Are you ready to get all those bakery ideas out of your head and onto paper but you don’t know where to start? You’re going to want to read this full post because I’m breaking down the process in an easy step-by-step tutorial that will help you go from feeling scattered and disorganized to being ready to launch your dream bakery in no time!
What is a bakery business plan and how it can help you?
Your business plan is a place to get all your ideas and plans organized. It’s an opportunity to look at your future bakery with a critical eye. Many eager bakers skip the business plan, then find themselves lacking a strategy, not knowing the investment cost upfront, or even knowing if their ideas will be profitable at all.
Create your business strategy
Your business strategy is a detailed sentence or two that explains how you will do business. What’s your edge? How will you make this work? Get specific and ask yourself these questions before you start your business. Your strategy is your road map for how to do things.
Learn how much you need to invest
Wouldn’t you like to know all your expenses up front? A business plan helps you look at your plans and think through what you need to spend money on. You’ll research start-up costs, fee’s and licenses, as well as equipment expenses that you need to plan for.
Learn if your business will make a profit
This is an important step that many people overlook. Looking at your income and expenses will help you get a big picture of what you need to do to make a profit. Once you have a clear picture of your income and expenses you can set some goals for your bakery sales. When you do this you’ll be functioning as a real business and not just a hobby that earns some extra income.
The four sections of a bakery business plan
Your business plan consists of market research, a breakdown of your products and services, your financials, and your sales strategy. While this may sound a little intimidating, it’s not when you break it down into smaller, more manageable chunks.
The first section of your bakery business plan is to do market research
In this section, you want to turn your focus towards your customers. Learn about their wants, needs, and desires so that you can give the best service and offer the exact product they want.
During your research, you’ll ask questions like:
- Who will my customers be?
- Why do they need my product?
- How often will I get repeat customers?
- What occasions are they buying for?
- Where are they currently getting their needs met?
- What gaps are there in the market?
I’ll use my bakery as an example. In my shop, I sold cakes and cupcakes.
- My customers were primarily women between 18-55.
- They needed a shop like mine to pick up treats to share (offices, classrooms, parties they were throwing, etc) and to have a trustworthy, go-to baker that they could count on for their special events. (custom birthday cakes, showers, graduations, and weddings.)
- Before I opened they were using one or two other local bakers and the big stores like Walmart and Sam’s Club.
- The local bakers were often fully booked and unavailable and it was inconvenient to order from them.
- When my target customer was shopping at the big stores they couldn’t get the customized product they wanted, and the quality was low.
- The gap in the market was the lack of available high-quality products, that had easy and convenient ordering.
- By doing market research I realized that my edge would be to offer a convenient experience (easy, friendly ordering), sell high-quality products ( emphasize that I was all scratch-baked), and have plenty of availability (hire help for the busy times so I didn’t have to turn away orders).
Once I recognized what my customers wanted, I build it into my messaging in ads and on social media. When I promoted my bakery, I described my customer’s problems and positioned myself as the answer to what bothered them about other bakeries. These qualities began to define my business and my brand.
The second section of your bakery business plan is your products and services
It’s time to take a look at what you want to sell and how you will price your items. For many creative bakers, this is the fun part, but your imagination can run wild and you can get carried away too. My advice is to keep it very simple in the beginning. While it’s tempting to want to do everything, you will set yourself apart from the crowd by having a specialty and narrowing your offerings.
- Your menu- To write your menu, ask yourself the following questions:
- What are you talented at?
- What items does my state prohibit?
- What am I allowed to sell as a home-based baker?
- Your prices- Don’t just guess at your prices. Make sure you do the work.
- How much does each recipe cost to make?
- How long does it take you to create the product?
- How much will you mark up your items?
- What is the going rate for something similar?
- Specials- Bakeries are fantastic for capturing holiday sales and your business plan should reflect this seasonality throughout the year.
- Plan of offering something special for each major holiday to entice your customers.
- You can change the decorations and colors of items you already offer, or add a special limited-time-only offering.
