If you want to begin your own business and you have a passion for baking, then starting a bakery sounds like a great idea. It’s a way to do something you love while being able to earn what you feel you’re truly worth. Bakeries are also something that the general public will embrace because the idea of warm, fresh bread and other baked goods is something that stirs hunger pains. And the smell of baking bread?
As with any business venture, there are also some risks that must be considered as well. Here are the key points to consider when thinking about the pros and cons of starting a bakery.
The Pros of Starting a Bakery
1. You automatically create a loyal customer base.
If people try your baked goods and they enjoy them, then you’ll be creating a brand loyalty automatically. Any time that customer is near your bakery and they smell what you’re baking, they’ll be ringing through your door. Over time, as more customers give your bakery a try, you’ll be able to establish a base of local customers that will frequent your business when they have a need for your goods.
2. High traffic locations can make for easy profits.
Bakeries create a temptation for people like no other business. The odors of baked goods can make anyone feel hungry and make them stop in for some browsing. If you have a location that offers easy street access, good visibility, and a fair lease that can help to limit your costs, then you’ve got a chance to beat the odds of having a successful business. New bakeries fail 14 out of 15 times.
3. You may be able to start a bakery out of your home.
Although your home will still face the licensing requirements and health and safety inspections, it is possible to create a catering or delivery service with a home bakery. This allows you to save some money on your capital costs and that savings can be passed along to your customers.
4. There is a need for niche bakeries.
Celiac disease and gluten intolerance is a growing problem in the developed world. Many individuals must avoid gluten-contained products at all costs and that means they can’t eat regular bread. The average grocery store might offer one or two selections for bread at most. With a bakery, you can meet local niche needs like serving gluten-free products to establish an instant business relationship.
The Cons of Starting a Bakery
1. You’ve got multiple levels of compliance that must be met consistently.
Because you’re selling food products, there will be regular health and safety inspections at your business. You’ll need to have the standard business license. You may also be required to collect sales taxes or meet other specific licensing needs in your community. Specific certifications regarding your skills as a baker may even be required. Not every business faces such scrutiny, so be aware of this before you begin the process of starting your business plan.
2. The profit margins are often quite small.
When you consider the labor and utility costs of baking your preferred goods, there is a good chance that your profit margins on some products could be under 5%. In the food industry, a standard calculation for pricing is to set prices at 4x what your cost per product happens to be. If it costs you $1.50 to make a loaf of bread, that means you’d be charging $6 per loaf and that just isn’t in the budget of many households today.
3. The cost of ingredients is high, even if they can be sourced at wholesale rates.
Just look at the prices of butter or olive oil at the grocery store and you’ll have an idea of the ingredient costs that you’ll be facing. You’ve got to purchase these ingredients before any baked goods are sold, which means you need cash on-hand every day. There’s also no guarantee that you’ll sell all of your baked goods every day, which means you could be out a lot of inventory without revenues and still need cash to pay for more.
4. The working hours are not always so friendly.
Let’s face it: if you want to serve fresh baked goods for the morning commute that begins at 6:30am, then you’ve got to be baking by 2:30am. This means you’ve got to get into bed the night before at a time when everyone else is spending time with their family and friends. You can’t always mix your dough the night before for certain products, so there’s no getting around this fact.
The pros and cons of starting a bakery show that it can be a difficult proposition to create success. The best solution is to see if your community could benefit from having a bakery. It is their support that will keep you in business. If there isn’t a high demand, then the risks may be too great. Otherwise, you may just find that the advantages to outweigh the risks involved.