The Fresh Loaf

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Which way to take the business?

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RebelBakingCompany's picture
RebelBakingCompany

Which way to take the business?

I'm starting a home-based pretzel business and I could really use a pros advice on which direction is the strongest endeavour....


Right now, I see two possible options while we are getting started (any other suggestions welcome!):


1. Sell wholesale to restaurants, bars, etc.


          Pros: I know what my weekly quantities will be, it allows me to continue working my current job until we can get this into full-time mode


          Cons: I worry that people wont connect our bakery with the product...we eventually want to create a store front...will they still keep going to the restaurant to get the pretzel instead of us? Also, once I hand off the product, I cant be sure they are serving it up to standard. If they aren't, I don't want our first customer impression to be a bad one.


 


2. Sell ourself (in between jobs) at farmers markets and the beach.


          Pros: our business name, contact information and advertising is right there with the product (and the owner's too). We are assured of quality.


          Cons: time, we are both working full-time as we start this up. I hear farmers markets are tough, tough, tough. We could create a stand on the beach...but we will need to shell out at least $1000 on a pretzel warmer.


 


I realize every business is different...but perhaps those of you who have started yours from the ground up can share your experiences. We are not looking to make oodles of money here...we are looking to get our product out there in a way in which we can harness our demand, keep up quality...and not kill ourselves.


 


Thanks everyone!

MikeL's picture
MikeL

Hiya,


I teach Strategy and General Management in a business school in Silicon Valley.  As a baker I am a novice.  


You suggest two very different business models.  In time, each implies diffferent assets (equipment, inventories, types of people), skills (retail is way different than dealing with institutional clients), and arrangements (vendors, institutional buyers, advertising).  Furthermore, each business model also implies a different market that exhibit different demands and requirements:  for example, how important are scale efficiencies (and where), supply-chain management, labor (the retail personnel turnover average is about 140% in the U.S.), unique or uniform product characteristics (only one item in the product line), etc.?


You say your objectives are not making a financial killing but being able to keep high quality and a gentle lifestyle.   Cool.  IMHO, that makes you are a bit idealistic--but that would suit a small enterprise that is meant to stay small and proprietary.  Larger enterprises ultimately demand far keener competitive spirits. (Small means you can do everything yourself.  Big means you need other people, and that means organization and influencing others.)  


What seems to be not very big choices in these matters can put you on a path that may be impossible to reverse. Investments create escalated commitments.


I suggest starting small and experimenting.  Also, do some market research.  Exactly, what are the customer profiles (who are they?), what do they want (not "pretzels," per se), and how would they most want to make purchases?  


You could, for example, make up 50 pretzels and take them to an office building, school, or to a social gathering and find out answers to those questions.  Or, go to different farmers' markets, give away pretzels if people are willing to take a brief survey in exchange (paper survey or interviewed).  You must be systematic about designing and conducting surveys if you use them.  


Good Luck & Be well,


Mike

GeraldC's picture
GeraldC

I don't think anyone guess will be useful. Unless there is another product in your market that acts like a pretzel but isn't a pretzel, you'll have to let the market performance drive the business. By like but not a pretzel, I mean it not like a cookie. Cookies are workable point of sale extras for sandwich shops and maybe even restaurants. Pretzels aren't. Customers aren't looking for more bread. Can you make a dessert pretzel? On the other hand, hawking fresh bakery products on the street has been a tough go since Simple Simon's pieman went to the fair. You can sell them, but can you sell enough of them to make it worth giving up large chunks of your life to retail? 


I will say, though, that if you're trying to start a business, balking at the thought of $1,000 for a piece of equipment means you're badly undercapitaized, which is the deathworm in most very small businesses. But you can get a used pretzel warmer in good shape off eBay for a LOT less than $1,000. You know, if I wanted to do such a thing, I'd try to negotiate a small space at a good local farmers market. I mean, what do you need. A place to set up the warmer and a place to stand and power. I'd build an attractive cart for it and pitch it to the management as an extra bit of revenue that doesn't displace a full size booth. Get a big, floppy chef's hat and a bright apron and put on an act. See how many you can sell. The risk is low. If I really wanted to do the beach, I'd try to cut a deal with a noncompeting stand already there to let you set up next to them and use their power. But I'd bet the farmers market is the better bet. People come there specifically to buy things, unlike the beach. 


But start looking into the local market rules. Many want, at minimum, (1) liability insurance specifically indemnifying the market, (2) any required state commercial kitchen permits for food preparation or egg vending, and (3) commitment to be there every scheduled day. (A beach peddling operation likely needs the same sort of thing to satisfy the City or State as a street vendor.) 


You want the insurance, anyway, no matter what. All it takes is a bit of metal beater to break off or a chunk of plastic in the dough, and you're off to court. My friend who sells tons of cookie dough has food service metal detectors, too. That business, by the way, began by utilizing an inspected and licensed commercial rental kitchen space for production until the sheer volume demanded its own plant. 


