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Start a bakery business, any advise?!

egyamado's picture
egyamado

Start a bakery business, any advise?!

Hello family,

Yes family. I have been a regular visitor and reader to The Fresh Loaf enjoying people's shares about make bread and bake goods. I have learned a lot and enjoyed being part of a huge wonderful Artisan Bread Enthusiasts.

I have been baking for the last 6 years for my family, friends and neighbours. Now I need/feel it is time to make a big more and open my Sour Dough Bakery in Toronto Canada.

While I haven't worked in a commercial bakery before or have experience bake big volume/quantity, I feel I'm ready to bake a big volume.

I would appreciate your advise/guide to run such a bakery where I can serve Sourdough Bread, baked goods and sandwiches.

Thanks in advance.

chefcdp's picture
chefcdp

I sincerely suggest that you try a job in a commercial bakery to get some experience in that environment. The work is very hard and can take a toll on a person.  The joy of creating bake goods may not be adequate compensation for the effort.

Good luck.

Charles

Arjon's picture
Arjon

then do it again, while focusing most of your attention the entire time on what could go badly. The #1 cause of small startup businesses not succeeding is unrealistic planning based on assumptions and projections that under-rate or even ignore not just possible but also probable obstacles, which means that when they do occur, the operators are poorly prepared to address them. 

Even if you make great bread, you're still likely to struggle or worse if you don't do a decent job at the many other things that running a successful business entails. 

egyamado's picture
egyamado

Thanks @chefcdp and @Arjon for you answers and advice. 

When I got the idea to do such a business. I know it would require lots of work, effort and money.
I'm willing to take calculated risks I'm aware of. So I work on ideas and solutions.

Here are challenges i think I would face: 

- Lost of work. The work and effort part I'm ready for it. Actually I need it. I have worked in the IT industry for 15 years, and I know how stressful and painful it is. I worked days and nights to meet dead lines, managers and client demand. So I'm ready to do the same for something I love and want to do.

- Finance. It is the hard and most important part, which I don't have. Here are some initial costs:

  • Monthly rent $4.000 for 1540 SF
  • Interior design, planning, getting the place ready for work between $20.000 - $50.000 (one time cost)
  • Equipments (used workable ones) between $10.000 - $ 15.000 (one time cost)
  • Daily products cost, I have no idea. It could be be around $200 - $400
  • Monthly bills for power and running water. It depends on the usage.
  • Salary, we both don't expect to make margin for the first few months. We are a new company.

We don't have this money. It would come as a loan or from an investor. 

What I like is the location. It is a business area with 4 business towers with hundreds of employees. 
I would have aroma coffee shop as competitor. And I need my products (bread, soups and sandwiches )to stand out from others. It is tough and challenging but it is what excite me.

I appreciate everyone's input, idea and advice. Please keep them coming, and i'm all ears for any kind of comments.

Thanks in advance.

 



Arjon's picture
Arjon

It may not seem like it because I tend to focus on the down sides of small start-ups, but I'm actually a champion of them. Over the years, I made my living from two that I started two plus a third I didn't start but in which I was an early partner. And I've also advised over 100 start-ups.

One of the things I know from all this is that very few people properly assess and prepare for the obstacles they will / are likely to face. As a basic example, I've seen multiple start-ups fail even though IMO they had decent potential to succeed because of under-estimating how long it would take to become profitable. As a result, even though they were growing, they ran out of money. And as is quite often the case with small start-ups, they had already tapped all of the funding sources available to them. So they had to shut down. 

In your case, what if it takes a year rather than a few months to start turning a profit? Will you have back-up funding in place? It's obviously a lot easier to hope you won't need it, but that doesn't mean it's a good idea not to. 

Another area that tends to be under-examined is market research. It's easy to assume, for example, that locating where there are lots of people close by and limited direct competition will mean solid growth pretty quickly. It even happens fairly often. But nowhere near always, and when it doesn't, it's nearly always the case that some if not almost all of the reasons were reasonably foreseeable. 

I could go on, but my point isn't to dampen your enthusiasm. My hope is to nudge you toward being as well-informed as possible about the pros and cons related to your idea so that if you decide to go ahead, you'll be better prepared than most, especially for the latter which can kill businesses before thy have the chance to succeed, and thus have a better than usual chance of success. 

egyamado's picture
egyamado

Hi @Arjon and others.

Yes I'm grateful for your advice, opinions and thoughts. Honest advice it what makes me come again to The Fresh Loaf community. 

@Arjon, your words are spot on and I agree with you. I looked at my numbers again and again and found out it would be so hard to manage and make profit or even for first 5 years. While I'm aware of many obstacles and ready to go through them. I know i'm not ready to work for 5 years without making even. It seems I underestimated the costs. Excitement and enthusiasm "almost" blind me from seeing all facts and be honest with myself. 

Your third paragraph is the reason for not committing to such business and stay away from it.

Forth paragraph is interesting because I did little market research and lot of assumption based on the landlord presentation and information and other companies profile. It is hard to know or predict what future would bring my business. I was driven with eagerness, assumptions and loads of hope. And I know these three elements don't pay bills and convert to $$$.

Your nudge worked well sir :) After adrenaline wares off, now I can see clearly, doing such a business would be a very bad move. It would be a suicide. Therefor, I'm not doing it.
I would rather not doing it at all or get involve in a working and successful food business, then convert it to my dream and vision. Which is what I like to share with you.

