There are many things that you can do to secure the success of your new business, but there are also mistakes that can doom it. Below we discuss the do’s and don’ts of how to run a bakery to set you on a path to cooking up sweet profits from your bakery.
Do: Make realistic and well-defined profit goals
Part of learning how to run a bakery and enjoying profitability is understanding the financial side of it all. In your business plan, you determined the viability of your business by knowing your expenses, projecting cash flow, and developing a monthly sales forecast for the first three years. You will use this as a guide in creating SMART goals, and by SMART, we mean “specific, measurable, achievable, relevant, and time-based” goals.
Remember that an attempt to increase revenue means doing something more for your bakery, may it be adding new items on the menu, bringing in more employees, or purchasing more equipment to increase production speed or volume. Important how to run a bakery tip: Enlist the help of a financial advisor or accountant in projecting a set dollar amount of revenue and consider all the things below:
Fixed and variable costs
Your annual income – how much you will pay a staff member to do your work
Return on borrowed capital- investment based on the long-term interest rates and the added risk of launching the business in the first place
Return for risk- investment for a new venture (the higher the risks, the higher the return)
Return for future growth- investment for potential development or growth of your bakery such as new services like delivery
On the subject of making financial projections, here’s another “how to run a bakery” tip for you: Keep up with your competition and be in the know of any upcoming business developments in your area. Study the current state of the economy and what it might look like in the near future.
Don’t: Underestimate proper equipment selection and maintenance
This right here is a crucial part of understanding how to run a bakery that will actually be profitable. Proper bakery equipment will help reduce food waste and expenses in a business such a bakery, where this is a greater risk due to the central role of perishable items in this kind of operation. Outfit your kitchen with powerful machines and tools that will streamline your processes. For a bakery, cold and dry storage areas are required. You would need refrigerators, freezers, and display merchandisers as well as ovens and proofing cabinets.
Another thing: Knowing how to take care of your Kolpak walk-in refrigerator or Hobart dishwasher and every single piece of equipment in your kitchen helps squeeze a long service life out of each and every one of them. Plus, thanks to the advancements in technology and the industry’s efforts to level up foodservice through equipment, a lot of commercial kitchen equipment is now made to self-maintain to reduce manual intervention and increase service call accuracy so that you only shell out for repairs that you need.
For this very reason, brand-new equipment is deemed the better investment for a bakery than second-hand equipment. While the latter might be less expensive upfront, it can result in unreliability and unnecessary expenses and disruptions because you end up spending more money and losing business getting it repaired. Records of maintenance might for used equipment as well as replacement parts may be difficult to obtain, adding a degree of unpredictability. Buying your bakery equipment brand new gives you warranty and customer support.
Do: Figure out when you break even
A sign of someone who knows how to run a bakery right is familiarity with when the bakery generates revenue amounting to the expenses. This tells you, among other things, how to price your products properly and can even introduce more ways to reduce costs.
How do you know when you break even? Develop a breakdown of your fixed costs (rent, utilities, licenses, insurance, maintenance) and your variable costs (cost of labor, ingredients).
The initial goal is to at least break even with your fixed expenses and then form an understanding of the fluctuation and the impact of variable costs. The ideal breakdown for that, according to Retail Bakers of America director of finance and Sapienza Bake Shop owner Paul Sapienza, is 25% for the cost of goods, 35% for labor, 35% overhead expenses, and 10% profit.
Don’t: Spend so much money on branding everything right away
This is very easy to overlook when navigating the path of how to run a bakery and make it profitable. Don’t jump the gun by bulk ordering packaging supplies with your logo or branding in it, at least early on in the business. Try things out first to see which sizes and types of materials will work best for your bakery. When you’ve fully established what your business truly needs, only then will you be ready to allocate a bigger branding budget.
Do: Build a loyal client base
If it is all about how to run a bakery that will stay in business for many years, attracting and maintaining a customer base is crucial. Get the word out about your bakery and hit up events that you would support out of interest and passion. Bring trays of delicious samples and a pocket of business cards ready.
The secret? Don’t make it about business. Instead, show genuine enthusiasm to meet potential customers while still letting them know that there’s more where those delicious sweets came from.
When your bakery is in full operation, set standards of excellence for your business and commit to meeting it in every slice of cake or table you serve and you will set yourself up for success in the long run.
Don’t: Skimp on learning the important processes in your food production
Part of learning how to run a bakery with successful results is being able to calculate food costs and track inventory. This way, you can identify which menu items are most profitable, manage expenses, and minimize waste. There are platforms that can help you streamline this process, but you should make it a point to develop a clear understanding of how it all works, especially when you’re just starting out.
Do: Prepare for surprises
Some things you just can’t predict, but can always prepare for. For a bakery, you will thank yourself when this unwanted surprise hits you when you set aside funds for emergency situations. This gives you the ability to be “business as usual” despite the burden.