How to Start a Bakery Business from Home

Starting a home based bakery business on a low budget.

Bakery business is mostly driven by passion.. Most people that operate bakery business started it as a hobby. Without passion in baking, you can hardly succeed in the business. Bakery business is somehow risky. At the same time, it can be very rewarding. Bakery business is like other business. If you know what you are doing, there is tendency for you to succeed. But if you don’t know what you need to open a bakery, it can turm to be a nightmare. There are actually many things that are involved in starting a bakery business. Below are some of the things you need to take into considering if you like to start a baking business.

Decide on the type of bakery business you want to operate

There are different types of bakery you can open. The kind of bakery you open will determine many things about your bakery business. Let’s consider the options that are available.

Online bakery. Online model in running a bakery business involves setting up a website where you will display and promote your baked products. If you want to start an online bakery, it is not too different from other options as you still need to meet all the necessary regulatory requirements such as obtaining permits and licences. Online bakery model is cost effective as you don’t need to open a shop. You make the pictures of your baked products attractive. And people should be able to place order on the website.

Read Also: A Guide to Starting an Online Business From Home

Kiosk service bakery. In this type of bakery, you need to build a kiosk or counter where you can display your baked items. You need to make it attractive to customers and passers bye. The kiosk or counter can be in the front of your home or at a designated location especially where there are lot of traffics. The customers can easily walk in and buy.

Sit down bakery. Another option that is close to kiosk service bakery is sit down bakery. In this case, sittings would be made available for customers. As they come to buy, they can sit down to eat the baked goods at your location. This provides you opportunity to add other related items to your bakery business such as tea and coffee .

Specialty service bakery.  Just as the name, this implies that customers will usually place a special order that suits them so that you can bake the products accordingly. If you are very good at baking, you can easily get this type of service ordered from big eateries especially during their busy periods.

In addition, you will have to select the type of bread you want to bake. There are plain white bread, nourished white bread and special bread.

Develop a business plan

Having decided on the type of bakery business you want to start, you need to develop a business plan. Chose a good bakery name for your bakery business and ensure you register it. This can be a sole proprietorship, partnership or limited liability company. Each legal structure has its pros and cons. You need to conduct market research about your product by visiting the existing bakeries in your area.  The type of bakery business you like to start will guide you on the information you must gather. Find out their strengths and weaknesses and see how you can turn their weaknesses to an opportunity. Evaluate your funding requirements and how you are going to source for the funds. It is better if you can raise substantial part of the money on your own. Don’t rely too much on bank loan as this may create tension for your new bakery business. How much does it cost to start a bakery? What you need to open a bakery depends on the option of bakery business you want to adopt. However, you will need some bakery equipment such as mixers, oven, pan racks, bowls, refrigerators, scales, tables and displaying boxes.

Choose your location

The choice of a good location is very crucial to the success of a bakery business except you want to run online bakery service. While drawing up your business plan. Ensure you make provision for the cost of your bakery location. Your target customers will be one of the important factors to consider when deciding on a location that will be appropriate for your bakery business. Endeavour to obtain permits for any location you finally settle for. The location for your bakery business must pass state and local health regulations.

Acquire experience

I mention that bakery business can be very risky especially if you don’t have good experience in this line of business. You may consider joining baking organizations. This will help you gain experience on how to run professional kitchens.

Open your bakery business

Bakery requires that you have recipes that people will like. Health of your customers should be paramount to you. Once you come up with recipes that people like, you need to be consistent with it.

Marketing

One secret you can adopt to quickly get your bakery business off the ground in no time is advertising. You can start advertising your bakery business even before you open your bakery shop. This will make people to be eager to have a taste of what you have to offer. Therefore, your first impression is very important. If you delight your customers, they will not only come back; they will help you announce your business.

One important point! You need to price appropriately. The essence for starting a bakery business is to make profits. It is possible you have been operating it as a hobby. But now, you are into a business. Your price should cover your direct and indirect costs. You should mark up the costs to include your profits. You may need to shop around the eateries or other bakery shops in your neighbourhood. This will guide you in arriving at a price that customers will be willing to pay.

Read Also: Home Based Business Guide – Work from Home

SWOT Analysis of Bakery Business

The SWOT Analysis below may not necessarily reflect your current situation. It is prepared to help individuals who want to start and grow their bakery business to know what to aim at. This will also help them to quickly identify the weaknesses or threats which may have adverse effects on their bakery business.

Strengths

  • Good financial resources
  • Experienced staff
  • Good location
  • Standardised system
  • Well established distribution channels
  • Variety of healthy options
  • Quality products
  • Loyal customer base
  • Strong marketing skills
  • Competitive price
Weaknesses

  • Perishable items
  • Lack of funds
  • Poor location
  • Limited menu: No variety of healthy options
  • Obsolete equipment
  • Lack of experience
  • High rental costs
  • Poor marketing skills
Opportunities

  • Large population
  • Growing market
  • Technological development
  • Products are not seasonal
Threats

  • New entrants
  • Competition
  • Going green campaigns
  • Substitutes
  • Government policies

Strengths

Good financial resources: To run a standard bakery business, you need good financial resources for the acquisition of equipment and for renting of a shop in a good location. You require money to launch advertisement campaigns that can create awareness for your business so as to draft customers to buy your baked products. Before you can pursue any meaningful growth objectives through the expansion of your outlets, money will be involved.

Skilled Management and experienced staff: If you are starting a bakery business, you must have baking skills and experience. Some people are naturally good at baking. With this class of people, it is easy for them to turn the hobby into business. You equally need experienced staff to work with you. In a situation whereby you are not available to mix the ingredients, your staff should be capable of standing in for you. Whether you or your staff mix the ingredients or bake the products, your customers should always enjoy good baked products.