Yesterday, a friend of mine has a restaurant in small and busy plaza. He business model is take out and catering. He showed me some of his bills and expenses. He makes 4X his cost. He run a very good quality and expensive African cuisine. He has a solid customer base, I'm one of them. I would give you an example of cost and profit of one item, Samosa. For one Samosa ingredient cost $0.35, he sell it for $1.75 + tax. Compare that to other store and take-away restaurants when they sell it for $0.75 or even $0.50.

I see the place would be a great start and first step towards my vision as Sourdough Bread and Sandwiches bar/restaurant. Continue with his cuisine beside few new items I cook/bake. I want keep his customer comes. He wants to walk out with not much money and leave everything behind for me to continue the business. 

Now I need to look at many numbers such as, lease cost, bills, ingredients cost, taxes, monthly, quarterly and yearly incomes, ... etc. I have few days to decide if I want to commit or not. During that time I will visit the place and work there to see closely how the place run.

It is exciting time again, and I would appreciate your constructive advice, inputs and nudges ;)

Thank you in advance!

futureproof's picture
futureproof

Hello kindred soul

After 14 years in IT I too jacked it all in and opened a bakery in Nova Scotia. I did however do it from my kitchen and for the farmers markets at firs, until my products were customer proven. You can't hide at a farmers market because you sell direct and your customers will tel you EXACTLY what they like or don't, or they just won't come back. I eventually opened a bricks and mortar bakery and cafe which won a new business award before my wife decided she couldn't take another Canadian winter. I'm now in sunny Somerset running my own ... bakery and deli :)

 So advice. Don't spend a fortune on equipment you don't need. In Canada I spent $8000 on an oven, some stainless tables and a mixer. I had to work that loan off every month, whether there was a blizzard or not. A few weeks later I read about the stretch and fold method, which I use now thus saving myself the expense of a mixer. 

Re your location - you need 30% new passing trade EVERY DAY just to keep your sales even, otherwise your customers, as loyal and dedicated they are, will get fatigue and drop away. If you go the bricks and mortar route choose your location well and don't be railroaded into any five year contracts without an escape clause 18 months through.

Plan to use the produce you don't sell. There will be days that you have a trunkload of bread and it kills you to throw anything in the bin, literally - you will die a little inside each time. Make sandwiches, puddings, breadcrumbs, biscuits and crackers... every loaf of sourdough I don't sell (or eat) gets sliced on my meat slicer, put on a sheetpan and turned into crackers. Bread and Butter Pudding can be made, packaged and frozen. People buy breadcrumbs ffs. I don't know what they do with them but they buy them.

Find a bakery supplier and get them to deliver to you. If they won't deliver to you because you're a residential address piggy back on someone elses neighbour. Not only will you get your stuff cheaper but you'll get freebies, recipes, ideas etc from the bakery supply co. Also if you need a line of credit in the future you can use them as an example of a creditor.

Smile, even though you've been in since 4am, have had 3 hours sleep and are having to say the same thing about the Wheat Belly book (or whatever bullshit fad it is) that you've said twenty times already that day. The customer buys you not your product. 

Don't compete on price - you will always be beaten. Compete on quality and it's 100% down to you whether you survive and thrive.

On that note relish a haggle with your customers, have a bit of give and take and they'll walk away smiling. If someones willing to engage you for a 20% discount then they're engaging with you and not your rival, they'll remember you and come back. 

Keep records of everything. Every penny you spend and every penny you take. The money in your pocket at the end of the day isn't yours - it's the businesses and if you treat it like that it'll be easier when it comes to a) tax time b) asking for a loan c) selling your company. Which brings me onto:

Always have an exit strategy. Don't get so far in debt that you lose your house when you have a bad season and don't be too precious about it not to a) sell it or b) close the doors and walk away. Those are the two things that it will come down to in the end so as long as you're prepared for that then you'll be okay.

It's stressful and after 8 years I'm surprised to still be alive but I've tried working for others since and just can't do it. Once you're in control of your destiny then that's your destination.

PM me if you need any advice or have any questions.

Oh and one more thing: Listen to everyones advice, nod, thank them then make your own mind up. Job done.

Arjon's picture
Arjon

I'll restrain myself and only comment on a couple:

Don't compete on price - you will always be beaten. Compete on quality and it's 100% down to you whether you survive and thrive.

This is critical. As a micro-business, it's effectively impossible to be the low-cost or even a low-cost producer. So if you compete on price, you'll lose. Period. It's just a matter of time.

The best alternative is to compete on value, which means finding customers (including by educating them) who are willing to pay more when they recognize that they are getting a better product. This means, in part, that everyone isn't going to be a suitable target for you. Like people who buy on price alone. Ignore them. You want the kind of customer who values good bread and who will pay a premium price for it, not the kind who thinks all sourdough (or whatever) is the same and who therefore buys whatever is cheapest. 

Listen to everyones advice, nod, thank them then make your own mind up. 

Every micro-business is different in various ways, so any time you unthinkingly assume yours is like someone else`s (or one in a case study), you`re taking the risk that the assumption is incorrect. Many time, the risk is tiny, but if you assume incorrectly on something that matters (which isn`t always completely obvious), the consequences can be significant, even dire. 

The key here is ALWAYS asking yourself what could go badly, how likely that is, and how much it would hurt. This doesn`t mean you should try to avoid all risks. That`s impossible anyway. What it means is that you should anticipate risks as much as possible so you`re as well prepared as you can be to deal with the ones that have to be addressed. 

Best of luck btw. Many micro-business, even the well-planned ones, need some of that too because in practice, it`s nearly impossible to anticipate everything unless your business has a very narrow, specialized scope..