one dry and one refrigerated one (assuming you need it). For $12k you can probably get them both new.
  9. Small Wares ($1,000) – from pans to utensils and any other items needed, these should not cost you more than a thousand bucks in total for a small bakery.
  10. Refrigeration ($2,500) – you’ll definitely need a cooler but you may need a freezer as well. You can get them new or used depending on your needs and budget.

The list of equipment above totals up to $43,000 and it includes a mix of new and used items. This figure could be significantly less if most of the equipment is purchased second hand, or it could be a bit more if you decide to buy everything new.

Overall, be prepared to spend at least $35,000 to $50,000 in order to set up the kitchen for a small to medium sized bakery.

Setting Up a Bakery from Scratch

If you’re starting a brand new bakery for the first time, you could probably do with a few useful pointers.

To get you going, here’s a 20 point step by step guide covering most of the essential things that you need to address when establishing a bakery business:

  1. Decide What Type of Bakery You Want to Set Up
  2. Create a Business Plan for the Bakery You Envisioned
  3. Get the Financing Necessary for the Proposed Pan
  4. Choose a Name for the Bakery and Company
  5. Incorporate the Company to Run the Business
  6. Hire the Baker, Chef and Main Team Members
  7. Find the Location for the Business Premises
  8. Negotitate and Sign the Lease for the Property
  9. Apply for the Necessary License and Permits
  10. Design the Corporate Identity and Marketing Material
  11. Purchase or Lease all the Equipment of the Business
  12. Confirm the Interior Design and Decoration Plans
  13. Get the POS Hardware and Software Set Up
  14. Select a Financial Management Software
  15. Hire a Business Manager and other Support Staff
  16. Confirm all the Menu Items, their Costing and Pricing
  17. Conduct a Menu Tasting Session with Potential Customers
  18. Test all the Kitchen, Technical and Computer Equipment
  19. Do a Trial Run with the Kitchen and Service Staff
  20. Open the Bakery and do a Live Test with Real Customers

Got a question or suggestion to add to the list above? Please share your feedback in the comments section.

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.