Neighborhood kids come running when the chocolatey scents of freshly baked cookies emanate from your kitchen. For gatherings with family and friends, you are the one who is asked to bring freshly baked breads or delectable desserts. Now it is time to transition from baking for family and friends to sharing your gifts with many more soon-to-be-happy consumers.
The top six biggest mistakes to avoid when opening a bakery include – not transitioning from a hobby to a business, inaccurate pricing, insufficient funding, inadequate sources, lack of marketing, and not understanding your customers’ needs.
Opening your own bakery offers exciting challenges. Thinking through how to address each challenge as part of your planning process will help you be more successful. Continue reading to learn more about six mistakes to avoid. Happy Baking!
- Not Transitioning from a Hobby to a Business
You enjoy baking and sharing your treats with others. To successfully open your bakery business, you need to adjust your approach. Broaden your vision from baking as a hobby to making your aunt’s favorite peach cobbler to it is now your business. Your repertoire of offerings must grow, the equipment you use will evolve, and the scale of how much you bake must be adjusted.
The treats you have been baking for your family and friends have probably been items that they have always enjoyed. Hopefully, you have been piloting some new additions to your offerings. When you open your bakery, you need to bake items that will sell, not just those you enjoy making or serving. A full range of baked goods should be in your display cases and bakery racks. What you continue to bake and to sell will depend on what customers are paying for.
As a bakery, you now provide a service that people need and want. Customers purchase goods from bakeries because they are unable to create their incredible breads and pastries that you can. When you first open, you will not be certain which items will be your best sellers. Your customers will provide that information for you.
- Inaccurate Pricing
Now that you are a business owner, pricing your items to ensure you will cover your costs and earn a profit is essential. The most accurate method of pricing is to account for every single ingredient that is used in every item you make. Adding to the cost of ingredients, you need to include your overhead, packing, labor, utilities, loans, insurances, website, marketing – truly all elements of your business.
Without this data, you cannot assess your profitability for each item. Also, with per item cost information, you can make data-based decisions on altering any of your recipes, changing your display cases, and/or modifying your packaging. Sometimes, you will need to make difficult decisions on eliminating an item from your bakery. However, you can use this method of pricing to add exciting new items or offer some baked goods only on certain days of the week. As prices change, you can use this information to modify your ingredients or price for the item.
You should know what your competitors are charging and selling but basing your pricing on your competition is not effective. They may have different overhead costs, or they are incorporating different ingredients. Nor should you use the method of multiplying your total food costs by three. There are mistakes that will make it a challenge for you to be successful.
- Insufficient Funding
Starting your own bakery will take money. The amount of money will depend on the size and scale of the operation. If you are going to start small and work from home that will necessitate a different investment than a storefront. Even if you work from home, at some point you will be seeking to expand, which will require money.
In your business plan, think through where you envision your bakery for at least the next five years. To grow your business, you will need capital. This money will be your means to purchase a larger oven or machines to mix your dough. At some point, you will need to explore labor savings devices and ways to produce more products in less time. With more sales, these investments will make sense for you and your business to explore.
Some of this money to reinvest in your business can be from your profits. Bank loans and grants for small businesses should also be explored as you need money to build your bakery. Explore some of these paths before you open, so that you have ideas and understand the requirements to obtain funding.
Do not mix your personal finances with your business. The two should be kept separate from each other. The separation includes your bank accounts. Using your inventory for business and personal purposes should also be avoided. Bakery inventory is equivalent to money; it needs to be accounted for.
How To Start Your Own Bakery Business
- Inadequate Sourcing
Another misstep often made when opening a bakery is not planning for where, when, and how you will make purchases. Before you start your business, explore options for purchasing ingredients, packing materials, baking supplies, baking equipment, and marketing materials. Research which wholesalers and distributors can offer you the best pricing, quality, and service. Shopping can be time consuming, which takes away from your bakery. Select suppliers with whom online ordering and streamlined paperwork is available. Check for references to make sure that they are dependable.
While shopping at the retail level will most often be more costly than wholesale, you do need to locate a supplier for fresh ingredients. You may want to consider exploring locally grown ingredients as part of your sourcing options. This will provide freshness and a good community connection. The farmer might have a farm stand at which you can sell your baked goods!
- Lack of Marketing
Linking back to your local sourcing, collaborating with your suppliers can be a great means to start local marketing. You can support each other; in your shop you can provide information about the nearby farm, and they can reciprocate. Developing relationships in your community is a great way to expand the connections that you have.
For your bakery to be successful, you need a marketing plan. While you do want family and friends spreading the good news about your bakery, for continued business growth, you need to expand the number of people you reach.
Knowing your competition and what makes you different is a great way to begin your marketing campaign. Creating a website and using social media to promote your bakery and what it offers is an important part of your overall plan. If this is not your forte, hiring someone who can help you will usually be worth your investment. Then you can focus your time on baking.
- Not Understanding your Customers’ Needs
Avoid the mistake of baking what you think people will buy. As you developed your business and marketing plan, you explored what the competition is offering. You determined products that you could bake that will make you stand out from others. However, make sure you know who your target customers are.
Get input from your customers. Understand them and what they want to purchase. In addition to the baked goods they want, your customers might also be looking for coffees and teas to enjoy. Or maybe they would prefer options for sandwiches with the wonderful breads and rolls you bake. Expanding into catering might be another avenue for you to explore. Without asking, you will not know!
Lastly, stay up to date with what is going on in the world of food. Sourcing locally, reducing your carbon footprint, being sustainable, are important to many people. Understanding people’s health concerns and adjusting your offerings to meet those needs is important.
Share with your customers and potential customers what you are doing that keeps you current on what is new in the world of food and related ideas.
How Much Ingredients Should Cost For A Bakery
Frequently Asked Questions
COGS is an acronym for cost of goods sold. This calculation of expenses will assist you in determining how to price your baked goods. Included in the formula are the per item costs of – ingredients, labor, fixed expenses, and variable expenses added together. It does not include your profit.
Your bakery’s business plan is the framework for your bakery. It includes a summary of your business, your expected customer base, plans for marketing, ideas of what you will sell, information about your competitors, and your financial condition with sales forecast.
A mission statement is included in your business plan. It is a succinct summation that helps frame out your business. Your mission statement includes an explanation of why you are opening your bakery. The statement encompasses your bakery’s purpose and its presence in your community.
A vision statement expresses what you believe you will accomplish as part of opening and operating your bakery. Also included as part of your business plan, your bakery’s vision statement should inspire you and your employees with goals and issues you will address.
To learn more on how to start your own bakery business check out my startup documents here
This blog post is provided for informational purposes only. The information contained is not intended to constitute legal advice or to substitute for obtaining legal advice from a qualified attorney.
About the author. Entrepreneur and Bakery Business Fan.
Hi! I am Shawn and I am a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online bakery business resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a bakery business owner, I see myself. I know how hard the struggle is to retain customers, find good employees and keep the business growing all while trying to stay competitive.
That’s why I created Bakery Business Boss: I want to help bakery business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.