How to Open a Bakery That Will Thrive
Running a bakery has the potential to be lucrative. Typically, you can charge a markup of between 40 and 70% for most baked goods. After your overheads have been taken out, profit margins are around 9%. In some areas, 20% is the norm. Both figures are better than they are for many other retail business models.
People, everywhere, love baked goods. In much of the world, bread is eaten every day. So, you have a ready market for that product, as well as one for sandwiches, wraps, pizzas, and pasties.
Plus, of course, the opportunity to sell them cakes, coffee made on a good commercial coffee machine, drinks and other sweet or savoury products.
Provided they enjoy what you serve them, many customers will turn to you when they have a special occasion to celebrate. Opening up the chance for you to make a big cake for them or sell them a lot of smaller items in one big transaction. When that happens, the person who drops in now and again for a sandwich suddenly turns into a valuable customer.
If you offer home delivery and sell online, you can potentially more than double your turnover. So, over time, it is not hard to turn a small bakery into a very profitable business. But you need to set things up in the right way.
Work out if there is enough space for another baker
Bakeries need to be located where there is a lot of foot traffic. You need a fairly high turnover to cover your overheads. Industrial ovens are not cheap to run and represent a significant additional cost that other businesses do not have.
So, before you open your store make sure the market is not saturated. Check out other bakeries, if nobody is queuing, or sitting at the tables during busy times you are going to experience something similar if you open in that area. This in-depth article will help you to do your market analysis properly.
Understand how much you can charge
While doing your research make a note of how much other businesses are charging. You can use that information to make sure that you will be able to sell at a profit.
If you can start with a pop-up unit, or maybe a kiosk with some tables and chairs. Doing this will give you an even better understanding of the potential and enable you to learn about what types of baked goods people in the area like.
Crunch the numbers every week
Regardless of the format you choose, be sure to do your accounts at least once a week. This enables you to spot spikes early. If sales of a specific item are growing super fast, try to work out why. The sooner you do this the more likely it is that you will uncover the reason behind it and be able to maximise on that growth. This will also help you to see seasonal, monthly, weekly, and even daily trends, which you can take advantage of.
For example, if you notice that there is a spike in coffee and bun sales mid-morning keep an eye out around that time to see who is buying that combination. The chances are if that demographic is doing that in your bakery, they are doing the same in others in your town. Potentially, you could create a mid-morning snack special offer and display it on your in-store or pavement screens to tempt some of your competitor´s customers to shop with you instead. You can do that in less than 15 minutes using modern digital signage software for bakeries. Plus, provided you have bought the right type, you can easily work out how effective each ad is. The best software keeps track of the time each advert was posted and allows you to combine that information with the sales data for the item that you were promoting. This will tell you which adverts and offers to continue with and which ones to scrap.
Always have something on offer
Do your best to always have at least one promotion available on a popular line. It makes customers feel looked after and ensures that people pop in regularly. When they do that there is a fairly good chance that they will buy something else while they are there. As well as being more likely to place a big order with you when they are arranging a party or a special celebration.
Doing the above will greatly increase the chances of your bakery being a success. But with this type of business, you can never stop innovating. People´s tastes change, which means you need to keep an eye on what your competitor is selling, watch cooking shows and visit the big food and baking websites to keep an eye out for new products for your customers.