Do you want to start a small bakery from home? If YES, here is a detailed guide on how to start a profitable bakery business with no money or experience.
Okay, so we have provided you an in-depth sample bakery business plan template. We also took it further by analyzing and drafting a sample bakery product marketing plan backed up by actionable guerrilla marketing ideas for bakeries.
The United States food and beverage ingredients industry consist of different markets such as bakery, beverage, confectionery, dairy, processed foods etc. Consumers love and inclination towards healthy food and convenience products is the leading driver governing innovations and growth in most of these markets.
Table of Content
- 1 Why Start a Bakery?
- 2 Starting a Bakery Business – Market Research and Feasibility
- 3 Writing a Business Plan for a Bakery Business
- 4 How Much Does It Cost to Start a Bakery Business?
- 5 Choosing a Suitable Location for your Bakery
- 6 50 Catchy Creative Bakery Business Name ideas
- 7 Choosing the Best Legal Entity for your Bakery Business
- 8 List of Legal Documents You Need to Run a Bakery
- 9 Is Professional Certification Needed to Start a Bakery?
- 10 The Best Insurance Needed for a Bakery
- 11 Starting a Bakery Business – Technical & Manpower Details
- 12 The Service Process Involved in the Bakery Business
- 13 Starting a Bakery Business – The Marketing Plan
- 14 Possible Competitive Strategies for Winning your Competitors in the Baking Industry
- 15 Possible Ways to Increase Customer Retention for a Bakery
- 16 Strategies to Boost your Brand Awareness and Create a Corporate identity
- 17 Tips for Running a Bakery Business Successfully
Why Start a Bakery?
Shifting consumer trends and increasing consolidation have posed a significant challenge to bakery manufacturers. Of the major product types such as bread and morning goods, cakes and pastries and biscuits. Bread is the largest source of revenue for the market followed by morning goods, cakes and pastries and biscuits.
Bakery ingredients such as starch, fibre, enzymes, emulsifiers, colours, flavours, antimicrobials, yeast , other functional ingredients ( omega-3, and 6, vitamins, minerals, pre-biotic , probiotics) and formulated bakery ingredients constitute a major part of this industry.
Nevertheless, this industry is soaring and has continued to grow, largely due to the impact the products from bakeries have on people in the society either as a major snack/ a food supplement. The US bakery products industry includes about 2,800 commercial bakeries with combined annual revenue of about $36 billion, along with about 6,000 retail bakeries with combined annual revenue of about $3.8 billion.
How to Start a Bakery Business from Home With No Money – A Complete Guide
- Bakery Industry Overview
The bakery industry in the U.S. has certainly reached the mature stage, with a growth rate of 2.0 – 3.0 percent per year. It is characterized by increasing consolidation. Bakery manufacturers need to keep innovating in order to sustain in the industry. Their efforts in this direction have been witnessed in the past few years.
- Interesting Statistics About the Bakery Industry
In recent times, the U.S. bakery industry has undergone significant changes as it responds to shifting consumer trends- particularly the growing preference for products providing health, convenience and indulgence.
While the level of competition is high in the market and is on the rise. Also, a few restrictions pose difficulty for new companies to enter the market. The major competitive factors include price, product quality, product differentiation, innovation, branding, and technology.
Most of the U.S. citizens and residents take Bread which forms a part of the staple diet and this market has witnessed the most innovation, with healthy bread variants such as natural, functional, light or low-carb and organic breads being developed.
Biscuits follow suit in innovative prowess as a product in the sector and are capitalizing upon the indulgence trend in the U.S. While innovations in biscuits were focused on formulation with exotic flavours, rich textures and packaging. The cakes and pastries sector also displayed some level of innovation and differentiation in terms of novel healthy variants such as low/light, fat-free and sugar-free products.
The U.S. bakery industry was estimated to be close to $ 34 billion in 2007. Bread represented the largest product category accounting for 50.0 per cent of the volumes. Morning goods such as bagels, muffins, croissants, buns and rolls represented 20.0 per cent of the volume.
Pastries and biscuits represented the rest of the market. While, the commercial side of the industry is concentrated: the 50 largest companies generate 75 percent of revenue. The retail side of the industry is highly fragmented: the 50 largest companies generate about 15 percent of revenue, and the typical company operates just one facility.
Factors that encourage people such as leading entrepreneurs and investors to venture into this business is the projected output of the industry, and its relevance over the years and its continual relevance. Until people stop taking baked products as staple diets, that is when the industry can only die, the viability of this industry is incomparable to many others, and this definitely is enough an incentive to lure entrepreneurs into it.
Starting a Bakery Business – Market Research and Feasibility
- Demographics and Psychographics
The demographic and psychographic composition of those who need the services of the bakery industry cuts across the public sector, the organized private sector, most especially households, communities and people of different class and from all walks of life.
Below is a list of the people and organizations that need the services of the bakery industry.
- Cakes and Cupcakes: The largest households, which are those with children, are the best customers for cakes and cupcakes. Six in ten married couples with children spend more than the average household on cakes and cupcakes, with that rate increasing to almost three in four for people with school-aged children.
- Cookies: The largest portion of revenue from cookies is derived from households with children. A household with a married couple and children will spend 54 percent more than the average household on this product within the baking industry. Spending on cookies fell by over two tenths between 2000 and 2006, but has held steady since then.
- Prepared Desserts: The oldest consumers as well as married couples with school-aged children or older children at home are the best customers for the prepared desserts segment of the baking industry. An increase in consumer preference for the convenience of prepared desserts has led to an 18 percent increase in household spending from 2000 to 2009.
