The Fresh Loaf

A Community of Amateur Bakers and Artisan Bread Enthusiasts.

Reality Check for Bakery Business

jay_aryan's picture
jay_aryan

Reality Check for Bakery Business

Hello Everyone,

I am Jay and I am a very small enterpreneur at the age of 29. I am in tech industry at the moment but I love baking.

I am at the stage of choosing a path for my upcoming life because current business is not doing well. I thought about learning how to bake by myself as i love baking. There is no culinary school here, so internet will be by teacher. But, while researching I got terrified by some forum posts and websites saying that it's not how it looks like, one has to arrange lot of money, failure rate is very high, you can't just think and do it, partnerships are safer, you can not rely on your team even at later stage, etc etc etc.

I would like to know the facts from all of you who are doing this business already. Below are more details about my plans:

1. I do not want to start bread baking at the moment. Just cakes, cupcakes, pastries, puddings and other basic items including drinks like hot chocolate, coffee, shakes etc. Donuts are coming in demand here, so i will add them too.

2. Here in my area which is located in India. The market is very limited for breads, but people love creative cakes and chocolate items. They don't like if it is all sweet in the menu, they like variaty in the menu. Things to eat, drink and enjoy.

3. I am ready to put myself fully into this business in the beginning years. I love trying and experimenting new things and i will do that with full passion. But, slowly I would like to build a team which can take care of the work and allow me  some time to expand the business + time for my family.

4. I am not rich, so i will depend on loans and personal savings only.

Please give me reality check. Should i proceed with this kind of thinking and planning? or not?

Arjon's picture
Arjon

If you're going to make a living baking, you need to be able to produce products that people will be willing to buy - people you don't know. So, one thing you should do early on is to assess if your baking is at a commercially viable level. Not that this isn't done by asking your friends and family since they are predisposed to tell you what they think you want to hear. 

Another thing is to estimate how much product you need to be able to produce in order for your business to be viable. This will let you project your facility and equipment needs. You'll also want to consider things like distribution and market pricing. At the first pass stage, you can use estimates, but obviously, the better the information, the more likely it is to indicate the degree to which your business is likely to be viable. 

jay_aryan's picture
jay_aryan

I just started learning how to bake and I am doing it by myself as there is no culinary school nearby and I can't leave my family which depends on me. So, I am learning online only.

At this point, I am trying to analyze if baking business can become so big that I can make good living with this business. Because, at the age of 29 I want to decide the path of my life. I am sure I can learn good baking, but I can not be perfect in everything, so I am thinking if I can learn limited products and then start in few years by hiring another baker with me.

I am planning to take around 2 years to learn and do my research about the local demand and the eating trends.

You are right about the product estimates I need to do and for that I am thinking about starting small in a limited space with limited menu. With a small start I will be able to do a test run at limited cost because going big in the beginning will bring bigger risk.

I want to ask one thing. Why there are very limited success stories of bakers? I tried a lot of online research but stories of growing big from a small bakery are rare to find. Is this business is very risky? As some blogs mention, the failure rate is higher, success rate is just 1 out of 15. What are your thoughts on this?

Arjon's picture
Arjon

I'm sure it varies by industry, location, etc., but in general, micro- and small businesses don't have a great success rate. I'm not up to date, but as of 15-20 years ago here in Canada, it used to be that less than 15% of small startups could expect to be in business 5-7 years later. And while I don't remember seeing any numerical data on how many were successful (which is hard to define), it's worth noting that there's more to succeeding than just surviving. 

clazar123's picture
clazar123

There are several TFL veterans that have gone into the business. Mark Sinclair has taken on "interns" but if that is not feasible, he is definitely someone to give you a reality check. Send him a message or reply on his blog.

http://www.thefreshloaf.com/user/mcs

jay_aryan's picture
jay_aryan

Thanks for the info. I will surely try to get in touch with him :)

alefarendsen's picture
alefarendsen

although by now that is close to 7 years ago. I still think back of the days when daily rates of €2.000,= where not unheard of and hourly averages definitely never went below €60,=.

