Finally going to take the entrepreneurial plunge? Plan now for success by reading this article on opening a bakery.
State of the Bakery Industry
Many of us have pleasant memories of a visiting the corner bakery as a child. As the smell of baking bread filled our nostrils, we stuffed our faces with cookies, sticky buns and a wide assortment of other sweet concoctions.
Over the past thirty years, the bakery industry has changed dramatically. Corner bakeries serving a full range of baked goods have been squeezed out of the market by big box grocery stores with their own bakery departments. Although small bakeries still exist, the vast majority of them are specialized operations that give customers access to unique lines of baked goods.
Bakery specialties can include cupcakes, vegan, gluten-free and other products. As a small bakery startup entrepreneur, it's imperative to identify your field of specialization and test market your products to ensure that there is genuine demand for them in the marketplace.
What to Expect as a Startup Bakery Entrepreneur
Many new bakery entrepreneurs fantasize about what life will be like as the owner-operator of a bakery shop. Unfortunately, those fantasies rarely live up to the reality of bakery shop ownership. Here are just some of the things you can expect during your first years as bakery entrepreneur:
- Long hours. Cash is always in short supply for startup bakery owners. Most bakery entrepreneurs reduce labor costs through sweat equity, filling the roles of one or even two employees themselves. Twelve-hour days, seven days a week are par for the course -- at least until you can afford to hire employees.
- Negative cash flow. A modest bakery startup costs between $35k and $50k to launch. Monthly break even revenue will be around $10k. How many cupcakes will you need to sell each day just to break even? A lot . . . and that may be tough to do right out of the gate. Negative cash flow is normal during the first year or two. Make sure you have enough capital to cover the shortfalls and develop a strategy to get out of the red ASAP.
- Self-doubt. All startup entrepreneurs experience periods of self-doubt -- and bakery entrepreneurs are no exception. When you begin to question your decision to start a bakery, it's important to rely on your strategic plan. The addition of wholesale component, expanded marketing initiatives, a social media campaign and other tactics can provide the enthusiasm you need to press on.
Characteristics of a Good Bakery Business Plan
Looking for a one-size-fits-all business plan? Good luck. . . because it doesn't exist. However, the most effective business plans do address specific sound business plan elements:
- Mission Statement – Your description of your bakery's reason for existing.
- Goals & Objectives – A list of mile markers on your bakery's road to success.
- Financial, Marketing & Action Plans – Specific plans that describe your business environment, demographic targets and quantitative estimates.
Evaluate the Competition
Well in advance of opening a bakery in your town, it's worthwhile to find out how you will fit in the competitive landscape. We've provided the link below to help you get a list of local competitors in your area. Just enter your city, state and zip code to get a list of bakeries in your community.
How are you going to successfully complete with existing firms? It's important that you never underestimate the competition.
Find Good Remote Business Advice
As part of your due diligence on opening a bakery, it's essential that you learn from folks who are already in business. If you think owners of nearby bakeries will give you advice, think again. It'd be crazy for them to teach you the business.
However, an entrepreneur who owns a bakery outside of your community may be more than happy to give you a few tips, given that you don't compete with them in their area. Many business owners are happy to give advice to new entrepreneurs. Our estimate is that you may have to contact many business owners to find one who is willing to share his wisdom with you.
Where does one find a bakery entrepreneur in another city who you can speak with?
Here's one way to do it. Just use our link below, find somebody and call them.
Three Arguments for Buying a Bakery
It's almost always preferable to buy a bakery than to pursue a bakery startup.
Due diligence and other business buying requirements are essential. But there are several reasons why buying a bakery may still be your best bet.
- Initial Revenue. Startups struggle to bring in revenue right out of the gate while existing businesses usually have a steady stream of income.
- Established Operations & Processes. When you're shopping for a bakery, be sure to look for ones that have all of the necessary processes and systems to ensure seamless operations from your first day of ownership.
- Capital Acquisition. Lenders, investors and other funding sources almost always prefer business purchases to startups.
Consider Buying a Franchise
Too many new business owners fail simply because they didn't take the time to explore the possibility of a franchise. Franchises are popular because they are based on a business model that works. The nation's leading franchisors know their way around the industry and are now passing their learnings on to the next generation of business leaders. Today's franchises offer a range of opportunities for ambitious startups.
The link below will take you to Gaebler's bakery franchise directory where you can explore franchise opportunities and find the one that's right for your startup.
These additional resources regarding starting a business may be of interest to you.
If you already are in business and came here to learn about growing an existing bakery, these resources will come in handy:
If you sell to bakeries, you're in the wrong place. These resources are more appropriate for you:
If you are interested in starting a different kind of business, please browse our directory of guides below.