A question for bakery owners

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

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

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

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

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.

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

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.

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! .

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

This conversation has been very insightful. I’m in a similar position. We actually have been doing the home business bakery for about 5 months now and have gained quite a following. A restaurant chain approached us and wants to use us for private label desserts so this is pushing us into a storefront given we don’t have the capacity to do it out of our home. That said the overhead is a LOT higher. Up until now I’ve used the 25% rule to count for food cost. Multiple food cost by 4 to figure out what I charge. However I know certain products won’t sell if I charge that much. But if I don’t charge that much, it’s not really worth the time to bake it.

So my question is how do you determine what products to take a loss on and what’s fair to charge?

From the conversation it seems like bread is one of those items. While the only bread our bakery currently sells is Filipino pandesal, it’s typically a cheaper bread. Most places charge about $5 a dozen. I’ve been charging $18 a dozen. Consequently I haven’t gotten many orders. However I do get a fair amount more orders for the stuffed pandesal which I charge $24 a dozen for. (I think the price is fair, given similar niche bread bakeries charge $3-4 for specialty single serve bread rolls and it’s very labor intensive). Ours is about 2/3 the size so $2 seems fair. I guess plain rolls people aren’t willing to pay a lot for so that might be something I just have to take a hit on. We do pastries as well. I’m wondering where do bakeries make up the slack? Coffee? Our ultimate goal is actually to find a factory to produce the goods so we can sell them frozen to restaurants and bakeries. But having a storefront has always been a dream. I also understand the importance of corporate accounts. 
My fear is you only get one chance to make a first impression. If you charge too much and lower the prices, it turns people away and looks bad like either you’re failing or were too greedy. If you charge too little then have to raise prices, people may stop coming cutting off your market. We’re going in as a boutique bakery so higher end appealing to upscale clients. (In California it’s not hard to do). Any ideas or thoughts would be appreciated.