bakery business plan

bakery business plan

Opening a Successful Bakery Business

1. Introduction

Starting your own bakery is no easy task and you should be prepared for some long hours and hard work, but the rewards can be tremendous and well worth it. Before you open your bakery there are some key decisions that you will need to make. By making informed choices, you can turn your dream into a reality. From selecting a location, to purchasing necessary equipment, permits and licenses, to hiring the best staff, and lastly advertising your grand opening. Gather all the information that is applicable to your situation and research it thoroughly. Proper planning is the key to starting any successful business and if you lack the ability to plan, you are providing the ability to fail. In this guide you will find all the necessary tasks and requirements for opening your bakery. This guide will help simplify the process, by breaking down each step of the way. By using this guide as a checklist, you can confirm that you have completed each individual task, or consider it as a crash course on opening your business. Now, let’s get started on making your dream a reality!

2. Market Analysis

Demographics, Needs & Trends Age, income levels, revenue potential (consumers with higher levels of disposable incomes), and education levels are among the most crucial demographic indicators that can be used to identify a target market for Sunnyside Cafe. Sunnyside Cafe will cater to a broad range of customers at a general income level. However, we assume that our most likely customer will be a female, aged between 30-50, who has a general level of awareness and interest in the health food industry. A recent marketing survey, undertaken by the Australian Bureau of Agriculture and Resource Economics, indicated that the people most likely to consume organic products are 25-49 year olds, inner city residents, people with young children, and adult singles or couples without children. This data strongly supports an assumption that Sunnyside Cafe will be able to maintain a wide range of customers. It is hoped that over time and with products offering a high level of nutritious value, patronage from local schools (pre-teens) and the elderly will become significantly high. These groups are generally perceived as those who can benefit most from healthy food alternatives. In Australia, a recent trend for increased demand of organic produce has been noted. Sales of organic products have increased dramatically in the past six years, particularly in meat and grocery lines, and the trend is predicted to continue. According to the Biological Farmers of Australia (BFA), the nation’s organic industry now has annual sales of over one billion dollars, forecasting a 7.5% increase in demand annually. Data from national consumer market researcher, the BIS Shrapnel group, states that health issues and desire for healthier lifestyles are the main drivers behind the increased demand for organic food. A growing awareness of the nutritional value of food and its effect on health and well-being are attributed to the increased propensity to consume organic produce. The group predicts that with increased interest in health issues in general, the organic industry will enjoy ongoing growth over the next five years, despite average income growth being lower than its historical levels. Recent times have seen an increase in awareness of diseases, food additives and genetically modified organisms have encouraged people to seek healthy food alternatives. This trend towards healthy eating and demand of supplies to match the need, provide an outlook of a stable future in the organic food industry, most likely continuing Sunnyside Cafe’s business duration.

3. Business Strategy

An overall good strategy, as summarized by Johnson et al. (2008), is to implement strategic options of what to change, what to focus on, and how resources should be spent.

A cost leadership strategy involves being the lowest cost producer in the industry. This strategy is only likely to be successful in the provision of goods which are homogeneous. If a bakery decided to implement this strategy, it would need to produce only homogeneous products and use cost-saving features to produce the goods, such as technology or efficient use of distribution channels.

This means that the bakery should determine which provision of bakery products are in short supply or high demand and do extensive research to see if there is, in fact, a market for what it intends to produce. It needs to be careful that it does not produce a product that people will eat more of in times of prosperity, spend more money on, or substitute for a better product when incomes are higher (Wadhwani, 2008). This type of product is called an ‘upmarket’ product and would ruin the strategy as the product would be substituted.

Wadhwani concludes that a business strategy “reflects a game plan that a company will use to outdo its competitors”, hence this element is essential in its production on a successful bakery business. The strategy needed is either a niche differentiation strategy or a cost leadership strategy. A niche strategy is looking to serve a segment of the market which is not currently being catered for.

4. Operations and Management

Taking into account the nature of the expected clientele and the focus on fresh baked foods, Norman is going to have to make sure that his staff is prepared at all times. The staff will have to be very knowledgeable in special client service. Having the ability to interact with other people in a gracious manner is key in making them return satisfied customers. Staff will also have to be well-informed in answering any questions a customer may ask about the foods being sold. If they do not have the knowledge offhand, they will have to know where to direct the customer in finding the answer. Typically, this will mean the staff should have previous experience in the field or have done some research upon being hired. Another quality of the staff that is very important is the necessity of teamwork. Too much is done in the preparation inside a bakery for one person to handle. Staff will have to work together on almost everything. They will need to work as efficiently as possible and be able to coordinate with each other, so as not to cause mix-ups. This may mean designating a person to do a specific job or being able to read each other’s actions well. Open communication is key in making sure the job is done right. Norman is of the assumption that keeping an amiable staff that takes an interest in the work they are doing will keep productivity high. If staff members take an interest in the work, it will be done with more care and quality. Establishing training in the various areas of the bakery will be very easy given the levels of experience of the staff. This may involve two or three people taking some time to become the “resident expert” in a specific area and then being able to train others to the same extent. This can help to implement the possibility of advancements if the bakery does well and open up new opportunities for hiring.

5. Financial Projections

Future projections after the first year are $648,000 in year 2, $720,000 in year 3, and finally $800,000 by year 4. This is a combination of the increasing reputation of the store and the continued product demand. Each year, custom cake revenue should increase by at least $5000 due to inflation and more costly ingredients. Any additional revenue increase will just be more frosting on the cake and can likely be achieved if more aggressive strategies are used. Any higher than anticipated earnings will result in either staff bonuses or profit sharing. Staff who helped to achieve higher revenues will be given more hours to work, thus reducing the need to hire outside part-timers and further stimulate our close-knit community. Staff are expected to begin profit sharing during the third year in business. It is likely that profit sharing will result in more dedicated workers and higher revenues as they will now be directly rewarded for their hard work. Staff bonus and reward programs are aligned with our philanthropy; creating opportunities for lower-income individuals. In addition to this, the owner is considering the creation of a student apprenticeship program. This program will encourage enrollment into culinary school and raise the overall average skill level of future generations of bakers. Any profits from this program will be put into a set-aside scholarship fund. Even with all these measures, the business owner does not anticipate the aforementioned method of increasing revenues as it is just too much unnecessary weight on his shoulders.

Revenues for all the products and services mentioned above are realistic and can be achieved by the business. We anticipate total annual revenues to grow rapidly and remain healthy; as mentioned in the table, first year revenues will be $484,000. This is due to a large catering job received just before the beginning of the first year and then at the end of the year, parties around Christmas time. Secondly, our own aggressive marketing and networking has succeeded in establishing contacts with event planners and corporate clients. Without counting any potential larger jobs in the future from these contacts, a very conservative estimate is 4 custom wedding cakes per month for 9 months at an average price of $500 per cake. At this point, the shop can already recognize revenue of $30,000 in a month from wedding cakes, anything on top of that is gravy. We feel these estimates are on the low side, but we don’t want to overstate our case and find they are very achievable and will serve as a solid revenue base. The total monthly expected orders of custom cakes, pastries delivered to cafes, and wholesale bread is $18,000. These prices are arrived at by using similar products/services already offered in the market and tested out on a few potential clients.