Key Takeaway - Starting a bakery business is very profitable if you have the right guide and eCommerce marketing automation tools. Recent restaurant industry trends show that the demand for baked goods has witnessed a steady increase in the last few years (Fortune Business Insights).
If there was ever a time to start your baking business, it’s now. Running a bakery is a great investment for small-time bakers and business owners.
In this ultimate guide to starting a bakery business, you will learn the steps needed to open a bakery business. We will also include relevant advice on how to use your online presence to grow your online bakery business.
Bakeries are popular with consumers these days because of their convenience and affordability. A consumer can simply walk into any retail bakery store and purchase cupcakes, couture cakes like bubble cakes, and all kinds of cultural desserts.
Before starting your bakery business, there are several factors you need to consider. First, you need to have great recipe ideas for your different menu types.
Next, it is important to look into your startup costs and do adequate market research. Writing a business plan for your bakery business is also necessary. It will help you if you are contemplating taking out a business loan.
Let’s discuss in detail the steps to take when opening a bakery business.
What Steps are Needed to Open a Bakery Business?
- Write a Business Plan
In addition, creating a business plan serves as a template for future business expansion goals. Your business plan should include the following:
- Summary of your bakery business plan. Include your mission statement, business objectives, and history, as well as the legal structure and ownership information.
- Overview of the business. Explain the concept of your business, the type of baked goods you want to serve your customers, and your eCommerce organizational structure.
- Industry analysis. Carry out a competitive analysis of the baking industry. Learn about your competitors, niche market, and target audience.
- SWOT analysis. Identify your strengths, weaknesses, opportunities, and threats. This will help you to stay ahead of the competition.
- Operational plan. Highlight details about the general operations and functioning of your bakery. Include supply chain management, inventory management, order processing, supplier relationship management, staff time management details, and so on.
- Financial analysis. Research the financial viability of your bakery business. Include details on the operating costs, costs of buying bakery equipment, costs of integrating bakery technology, cash flow statements, interest rates, and recurring and fixed expenses.
- Marketing plan. Give details of potential direct-to-consumer marketing channels and your plan to promote your bakery business.
- Select the Location of the Bakery
The location of your bakery is another crucial element to consider when starting your bakery business. Depending on how much you want to spend, you can either open a brick and mortar store or start an online bakery.
You can start your bakery business after selecting your area of choice. If you choose a storefront, check the location for potential competitors. Make sure the area is a high-end shopping street with frequent foot traffic.
There should be enough space to build a functional kitchen and a display cum serving area. Take note of the following when selecting an on-site location for your bakery:
- Existing competitors
- Availability of target customers
- Proper water supply and drainage facilities
- Enough space
- Affordable rent
- Easy visibility
- Parking space
Starting an online bakery business has other requirements and basic guidelines. Before selling baked goods online, there are some online business basics, legal precedents, and marketing approaches you should be aware of.
An online bakery business will require that you have a solid eCommerce marketing plan. You’ll also need to set up your online marketplace to sell your baked goods.
- Get All Licenses Required to Open the Bakery
It is important to get all your paperwork in order before launching your bakery business. The paperwork you need for your bakery includes an eCommerce business license, zoning forms, and a food handling certificate.
You may also need a wholesale license, depending on your business model. Here are some other paperwork requirements you need to know:
- Food license
- Fire license
- Building health permit
- Certificate of occupancy
- Sign permit
- Business license
- Employer identification number
- Seller’s permit
Starting your paperwork early will save you loads of legal trouble. Make sure to get proper legal counsel.
- Get Your Team Ready
Running a bakery business requires extra hands. You need culinary experts to make your baked goods and other non-culinary team members to help with the daily running of your bakery.
- Buy Equipment for the Bakery
While it may be one of the most costly aspects of starting a bakery, buying equipment is very crucial to the success of your business. Unlike home baking, you need a lot of specialized baking equipment in your bakery.
Here is some of the equipment that you need:
- Planetary mixers
- Deep refrigerators
- Cooling refrigerators
- Working tables
- Gas stoves
- Storage utensils
To lower the costs of equipment, you can buy them second-hand.
- Install a POS and Billing System
Setting up a POS system in your bakery will be a major game-changer for your business. A typical POS system features powerful restaurant management software and a robust restaurant inventory management system.
Restaurant POS integrations will make it easier to link your POS system with other restaurant technology. Your inventory control, accounting, customer relationship management (CRM), and eCommerce systems should all function seamlessly with this system.
How Much Does It Cost to Open a Bakery?
The typical startup costs for a bakery might be anywhere from $10,000 and $50,000. Numerous elements, including location, size, and the variety of bakery fare, can affect this range.
Ordering and buying ingredients including dairy, eggs, sugar, cream, flour, and equipment might be included in typical bakery costs. Payroll, advertising, and maintenance are some examples of costs. It's advisable to calculate your bakery startup costs by considering what must be paid upfront and what can be financed.
Here are some typical startup expenses for a bakery:
- Location - the price depends on the area
- Building utilities - $1000 - $2000 per month
- Interior and exterior design - $1000- $40,000
- Bakery equipment - $20,000 (initial cost)
- Inventory expenses - $20,000 - $120,000
- Marketing and advertising - $0 - $100,000
That breakdown looks like a lot. However, if you open a bakery, you may make an average of $450,000 annually. The size, scope, and location of your company, as well as other considerations, will all affect your prospective earnings.