Good location: Having your bakery business located where there are huge foot traffics will be an advantage. However, if you operate your bakery business from home, it is expected that you have a stand where people can easily buy your products.

Standardised system: If your bakery business is able to standardize its processes, this will ensure consistency in the taste of your baked products. This will endear customers to you. They will be sure of having the unique taste that your baked products offer them.

Well established sales channels: Your customers may include hotels, supermarkets, restaurants and retailers. If you have these set of customers who buy from you on a regular basis, your business will enjoy steady sales. However, you must ensure that you collect cash from them so that your working capital is not tied down unnecessarily.

Read Also: How to Increase Sales Without Extra Marketing Costs

Variety of healthy options: Customers are not the same. One man’s meat is another man’s poison. You should be able to provide your customers with variety of healthy options for your baked products. For example, you may decide to make an ingredient optional for a particular baked product. You should let your customers be aware of this. This will give them an option to choose the one they consider okay for their health.

Quality products: Remember that customers will take your baked products into their system. Therefore, you cannot afford to produce baked products that are not of high quality. You need to maintain highest level of hygiene where the production takes place. All your equipment should be properly washed and sterilized. Selling products that are below standard can attract fines and penalty from the regulatory body.

Loyal customer base: There is a particular brand of bread I like to buy. It is either the brand or none. This is customer loyalty. If you have a strong brand that earns the loyalty of your customers that way, you can leverage on this to expand your products offerings. However, you must ensure the availability of the brand at all times. If you starve your customers to the point that they try other baked products, you may soon discover that some of them will never return.

Strong marketing skills: Someone once said that the difference between sachet water and bottled water is packaging. He is actually correct. One is sold for five naira and the other is sold for fifty naira. Meanwhile, the content is the same. You need to be sound and creative when it comes to marketing your baked products. Proper packaging and labelling of your baked products is very important.

Competitive price: No matter how unique your baked products are, you will still have competitors or substitutes. If your overheads are low, you will be able to keep your price competitive. As long as your price is competitive, customers that buy to resell will be able to enjoy margin on your baked products.

Weaknesses

Perishable items: Baked products are perishable goods. There is limit to how long you can keep them. If you don’t sell them on time, it becomes wasted. For every wasted material or baked product, you are actually losing money, both the capital and the profits. Excessive wastages can easily wreck any bakery business.

Lack of funds: Without funds, there is no way you will be able to finance your business. You will not be able to buy good equipment. You can’t compete in the market as you will not have money to advertise. Even, if you decide to secure equipment from leasing company, you still need funds to pay for the lease rent.

Poor location: If you operate a bakery business and have good baked products and you still experience low sales, it is possible your location is not suitable for the business. You may need to relocate but this requires funds.

Limited menu: Not having variety of healthy options for your baked products will limit your clientèle potential. You may need to conduct a market research to find out what your customers need so as to enable you adjust or expand your menu list.

Obsolete equipment: Nothing can be frustrating like using obsolete equipment. There is no way obsolete equipment can give you the best output. It will even slow down your process.

Lack of experience: I don’t expect anyone without baking experience to launch a bakery business. In case you don’t have the experience and you discover there is good market for bakery business in your environment, it is good to acquire the skill. Rushing into business without necessary skill is like putting the cart before the horse.

High rental costs: I have emphasized the need for good location. Nevertheless, if your scale of operations cannot support the rent you will have to pay, you can start your bakery business from home. A lot of businesses started as kitchen table business before they grow big to become what they are today.

Poor marketing skills: For people that like to turn their baking hobby into a business, I like to say that baking skill is not enough. You need to develop marketing skills among others.

Read Also: Business Management Skills Needed by Business Owners

Opportunities

Large population: Bakery business will thrive where there is a large population of people. The more people you have around, the more sales you will likely make. That is why bakery business is better located where there is heavy foot traffic.

Growing market: If you just started your bakery business and you observe that your sales keep increasing, it means that there is a growing market for your products. This may be an opportunity to invest more into the business so that you can increase your capacity. You can also open new outlets. Please, don’t forget to carry out market research before embarking on such expansion to new locations.

Technological development: The use of eCommerce to sell baked products has actually opened opportunity for bakery business to sell more. Your sales are no longer restricted to your geographical location. Someone or supermarket from a nearby city can place an order from your website. With this technological trend, if your baked products are okay for the consumers, you will enjoy patronage. Also, social media are good platforms for you to showcase your baked products.

Products are not seasonal: Sales may be higher in certain season but generally, we can say that bakery business is not seasonal. This means that you can enjoy steady sales throughout the year.

Threats

New entrants: Although bakery business is regulated to certain degree, you are not mandated to have any certification before you can be granted license to operate the business. Anybody that meets the regulatory requirements can start the business. Therefore, if someone observes that your business is doing well, he can decide to open his own shop close to you.

Competition: With the new technological trend, your competitors are not only the other bakery businesses that are located in the same environment with you. When there is competition, it can lead to price wars. This will drag down the price to the point that the business may no longer be profitable especially if you can’t keep your overheads low.

Going green campaigns: ‘Going green campaign’ is forcing bakery business to start using re-useable packs and this comes with attendant costs. This additional cost may impact on margin negatively especially when the costs cannot be passed to the consumers.

Substitutes: If you go to the market, you will find several substitutes to any given baked products. In a situation like this, you can’t increase your prices anyhow. Otherwise, your customers will prefer a cheaper substitute.

Health consciousness: Customers are becoming more health conscious. This is making many of them to run away from products that contain cholesterol.

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