Using my bakery as an example again, my original menu consisted only of cupcakes. I offered them in two different sizes and had a special price for one dozen. While the flavors varied each day, I build it into my pricing to charge the same price for every flavor. During the holidays I would change the decorations and the colors, as well as create seasonal offerings. My best-selling cupcake was a Pumpkin Cheesecake Cupcake and customers waited all year for me to bring it back on the Fall menu! It wasn’t until later that I added a cake menu, expanded bakery offerings, and added wedding services.
The third part of your business plan is financials
Your income and expenses are some of the most valuable parts of your business plan. This is where you can get a clear vision of your hobby becoming a real business. It may feel like you are just guessing at some of these figures, but do the best you can. You can always adjust them as you learn more.
What will it cost to start your dream bakery business?
Let’s take a look at the investment you’ll need to launch your dream bakery. You’ll want to consider the following things:
- Permits and Licenses-What fees are associated with opening a home bakery in your state? How much do they cost?
- Equipping Your Kitchen- Will you need to make any adjustments to your existing kitchen setup? Does your state have any requirements that you’ll need to budget for? What supplies do you need? This can include equipment like a mixer or an oven, as well as supplies like muffin pans, cookie cutters, and spatulas.
- Classes and Courses- Being a business person may not be second nature for you quite yet. Will you take any courses or buy any apps or tools to help you along the way?
These are all one-time start-up expenses. Your business plan should include an estimate of all the expenses you will need to get up and running.
How much will you make as a home bakery?
Now it’s time to think about your profitability and make a plan for how much you will sell. You’ll use this to project what you’ll earn each year too! (This is my favorite part- How exciting is it to make a profit doing something you love?)
- Sales goals- Are you planning to do this full-time or part-time? Does your state have limitations for your earning? Once you answer those questions you can decide how much you want to earn each month.
- Income- Break down the sales goal into exactly how much you’ll need to sell to meet that goal.
- Expenses- This is a list of the expenses you will have each month. Ingredients, packaging, farmer’s market booth fees, etc)
Your sales strategy is the Next section of your bakery business plan
Your sales strategy describes how you will get your product to your customer. For bakers, without a storefront, you’ll need to have a different method. This section will break down your exact strategy.
- Social Media- Promoting your bakery via social media involves some decisions. How often will you post? Which platforms? Will you take preorders? Or announce when you have a ready-made product available?
- Selling Online- What forms of payment will you accept? What payment policies will you have in place? Will you deliver or offer home pick-ups?
- Farmers Market/Pop Up Booths- Does your home bakery plan involve selling at the farmer’s market or pop-up booths? How often will you participate?
Think about what will work best for your home bakery and your lifestyle. You’re designing a business that is uniquely you. One that you’ll want to keep running for a long time.
Now let’s pull it all together for a winning bakery business plan
The last thing we need to do is to write the summary. Although this will go at the beginning of your business plan, it is easier to write last.
Writing the summary section of your business plan
The summary serves as a way to organize the information you are sharing about your bakery. You’ll want to highlight the 4 main categories that you just worked on clearly and concisely.
Write your summary with your objective in mind. What is the reason you are writing this business plan?
- Looking for a loan- If you’re writing your business plan to get a loan, then you’ll want to make that clear by stating that you are seeking a financial investment in the summary.
- Need a reality check- Does your plan serve as a way for you to confirm your plans? Then a persuasive summary is a way to go.
- Open to new ideas- Your business plan may help you see things differently. You may be exploring all your options, and that’s okay too.
Typing and formatting your bakery business plan
When it comes time to pull it all together here are a few things that can take your business plan from “ho-hum” to “oh wow!”
- Add graphs, charts, and tables for any financial information
- Include photos of yourself and your signature product
- Periodically review and update your business plan
Don't forget to print a copy for reference. Think of this as a living document. It should get updated and referenced and offer value to you as you launch your baking business.
The next step in your baking business journey
If you’ve made it this far, then you’re undoubtedly serious about planning your business and learning as much as you can before you start. Congrats! You are off to a good start already.
So far you have researched the marketplace, you have written a menu with seasonal specials, you have listed your start-up expenses and you have forecasted your sales. You have written a summary that outlines your intentions for the business as well.
If you’d like a little more help pulling it all together, please join me in my next Baker's Break Room event! It's a virtual get-together with other bakers where I share tips and answer your home bakery questions.