Your state has state regulations for permiting and inspecting food prep and pushcarts and stands. I know in my state, the home kitchen can't be permitted. Obviously, a lot of people get away without being permitted. But the insurer might want to see permits, and I'd never, never get into this without plenty of insurance. 


 

Red5's picture
Red5

I see some red flags here


 


You say you are both working full time and one of your Cons is that you'll have to spend time working farmers markets on the weekend. I don't see you considering the time it takes to actually bake, pack, and travel to and from the markets you may want to work at (that's not even counting clean-up and shopping time) It seems like you're hesitant to invest $1000 dollars into the project (which honestly is not alot of money to get started) have you factored in fees to the markets? how much it will cost in gasoline to get to these markets?


 


If a market opens at 8am on a Saturday, and since there are only two of you, expect to have been awake and working from the time you got off work on Friday till the farmers market closes on Saturday, chances are you'll get a few hours sleep, but it won't be much. If it's a fresh product then it would have had to have baked a few hours before the place opens so calculate the time it would take to do everything involved. 


 


In your first scenerio, you say you can sell wholesale to resturants and bars, etc. But when are you going to have the time to actually sell to these places? If you already have reservations about the time it takes to work a farmers market, it won't compare to the time it takes to build a client base. You already have a full time job that will take up the time you need to sell your product, you will have very few chances to make sales if you're not starting until you get off work or only on a day off you may have during the week. 


 


I'm not saying you can't do it or don't have the desire to, but I don't think you are really considering the amount of time it would take to do so and make any money off it while working another full time job. 

mimifix's picture
mimifix

Starting a home-based food business can be worthwhile but it comes with much hard work and a realistic business plan. Thirty plus years ago I began my career this way and I guarantee it's a lot of work. In 2009 I wrote Start & Run a Home Based Food Business and ever since, I've received many many emails from readers asking about their specific ideas and plans.


For people who are unemployed and have time, it's been more successful than for those who have full time jobs and plan on keeping them while their business begins. It's certainly possible to keep one's job (and for many folks I recommend this) but it's important to be realistic about starting and growing a business when time is limited. I'm glad several members have jumped into this discussion. I just hope that people thinking about home baking for profit, will look at everything involved.


Mimi   BakingFix

MikeL's picture
MikeL

Hi, Mimi:


Just a minor point on your post.


You write: "For people who are unemployed and have time, it's [starting and running a home based food business has] been more successful than for those who have full time jobs and plan on keeping them while their business begins."  


With all due respect, I have real doubts about that claim as written.  Perhaps you need to qualify it more.  (Gosh, if it were true, then unemployment could solve itself.)  


Be well,


Mike  

mimifix's picture
mimifix

Thanks Mike, let me clarify my point:


My post was in reference to to the preceding post by Red5, that time is a key issue in running a business.


Running a food business is not for everyone. One of the key ingredients is having time to devote to the business. So my statement is only talking about the issue of time and comparing unemployed people (who have time), to people who are working eight plus hours and do not have that time. Therefore, when looking only at the time issue, an unemployed person has a greater chance of succeeding, since they can devote more time to the new venture. That statement is not referring to other business issues such as capital, food service experience, business management skills, etc. Obviously, owning a business is not for everyone, so unfortunately, unemployment cannot solve itself.


Mimi

MikeL's picture
MikeL

Here are a couple of observations from teaching and consulting on the subject.   


Entrepreneurs seem to be highly energetic people who make more (not necessarily better) decisions than regular business people.  They have a far greater passion and intensity of involvement than regular business people do.  These two particular characteristics may make-up for the lack of resources.


Here are some distinctions to consider.


Regular business people tend to be "resource allocators" (i.e., "given a set of resources, what can I do?")  This approach is very rational and objectively oriented. This is what we teach in most courses in business schools.


Entrepreneurs tend to be more "resourceful" than resource allocators (i.e., "given my passion and vision, what resources do I need, and how can I go about getting them?").  This approach is far more subjective, inventive, intuitive, and emotional. 


True entrepreneurs are different animals than regular business people:  they have different motivations and goals, and they respond to challenges in different ways.


The appeal to the standard of an 8-hour day is a sign of a regular-business mindset, to my way of thinking.  It takes a resource-allocator's approach.  A entrepreneur, on the other hand, will tend to ignore the lack of resources. They tend to work-around resource limitations and barriers--most notably with higher energy levels and more decision making.  They may not work smarter; they work harder, with more intensity, and notably with more creativity.   


I can understand how logical and rational it may be to predict success based upon the size of resource pools a business person may have available to him or her. Unfortunately, those can be irrelevant when applied to true entrepreneurs.    


Be well,


Mike