About 20% of the annual industry earnings are typically earned by the biggest businesses in the bakery sector. Having said that, smaller bakeries frequently earn less than the industry average, particularly when they are just getting started.
After the initial setup of your bakery and filling out all the necessary paperwork, you need to consider your marketing options. How do you promote your bakery business? Let’s find out.
How to Market Your Bakery
Restaurant marketing is an important part of starting a new bakery business. There are different types of marketing campaigns you can run before and after you launch your new food service business.
Digital marketing strategies such as social media marketing are used to engage with consumers and advertise brands. Utilizing marketing channels to their full potential can boost sales, increase brand recognition, and increase website traffic.
However, it is important to pay attention to your startup costs, especially for the first 12 to 24 months. One of the least expensive ways to market your business is through social media marketing.
Social Media Marketing for Restaurants and Bakeries
There are quirks and best practices specific to each social media platform. To maximize the effectiveness of social media marketing for different types of bakeries, you should adhere to some fundamental best practices.
Here are some of the best practices for social media marketing for bakeries:
- Set your marketing goals - Setting goals allows you to monitor the effectiveness of your marketing strategies.
- Tell your brand story - Social media gives business owners the opportunity to tell their brand story to customers.
- Have a content strategy for each social media channel you use - Create a plan that will leverage the power of each of these channels.
Check out our 21 social media marketing for restaurants and bakeries tips, too.
You can advertise your bakery business through channels other than social media. For instance, use eCommerce marketplaces and marketing automation software.
A list of other options is provided below:
- Create a referral program and provide rewards for successful recommendations.
- Try email marketing for eCommerce and content marketing.
- Attend regional conferences and events like farmers' markets, festivals, and concerts.
- Use conventional marketing techniques like billboards, flyers, and word-of-mouth.
Besides all of these, you can consider starting a baking subscription box. Your target customers can delight in their preferred treats from your bakery on a rolling basis with bakery subscription boxes. Let’s discuss how you can get started with your baking subscription box.
What Is a Baking Subscription Box?
A bakery subscription box sends consumers their preferred baked products regularly. Many subscription boxes are delivered right to the front doors of the customers.
There are different types of baking subscription boxes. For instance, you can decide to start a box of gluten-free baked goods or a box that caters to the culinary skills of other bakers.
Selecting a baking subscription box should be centered on your market research and customers’ preferences. Take advantage of the high demand products to sell at a bakery, including cakes, ice cream, and cookies.
You can choose any of the following types of subscription boxes:
- Prebaked subscription box
- Unbaked subscription box
- Themed bakery subscription box
- Specialty bakery subscription box
So, what are the benefits of selling a subscription box? Besides enjoying recurring payments from consumers, there are other benefits to starting a subscription box business model.
Why Sell a Baking Subscription Box?
Baking subscription boxes are very profitable. In addition to having lower overhead expenses, there is always room for profit because of the rising and constant demand for baked goods.
Here are some reasons to sell a baking subscription box for your business:
- Enjoy monthly recurring revenue - Selling a baking subscription box allows you to enjoy recurring payments from your customers. Depending on your subscription payment model, this could be weekly, monthly, or annually.
- Easy marketing and product discoverability opportunities - The subscription box business is popular among customers. It is easier to market the subscription box online and get your products discovered faster.
- Minimal operating expenses - With a baking subscription box model, you do not have to worry too much about the costs of operating and starting a bakery business.
How Does a Baking Subscription Box Work?
A subscription box business is quite easy to operate given the right subscription billing software.
Here’s a brief breakdown of how it works:
- Your target audience comes to your website.
- Sign up for one or more subscription services through your landing page.
- Consumers choose the type of subscription they want (weekly, biweekly, monthly, and biannually).
- A recurring payment is processed and set up on your website.
- The subscription box is shipped to customers.
How to Start a Baking Subscription Box Service
Starting a bakery subscription box doesn't have to be challenging. There is rising demand for the products and services this business model offers. Nevertheless, there are a few things you need before you can begin:
- Choose the subscription box model you want.
- Select the type of baked goods you want to include in your box.
- Pick your subscription box packaging materials.
- Use an eCommerce website builder to build your subscription box website.
- Research and select the best eCommerce website design.
- Integrate a payment processing software on your website.
- Set up your eCommerce shipping solutions.
After setting up the tools and resources to start your baking subscription box, it will be easier to start the subscription box business model.
Here are a few easy steps to get you going:
- Begin with fantastic subscription box ideas.
- Decide on your subscription box's price.
- Create a subscription box prototype.
- Start the prelaunch stage.
- Create a listing on your website, a marketplace, or both.
- Take orders now and start sending out your subscription boxes.
Tips for Starting a Subscription-Based Business
As you can see, there are numerous benefits to starting a bakery business using the subscription box model. The subscription box business is easy to begin.
Here are some tips to make your own subscription box business:
- Research your particular market.
- Select your target market.
- Choose the most effective baking subscription box business model.
- Selecting popular products
- Come up with a distinctive selling proposition.
- Utilize a pricing approach based on value.
- Select the most suitable subscription billing system.
- Configure your order management system.
- Think about optimizing the delivery route.
- Online business promotion.
Time to Level Up
Starting a bakery business can be less challenging if you have the right resources and the perfect tools. A bakery business can be very profitable; the numbers prove it. However, poor planning can be a disaster waiting to happen.
So, write your business plan, set up your SMART goals, and put your customers first. Having a solid marketing plan will also help you promote your business and aid your quick scale-up.