Bakeries are popular with first-time entrepreneurs. Image courtesy of: freedigitalphotos.net
Starting a bakery requires a mix of skills; you need to be an experienced baker and also an astute businessman, as success will require not only the skills to create attractive products but also the skills to run and grow the business with profit in mind. Location is absolutely key; baked goods are often bought at strategic intervals (breakfast, lunch). Despite the challenges, running a bakery can be very rewarding, and there is scope for regional expansion if you are successful.
Why start a bakery?
Bakeries are popular businesses because the sale of baked goods is not hugely affected by economic factors; products like bread will always be required, and in large quantities. They are also popular for first-time entrepreneurs because of the (comparatively) low start-up costs. It’s also easy to specialise – adding an additional service as a USP, such as wedding cakes – in order to bolster income and stand out from the crowd.
What types of bakery are there?
The most common type of bakery will offer a selection of fresh breads, along with savoury goods such as sausage rolls, and sweet goods like cakes and pastries. This wide product range helps create a substantial target market and increases the amount of business open to you. Some bakeries specialise in particular services, such as wedding cakes. These require more specialist equipment and skills, and can be costlier to make in terms of time and money, but if you can build up a reputation it’s a good way to supplement the day-to-day income of the bakery. Deciding on what services you want to provide is a key issue when considering starting a bakery.
What skills will I need?
Starting a bakery requires general business skills and the ability to bake. The former includes such things as managing profit and loss, keeping on top of the books, negotiating with suppliers and understanding cash flow. Your ability to bake is key because, in the early stages when things are tough, you need to be able to manage the shop yourself. If you have to hire a baker/manager, your costs will skyrocket while revenues will remain the same. Baking skills also allow you to understand the market more effectively, build stronger relationships with your clients, and innovate.
Buying an existing bakery
Buying an existing bakery can be a good way to start, especially for first-time entrepreneurs. You get the benefits of a successful business, alongside the ability to ‘make it your own’ by, for example, introducing new products and services.
The most important thing to consider is the location – somewhere where there is foot traffic to ensure sufficient ‘walk in’ trade, alongside your regulars who make a special journey. Another consideration is access; if the road is congested cars won’t be able to park, which will severely limit your trade.
The building must also be up to scratch commercially, which means it must abide by regulations, including health and safety regulations – make sure you check its latest Food Safety Report. Is there disabled access? Are there parking spaces for you plus your employees? Also check to see if the building is freehold or leasehold, as this makes a difference to not only the price and the length of time you ‘own’ the property, but also the regulations you must comply with.
Get a lawyer to check over the contract carefully. If you can afford to buy a bakery, you can afford to hire a lawyer to check the contract – it could save you enormous amounts of money and stress in the long run if they find something that needs attention.
The cost of starting a bakery will depend on a variety of factors, including the range of products you’ll offer, any renovations or redecorating that needs doing, equipment etc. There’s no easy answer and you’ll need to carefully consider your budget so you can buy all the essentials, leaving the luxuries until a later date when you have more cash.
- Licenses and legal: if you want to do things ‘properly,’ you may wish to set up your bakery as as a legal entity by registering with Companies House. Health and Safety regulations, including sale of food and food preparation, will be needed. Check with the Health and Safety Executive to see what you require. You will also need a lawyer to check over any contracts, such as with your landlord. A budget of between £500 and £1000 should cover you for licenses and legal in the early stages
- Equipment: this can vary a lot and the amount you need to spend will depend on the products and services you’ll offer. If you want to bake and sell wedding cakes, you’ll need specialist equipment. And if you sell bread, you’ll also need a slicing machine. An initial budget of around £5000 should be enough to buy what you need to get things moving. As you grow, you can supplement your equipment
- Start-up supplies: these include raw materials for your baked goods, packaging and advertising collateral. A budget of around £2000-£3000 should be sufficient
- Renovations and decorating: budget around £2000 to make any changes to the location, although this could climb heavily if the location needs a lot of work. If it does, try to negotiate a rent discount. If you are buying an established bakery this figure will obviously be much lower
- Rent deposit: you’ll need a deposit on your rent when starting up, which is typically a month’s rent in advance. Depending on the location, this could be anything between around £500 and £2500
Insurance is essential for any business but especially so for those selling food to the public. Bakeries must have both public liability insurance
and professional indemnity insurance. If you hire staff, you should also have employer’s liability insurance
to protect yourself against any legal action taken against you by a former or current staff member.
A thorough business plan is essential if you want to start a bakery. But first, check to make sure you have the skills necessary to start one. Do you need to brush up on your general business skills? Or perhaps ensure your baking skills are sufficiently well-rounded? Once you are sure you wish to proceed, a business plan is the first stage; without one, you won’t know how your business will turn a profit or what goods you’ll be selling.
You should then consider the location; this can make or break your business. Learn about tenancy agreements to ensure you can hold your own during negotiations. Don’t rush to rent a property, as you may realise it has significant disadvantages at a later date. Take your time – it’s probably the most important decision you’ll make when starting a bakery.
Key tips to help make your bakery a success
- Pricing is key: products must be competitively priced but must also give you a decent profit margin. Because you are selling low-value products in quantity, it can be easy to think that pricing is not that important, but every penny must count
- Décor and cleanliness: getting repeat custom is very important for bakeries, especially because they need to compete with big supermarkets for custom. Ensure your premise is clean and welcoming
- Learn from your customers: catering to peoples’ needs is essential if you want to beat the competition. Keep a note of what you sell each week and ask people for their opinions. Develop new products based on what is successful. Constant innovation is important as you’ll need to keep people interested and – by extension – coming back to you
- Develop a USP: successful bakeries often differentiate themselves by offering less common services. This can supplement the standard revenue stream. Wedding cakes are popular as an additional service, or – in the case of town-centre bakeries – providing special meal deals at lunchtime can help draw a regular crowd. Don’t choose a USP based on what you want to do; choose one based on what is right for your location and customer base.