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.