The Fresh Loaf

News & Information for Amateur Bakers and Artisan Bread Enthusiasts

A question for bakery owners

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Faith in Virginia's picture
Faith in Virginia

A question for bakery owners

I have a question for bakery owners.  Do you make money? 

 

That is a straight forward question that is actually the bottom line of anything here that follows.  I would like to quit my day job and start a bakery but the thought of it scares me silly.  I am the sole bread winner (pun intended) of my household so I don't have anyone paying the bills as I start a bakery then figure out if I can make  a living after going through the initial start up.

I am very good with business I have started and owned a few over the years so I have  a strong knowledge of business practices and finances and such.  But a bakery is a new concept to me.  I keep counting loaves of bread  rolls and pastries then calculating in expenses and overhead and it looks like I would need to punch out huge amounts of product just to break even.  I have no real competition locally but still wonder if I could sell that much just to pay the bills.

I know there are major factors that could push the success meter in either direction.  Some factors that are controllable and some that are not.  

So is any one is interested in giving me a bit of mentoring before I get in to far so that I can save myself if the numbers aren't realistic.

 

 

 

 

LindyD's picture
LindyD

Hi Faith.  If you're not already a member, do consider joining the BBGA.  http://www.bbga.org/

Your question has been the subject of recent discussion on their forum and the pros there have given darn good advice.

Lindy

Faith in Virginia's picture
Faith in Virginia

Thanks Lindy,  I did not see a forum on that  site .  Is that something you see once you log in as a member?

Faith in Virginia's picture
Faith in Virginia

Just joined the BBGA.  Thanks for the advice.

gerhard's picture
gerhard

That is kind of a wide open question that doesn't have an answer that will help you.  If I make money there is no guarantee that you will.  One thing you probably have a better chance of making money jumping in with both feet than if you are doing it part time.

Gerhard

Faith in Virginia's picture
Faith in Virginia

I know it's very wide open question  as I don't expect people to post their General Ledgers.  Just would like to know how deep the water is before I take that leap and you need to know if there are any rocks just below the surface. So if I know small bakeries are doing well is better then knowing it's a constant financial struggle.  

I took a class on WFO's a while back and they had a section on the huge dollars that could be made with a portable pizza oven.  All is well and good in a classroom setting but I'm more interested in the real life people that are working the business.

I don't look at this as a won't it be nice to bake all the time adventure.  If I'm going to do this it's business first  then  hopefully enjoy the baking.

Faith in Virginia's picture
Faith in Virginia

Could you give me the topic title so that I could search for that discussion.  I can't find it. Thanks Faith

hanseata's picture
hanseata

I bake from my home kitchen with a home processor's license, and didn't have to install expensive equipment. You should check your local regulations what installations are required for a professional bakery. Special vents and filters and what not else can add up to costs you can't recover with a small operation.

Also, there is no big profit margin in selling breads as is (I don't have to live of my little bakery, it's my hobby). You make more money with selling sandwiches or snacks made with your bread than with the loaves themselves.

Karin

 

Mebake's picture
Mebake

Hi, faith

Pastries can increase your profit margin. Sandwiches too. Try also to sell more healthy artisan sourdough breads, as they are the most sought after healthy breads and are usually priced higher. 

Khalid

 

Faith in Virginia's picture
Faith in Virginia

Karin and Khalid,  Thanks for he great advice,  I want to have the bakery wood fired oven based. and I have most equipment I would need for an inexpensive start up.  I do plan to start small and grow as there is a need and go from there.  I figured bread alone would limit any real income so I have ideas that would bring people in and grab some bread while they are there.

I just joined the BBGA and have been going over their information available.  I found a handout for a class on starting a bakery and that handout was a sheet to calculate operating costs.  It looked like they figured a 3%profit margin that could be spot on but is lower than I would like.. . 

 

 

gerhard's picture
gerhard

You should aim for at least 25% profit, 3% is for grocery stores selling cans of soup remember their average bill will well over a hundred dollars in a bakery it's probably around $10.  

Gerhard

P.S.  When figuring out costs you should also put a dollar value on your time, nobody works for free you shouldn't either

LindyD's picture
LindyD

Gosh, wish I could be more specific but I read only via email and don't recall the exact topic name.  As you've seen, the BBGA forum is more of a listserv.

I do remember that Noah Elbers of Orchard Hill Breadworks (WFO) made several comments, so perhaps if you track down his postings that thread will appear.  Of course, you can always pose the question there or PM Noah.  

Sorry I couldn't be more helpful.

ananda's picture
ananda

Hi Faith,

Start by looking at gross profit rather than net.   If you can achieve 75% GP [ie. Sales - Materials], you are onto something.

Best wishes

Andy

breadbabe's picture
breadbabe

I have a home based bakery ( in VA). My model was to grow as finances allowed - I haven't borrowed anything, and have the simplest of spaces and equipment. I opened in Dec 2010 and just last year started to make enough $$ to give me hope. Food business seems to have that kind of timetable. Your passion and drive need to be ready for a marathon, not a sprint. Others have commented on percentages, but stamina for everything belongs to you.