Let me share you my personal experience of doing a once-a-week bread-baking hobby turned into a super-small Whatsapp-based bread selling business. I'm baking 24 breads every Saturday, of which I sell 16. This is of course only slightly related to your ideas, because you're thinking about different products (mine is bread), you're in Indi, I'm in The Netherlands, ... Last but not least, even though I do, I can do this with do without earning money with it, nothing depends on it, I don't have to pay the mortgage with it, et cetera. Nonetheless, here goes:

 

Literally 5 minutes ago I popped in a load of eight 50% rye breads into my proofer. They sell for €4 a piece. Ingredients alone come in at €0.77. Other production costs include the oven, proofing baskets, and other tools; is probably about €0.25 to €0.50 per loaf. Electricity probably comes in at €0.10 - €0.20 per bread. This means there's a margin of about €2.50 to €3 on every loaf of bread. Some of the wheat breads are more expensive, up to €0.35 more per bread.

That €2.50 to €3 margin doesn't sound bad. If I would do this every day, optimise a bit and maybe get myself an extra oven, I could probably churn out 50 breads every day in time to sell. This means I'd earn myself €125,= per day, translating to a monthly gross margin of about €2.500 (20 days per month).

That leaves me (based on a 6-hour a day schedule, something I think I could get away with) at an hourly rate of about €20.

There are a ton of other costs I haven't included. Marketing, space rental, incorporation and general business-related costs are a few.

Like I said, I don't pay the mortgage from my bread income nor will I ever do. I'm in the position to do this because I made a bit of money in tech. I admire people like Mark Sinclair doing it as a full-time business!

There is something about the sound the bread makes when it comes right out the oven, it helps a lot making all of the above totally irrelevant.

Hope this helps!

regards,

Alef

 

jay_aryan's picture
jay_aryan

I enjoyed reading your reply. Even I am learning these days, so it goes with IT work side by side. But, I am thinking about taking it seriously as a business because IT work is shrinking day by day. On some of the blogs and forums, people use to say that it's not that easy, you can't just double the ingredients and increase the production to fulfill the increased demand, it is way more complex, etc etc etc. Which does terrifies me. 

But, after reading your reply, I think if I keep on doing this side by side and learn every day, I will be able to run it as a business in coming years. 

One thing I would like to ask you. You want to increase your IT business and keep baking as a hobby or you will use baking as a retirement option? :)

Regards,

Jay

RoundhayBaker's picture
RoundhayBaker

..on the Coromandel Coast. Definitely in Pondicherry but elsewhere also. I don't know where precisely you are in India but if you could visit them, maybe you could pick up some tips? They might be open to letting you work some shifts either in the bakery proper or in the cafes that are usually attached. I think your biggest obstacle might be red tape (which I'm sure you know much better than myself is a huge problem in India). Taking the route of least resistance to getting started is often a good way to build solid foundations.

May I also suggest some alternatives to the coffee and cake route you're thinking of taking? Can you run a small bakery from your family home? Or scrounge oven time from a restaurant during the hours it is closed? If so, you could build a small loyal clientele which could then be a step towards building something bigger and better. There are quite a few examples of successful bakeries here in the UK who have followed this route (if you can access BBC iPlayer content then look up the Radio 4 Food Programme archive, there are several reports on micro-bakeries and artisan baking you might find useful). That said, until a bakery is large enough to take trade orders, the real profit is in hot drinks, pastries, and cakes. So maybe you are already taking the right approach.

MichaelLily's picture
MichaelLily

It is extremely difficult and will tax you physically.  Bakeries fail for a variety of reasons: look at successful businesses and what they do that is different from small failing businesses to see the difference.  Bigger businesses spend a lot of money in order to make more money; small businesses are afraid of spending.  Big businesses advertise (usually), small businesses "can't afford it."  Whatever, whatever.

If you want to open a retail shop, consider that without employees, you will need to bake everything and run the store, which means you will be working all the time.  I don't recommend it.  Before I went into business, one of my counselors, who had started an egg business just a few years prior, basically told me it was hell and not to do it.  I did it anyway and he was mostly right.  It is a LOT of labor and no rest.  Without a co-owner by my side taking care of most of the administrative tasks, I would have failed just months in.  Remember, you have to make a LOT of baked goods to make real money.

There are easier ways to make money and support a family.

MichaelLily's picture
MichaelLily

By the way, I don't regret doing it.  But it certainly wasn't easy.  I came up with a business axiom a while ago which has proven true in every case: everything is hard.  Even if it seems easy, it's always hard.

