Starting a Bakery? Make Sure You Don't Waste Your Dough

Starting a bakery is no cakewalk. First off, the hours are long and setup costs can be pricey – between rent, equipment, build-outs, payroll, air conditioning and marketing, you should assume you’ll be spending a lot of dough just to get the ball rolling. The more you have the better off you’ll be, but conventional wisdom says you should have at least two years worth of cash to see you through.

It doesn’t have to be all that bad, if you put a little planning into it and spend your money wisely. As with anything, the devil’s in the details. To help get you started, we’ve compiled a list of financial tips for starting a bakery, the best ways to spend your money and stretch your dollars to the max.

Starting a bakery: 5 tips for success

• 1. Think big, start small
• 2. Look into buying used equipment for your kitchen
• 3. Keep your branding to a minimum
• 4. Don’t be shy with the freebies
• 5. Start with high-quality ingredients, finish with top notch products

1. Think big, start small

Just like a delicious yeasted crusty bread, your bakery will thrive and grow over time so don’t get ahead of yourself. You may have dreams of a large retail operation beloved by everyone, but (unlike the aforementioned yeasted crusty bread) that won’t happen overnight.

The space you choose should be carefully considered. Ultimately, you’re looking at a retail business, but the amount of floor space you dedicate to actual sales is usually pretty minimal. People don’t buy a loaf of bread or a sheet cake and then sit down and eat it there. They come in, they look at what’s in the case, they buy it, they leave. Most of the space will be used for the actual baking, which means you’re essentially paying the high cost of retail real estate for what’s essentially a manufacturing operation. Consider alternatives: warehouse space is usually much less expensive, and being a wide open space means very little is needed in the way of buildout.

It’s not uncommon for bakeries to start out in the wholesale business, producing their goods in a dedicated kitchen and then selling to restaurants, cafes, and specialty food stores. This is precisely what our good friends over at Sonoma Bakery did, well before opening their first (then second, then third, then fourth, then fifth, then sixth) retail location.

2. Look into buying used equipment for your kitchen

New equipment is cool. It’s shiny and gleaming and modern and still has that new appliance smell – it’s also crazy expensive. You can buy new equipment with financing, but the less debt you incur, the more money you’ll have for other things. Instead, look into buying used equipment. Make sure you scrutinise any used appliances before you commit and don’t get anything that’s more than three years old.

Another advantage of buying used is that it puts top of the line brands into your budget. This is great news, especially for the ovens. Baking isn’t cooking, there’s no room for improvisation and precision at all stages is the key. When you dial the heat up to a particular temperature, it’s got to be that specific temperature. If you absolutely insist on getting brand new gear, try looking at scratch and dent models where minor cosmetic damage prevents them from being able to be sold at full price.

3. Keep your branding to a minimum

There’s always the temptation to get custom made pastry boxes, napkins, and whatever else you can slap your logo onto. And if there’s no temptation, there’s going to be some sales rep from your supplier who’ll try and talk you into it, tell you that it’s worth the money and that you’re building brand awareness. We’re here to tell you that the sales guy is full of it. Ask yourself how you’re going to create awareness by branding items destined for the trash. Save your money. Use a solid colour box and an unmarked paper doily for cakes, cookies, and pies. Put your fresh baked bread into a plain brown paper bag. And put the extra money towards a much better way to get the word out to everyone, which just so happens to be item number four on this list.

4. Don’t be shy with the freebies

The best way to get people to love you is to put your money where their mouths are. We know you think very highly of your pastries (you did open a bakery, after all) but now you’ve got to convince everyone else.

Did you get warehouse space in an industrial park? Are you set up for retail in a strip mall? Bring free stuff to the all other businesses around you. Bring samples to a Chamber of Commerce-type networking events. Bring them to community events. The one place you shouldn’t give out too many samples is inside your storefront. It’s cool to have irregular pieces of stuff out for sampling, but for the most part, the people at your store don’t need to be enticed to come to your store. Of course, if you did a monthly tasting event, something that could be advertised and announced ahead of time, that would be an excellent way to get people to you

5. Start with high-quality ingredients, finish with top notch products

This is one of the few situations where it’s a good idea to spend more money than is “necessary.” If people want low-quality pastries made from oddly coloured butter and lumpy flour, they can go to the supermarket and buy one of their store-made cakes iced with shortening and Yellow #6 food dye—and spend a lot less doing it.

Economies of scale dictate that even if you’re using the lowest quality/cost ingredients for your recipes, you still won’t be able to beat the grocery store on price. So you might as well give people a reason to spend the extra money. That doesn’t mean you need to buy organic eggs and fair trade chocolate. In fact, that could even hurt your sales because of what such labels to do the price. But don’t skimp on anything to save a few bucks if it means sacrificing quality.