Not to be negative, because I love what I do (and I love my food!). As I've watched other start-ups in the food business recently, I've seen SO many opening -and closing just as quickly. They close the doors when they realize its not like living in a Pintrest photo.

Faith in Virginia's picture
Faith in Virginia

Breadbabe, thanks for your response.  I am looking to start the same way .with no debt on the business and grow the business as needed.

I appreciate your candid answer and don't see it as negative in any way.  With any business start up is the most risky part. I started my working career (many years ago) in the restaurant business so I have many years working the pace of lunch and dinner rushes  and prep for those times. So trust me I have no Printrest or Pollyanna dreams of a bakery experience.  I fully understand it's hard work and long hours and little moments of rewards for that effort.

Perhaps this is why I have reservations about jumping into this at this time in my life.  I cant afford to make a bad career move at this point but on the other side of that I don't want to miss and opportunity to get something going. So I'm still on the fence.

Thinking if I could get my personal finances debt free I would feel much better about taking this risk.  

breadbabe's picture
breadbabe

"I don't want to miss and opportunity to get something going." Exactly why I made the leap! A few years ago I had to shutter the doors of a lucrative business that went south fast with the recession. This baking gift was sitting in my back pocket and I decided that, while people may not spend their money on items for their home (old business), they were still eating! And trying to make better choices about what they ate (my baking wheelhouse). And if there was anytime to throw myself at a business, this was it. Nearly killed me about 2 years in (notice a big gap in my commenting here?), but there is now traction and a future.

So I understand your anxiety, as I went thru the same set of questions. If its any encouragement, I looked at your photos - and your breads are gorgeous and make me want to jump thru the screen to steal a bite. Your battle is certainly not with the product. 8-)

dabrownman's picture
dabrownman

debt free personally is very wise indeed.  It is also wise to have 3 years of living expenses in the bank too, not to be used for anything else, if you do not have any other income from outside the business to pay them.  Most small businesses fail because they are way under capitalized and do not have enough money to pay all the business and personal bills long enough for the business to become profitable enough to pay them all on its own.

Being debt free helps greatly if you don't have another job or better yet, have a spouse working to pay the personal bills.  This way you have 3 years to make a go of it without having to move into your car....like some end up doing.  2 years is really cutting it short and you aren't giving yourself enough time in mu book.  The silver lining and really good thing to know is that it is easier to sell a profitable business and retire than it is to start one.

Good luck Faith! .

ElPanadero's picture
ElPanadero

Hi Faith

I posted a similar thread regarding micro / home bakeries.  I contacted a couple of home bakeries and both basically said it was more a hobby than a business.  One of them doesn't make any profit and does it for fun and as a community project, the other only makes a small amount of money which ends up being spent on more equipment and is again, more a hobby than a business.

A full production bakery is a different prospect altogether and it's all about volume as far as I can determine.  I spent time working in a local artisan bakery and in a not so local bakery.  The latter was churning out about 1000 loaves and 1000 rolls every morning plus a wide variety of other products like muffins, manchets and so on.  They begin at 3.00am every morning and work through to about 11am.  1 guy mixes doughs using 3 mixers, about 3-4 guys work the table scaling, shaping and tinning / basketing the loaves whilst 2 more guys work the deck oven and wood fired oven.  It's a non-stop tiring job and it is very repetitive.  There is no space there for wasting any time, everything has a tight schedule and a lot can go wrong if you mess up that schedule.

Now, I love baking breads at home, I love baking sweeter products too.  It feels "Earthy" and wholesome and somehow very "right" and experimenting with different recipes from books and the internet is something I really enjoy.  This however is baking at home.  It's a hobby, a pastime, a passion.  It is a far cry from a production bakery.

Your opening post had the statement

"But a bakery is a new concept to me."

I found that a little worrying.

The one thing I would encourage you to do therefore before you do anything major, is to contact one or more artisan bakeries whether local or not, doesn't matter, and volunteer to work with them for say a week.  They get your free labour and you get lots of experience of a production environment.   Most bakeries are very happy to help people in this way.

What you will get from this is a real feel for the pace of the work, and the timings of the work and of course a feel for just how hard and tiring and repetitive it is.   More than anything else, working in bakeries in this way convinced me that I would never want to own and run one myself.  It was just too repetitive, the hours were long and unsociable and the profit margins seemed very small in comparison to all that work.   So for myself I found that everything I loved about baking bread, mulling over recipes, experimenting, sitting down for a cuppa whilst I watch the bread rise in the oven, was all somehow lost once this passion turns into a production environment.  I just couldn't do this day in-day out every week baking the same breads over and over.  I COULD however do it maybe a couple of days per week but definitely not full-time.  Hence I started to look into micro-bakeries.

Now you might feel completely different to me but you won't know for sure unless you go try it.   So my suggesion is to get out there, offer to work in an established bakery, and then see how you feel about it.

GL whatever you choose to do

EP