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Melissa Wylie is a former senior small business writer for A. In her role, Melissa explored all aspects of business ownership.
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How To Start My Own Bakery
Curt is a senior editor at Adams. Before becoming Money Nord, he has nearly a decade of experience as a writer, editor and digital marketing strategist.
How Do I Start My Own Bakery Business?
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Baking and selling sweet treats may sound like an attractive business idea, but starting a bakery without proper knowledge and skills can be a messy task.
While cooking for others can be rewarding and passion for baking is essential, the love of your craft will only take you so far. We dive in to find out what you need to know when starting a bakery business.
All retail bakeries sell baked goods directly to consumers, although some specialize in one type of pastry or service. You can choose from the following types of retail bakeries:
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You may want to consider diversifying your product offering to attract different types of customers, especially if you’re primarily selling something seasonal, such as wedding cakes with most ceremonies in the summer.
The type of bakery you want to run will determine other aspects of the business, such as how much space, equipment, and ingredients you need. We will discuss these details further.
Depending on the financial resources you have available you can buy or rent a bakery. Renting space may be a more affordable option for new business owners, but buying commercial real estate may be a better long-term investment.
Your city or state may provide resources for finding a business location. Some also offer incentives like tax credits, so check with your local Small Business Administration office or Small Business Development Center.
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Equipment is the second largest start-up expense for bakery owners after rent. Whatever baked goods you sell, you can expect to purchase pastry cases, commercial ovens, and refrigerators. Large tables, called workbenches, mixer taps and dishwashers are also essential in a bakery. Your prices will depend on what the bakery offers as well as the size of the space.
Many bakery owners buy used equipment at first, but it can pay to buy some new items. A used oven or refrigerator may have lingering odors that can affect your baked goods. The patisserie should also be free from odors or damage, so that the pastries look attractive. If purchases are prohibitive, equipment leasing will allow you to use the equipment you need for a certain period of time, but you will not own it at the end of that time.
New bakery owners often think they can handle the entire business on their own, but hiring a manager, especially someone with industry experience, can be a big help. Managers can take administrative tasks off your hands, such as ordering inventory, and they can train any bakers you hire to ensure products stay consistent.
To save time and money on employee training, it may be wise to employ experienced employees. Finding talented and skilled decorators who can meet deadlines can be difficult, she said, but the right ones can be invaluable.
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Rent and equipment are usually the biggest expenses for bakery owners, but other running costs can add up. Payroll can be a large expense depending on the hourly rate employees earn based on their skill level.
Economic factors often cause ingredient prices to fluctuate, and forecasting bakery inventory costs can be challenging. Natural disasters or weather events in other parts of the country can also affect the prices of raw materials such as wheat and vanilla extract. Buying basic components in bulk also helps reduce inventory costs.
The prices of baked goods usually reflect the labor and ingredients required to make them. To determine the cost of the item, estimate how long it will take to complete the cake. If the price can withstand the increase, you also need to consider the cost of ingredients and the costs of keeping the bakery open, such as electricity and water costs, depending on the time it will take to make the cake.
Marketing your bakery is a crucial step in getting customers in the door. Create social media accounts and a website for your bakery where you can post pictures of baked goods.
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Engaging social media followers with giveaways and contests will encourage people to interact with your brand and get to know your bakery. Make sure your social media output matches the actual experience of visiting your bakery. Customers also expect consistency, so your offering should look and taste the same every time it arrives.
If your personal savings are not enough to start a bakery, there are several business financing options that can give you a boost. Here are some financing options that may be suitable for new bakery owners.
The SBA works with lending institutions to guarantee loans made to small business owners. You can get an SBA-backed loan of up to $5 million to cover normal business expenses. The SBA offers several programs, including the 7(a) loan program and the microloan program, both of which can be attractive to bakery owners.
7(a) loans are the SBA’s primary offering. Eligible small business owners can receive up to $5 million with repayment terms between seven and 25 years. These loans can cover start-up costs or ongoing working capital needs. Microloans are smaller with a maximum of $50,000. The SBA caps interest rates to prevent lenders from charging higher loan amounts. Competitive rates and terms make SBA loans an attractive financing option for many small business owners.
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Online alternative business lenders can be a viable financing option for people who have difficulty qualifying for traditional bank loans. Online lenders can approve borrowers with less time in business and lower credit scores. The turnaround time for online loans is usually fast, with some lenders announcing approval within days or hours.
You can apply online for term loans, equipment financing, invoice financing, cash advances and lines of credit from lenders. However, there is a price to pay for the quick time to fund and minimal requirements. Online lenders often assign higher interest rates and shorter repayment terms to loans and typically offer lower amounts than banks.
Crowdfunding allows business owners to raise capital from family, friends and the general public. Startups sometimes have difficulty qualifying for business loans without significant experience or collateral, and crowdfunding can be a potential option. Online platforms like GoFundMe, Kickstarter and Indiegogo allow you to set up a campaign that explains your business and your funding needs. Most platforms charge a fee to use the service and may require you to give donors products or a stake in your company in exchange for money.
The time to get funding may be slow as it may take some time to collect the money and you may not be able to collect as expected. Competing with other online crowdfunding platforms can be challenging, but the exposure you get from being on a platform like GoFundMe or Kickstarter can be valuable in building your customer base.
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Although a formal background in culinary arts or business management will make the process of starting a bakery easier, it is not a mandatory requirement. Local small business development centers or colleges can provide education and guidance as you make decisions about your bakery.
To keep customers coming back, the quality of the food and the store experience must be consistent. The key to maintaining consistency is effective bakery management. If you don’t have long experience in the industry, consider hiring a manager who can and will lead your team, or at least teach you what it’s like to run a bakery. Open a bakery? Here’s a Recipe for Success Don’t go into business with a half-baked plan. Follow these 12 steps to open a bakery. We cover everything from drafting your business plan to designing your bakery’s layout and branding.
Has opening a bakery always been your dream? No office space smells better than a bakery, that’s for sure. Starting a bakery is one
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