Edo Bread's picture
Edo Bread

I watched a video I believe of Richard Bertinet where he says in every single class he teaches there is someone from the "tech" world  that really thinks they want to be a baker. He goes on to talk about the long hours, the hard physical work and that loving your home baking and being a professional baker are worlds apart.  - might be worth trying to find that video and check it out.

rgconner's picture
rgconner

IT workers, myself included, get frustrated with the fact you never really seem to create anything, and the praise and appreciation is rare and often backhanded. Oh yeah, and our jobs keep getting more and more rare. Where I work (Where Ken Forkish worked too) we are on our 4th round of layoffs. 

It is hard to decide who has it worse: those laid off, or those of us left to pick up the pieces and make up the slack.

However, when we hand someone one of our loaves, it is a clear "I made something" and the light on their faces is often more appreciation than we see for months on the job.

I am making bread on the side for a small cafe and the owner's eyes light up when he sees me come in with my bread. One, he knows he just sold as many sandwiches as I brought bread for, and two he knows he gets first dibs on the ends!

 

Edo Bread's picture
Edo Bread

Agree completely. There is something very satisfying in creating something. That seems to increase when it is something like food that others can enjoy. To take the raw materials and create a lovely and delicious loaf of bread is one of the more fulfilling endeavors to my mind. The urge to return to using our bodies, eating something more natural and sharing with that is strong and I am happy there is a growing appreciation and base of customers for those goods.

Wild-Yeast's picture
Wild-Yeast

Just a thought on the dialogue. It seems the discussion starts from the loaf up instead of looking at the process from the customer down. I've seen many businesses fail because the proprietors failed to provide and satisfy the customer's expectations. Remember we first feast with our senses...,

Wild-Yeast 

SCruz's picture
SCruz

Some market research might help. I traveled in India a few years ago. It seemed to me that if one could tap into the special needs of the ex-pat community one might make money. Ex-pats are used to a different economy. In the US we have Community Supported Agriculture (CSA) arrangements, where individuals pay a flat fee to a farm and receive in exchange a box of fresh produce each week. This arrangement occasionally is made with private bakers who bring bread and baked goods weekly. It reduces overhead because you are guaranteed to sell all that you produce, and you don't need a store to sell from. If you had individual families that agreed to pay a flat fee for a weekly delivery, you might get a sense of the viability of the income and lifestyle of your venture, and just devote one day/week to it, while keeping your regular job.

Good luck.
Jerry

 

PiratessBaker's picture
PiratessBaker

Hi I have been toying with the idea of opening up a small bakery/café myself.  But just early morning like 6 to like 6pm.  Mainly to capture bread lovers crowd, sandwich crowd and coffee crowd.  I love to bake and cook and although no expert the folks who have eaten my baked goods like friends and co-workers have enjoyed what I have made.  For me it is not a life choice since i just newly retired and this would be more for a creative outlet.  I thought all along that a baker/partner would be appropriate and that the small business would be very close to my house.  I thought about doing what no one else does so not to duplicate.  You can already get birthday cakes and cupcakes and cookies and donuts so what i was thinking of was more rustic baking either breads or cakes/pies.  Maybe some thick crust rectangular pizza as well as sandwiches with good deli items, and beautiful salads with onions, cucumbers, radish, tomatoes, homemade croutons, cheeses and olives. 

Jay,

   If you are going to set up your bakery in your neighborhood you need to figure out what the need is for your neighborhood if you know for sure they are lacking cute birthday cakes, cakes for tea time, cookies and cupcakes for kids then that is what you should try to perhaps start with small.  Offer coffee and  tea and just start off with a small menu and see what sells.  See if you could set up shop small with perhaps trusted family members who could help.  But it is like the old adage if you build it they will come....but especially if it is special and very good.

I hope this discussion continues since I am interested in this topic as well.  I am in southern California and in my immediate area there is only a few bakeries.  The grocery stores have big selection of many baked items.  There are Panera breads spread around but I know there was a bakery which was started by a phillipino couple who studied French baking and started a small bakery coffee shop and it was always busy and they went out of business due to 'which i was surprised about' corrupt business practices using immigrants they would bring over and they stated they were being abused.  Therefore place closed and that niche is now not being filled.