- Pies, Tarts and Turnovers: Households with children are the best customers of pies, tarts and turnovers. Those households spend 47 to 71 percent more than the average, while single parents spend just above the average on this product.
- Sweet rolls, Coffee Cakes and Doughnuts: Households with children are the best customers for sweet rolls, coffee cakes and doughnuts and spend about 52 to 69 percent more than the average household on this segment of the baking industry. Household spending on sweet rolls, coffee cakes and doughnuts fells 23 percent between 2000 and 2009, and will continue to surely continue to decline.
List of Niche ideas Within the Baking Industry That You Can Specialize in
Starting a baking industry is usually exciting, as there are a couple of niche ideas within the industry that an entrepreneur can choose from due to its versatility. Aside from the existing niches in the bakery industry, an entrepreneur who is creative can carve a niche for himself / herself.
Here are some niches / areas that an entrepreneur in the bakery industry can be specialized in;
- Online bakery
- Counter service bakery
- Specialty service
- Sit down bakery
The Level of Competition in the Baking Industry
As in many industries today, the bakery industry is very competitive and only the strongest and determined can survive it successfully. This is largely due to the fact that, the industry over the years has been booming and no stone has been left unturned in its continuous drive, thus making it very competitive. And despite the fact that the industry is highly capital intensive, many start-ups and entrepreneurs are willing to venture into it.
To this end, the industry is even becoming more difficult for starters to survive in effectively without any hassle. Though small companies can still make waves in the industry by focusing on niches that have not been tapped by the big names in the industry.
List of Well – Known Brands in the Baking Industry
Just as in any industry, there are usually big brands that have made a mark and a name for themselves, the bakery industry too is not an exceptions. As there are many big brands in all of the aspects of the bakery industry that have made a mark for themselves, and they include the following:
- Interstate Bakeries Corporation
- Sara Lee Corporation
- Flowers Foods, Incorporated
- Bimbo Bakeries USA
- Krispy Kreme Doughnuts, Inc.
- Tasty Baking Company.
- A B P Corporation
- Nonni’s Food Company Inc.
- Maple Leaf Bakery Hendersonville
- Thorntons Inc.
Starting a bakery business is indeed tricky due to the expertise and other things that must be put in place hence critical economic analysis must be conducted to ensure that the risks and other threats associated with starting a business from the scratch or investing in a business idea are mitigated.
If you are considering starting a bakery business in the United States, your concern should not be restricted to just acquiring an office facility and equipping the facility or hiring the best hands in the industry, you should also be concerned on how to attract customers to patronise your products, after all you will not consume them yourself.
Averagely, setting up a bakery business is usually expensive, but when done on a small scale with a lot of ideas induced into it, the business will pay off in the long run.
Is a Bakery Worth Starting from Scratch or is Buying a Franchise Better?
While there is the possibility of buying a franchise from a successful bakery company, or even partnering with an established baker if you are considering owning an investment in the bakery industry. Certainly, people are motivated to start a business based on various factors and incentives.
If you are looking towards building a business that you intend controlling, a business brand that you hope to one day transfer ownership to your children and perhaps also sell franchise in future, then starting from the scratch should be your best bet. But if you only interested in making money and multiplying your wealth, then you may as well buy the franchise of a successful bakery company that is willing to sell its franchise.
Possible Threats and Challenges You Will Face When Starting a Bakery
Generally in the bakery industry, just like in others, both the already established ones and start – ups are usually subject to threat and challenges from government policies, global economic downturn which usually affects spending, cost of ingredients, materials and the eventual selling price due to some unforeseen circumstances that might even be beyond the scope of the baker and the industry, in fact this might even affect production and sales.
The ever-changing market place might mean coping with widely fluctuating food and fuel prices especially by using futures products to hedge against losses, or dealing with a saturated and consolidating market where large supermarkets are producing in-house products, increasing competition.
Small bakeries, unless they automate or provide some other distinct value to their customers, may find that they cannot compete with larger bakeries and their economies of scale. Through 2016, the number of companies in the U.S. bread sector is predicted to shrink by 2.3 percent.
Another threat that you are likely going to face when you start your own bakery company is the stiff competition from already established bakeries that have stood the test of time. It will indeed be an uphill task to compete favourably with those companies.
Writing a Business Plan for a Bakery Business
As a person starting a bakery company, just like other businesses then one of the first steps that you are expected to take is to consult experts to help you write a good and workable business plan. The truth is that, in order to successfully run a bakery company, you would need to have a good business plan in place.
A Business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business.
You will be able to manage your business with purpose and perhaps precisions; you will know what to do per time and how to handle challenges, growth and expansion. It also defines your business, sets goals, creates a plan to generate revenue, lists expenses, describes your customer base, and examines your competition.
How Much Does It Cost to Start a Bakery Business?
These are the key expenses you are expected to make when starting a medium scale but standard bakery business in the United States of America;
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits (Health department license and business license) and permits (Fire department permit, Commercial Kitchen/Bakery permit, Air and water pollution control permit, Sign permit et al) as well as accounting services (CRM software, Payroll software, P.O.S machines and other software) – $15,300.
- Marketing promotion expenses for the grand opening of the bakery in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- The cost for hiring business consultant (including writing business plan) – $2,500.
- The cost for insurance (general liability, theft, workers’ compensation and property casualty) coverage at a total premium – $30,400.
- The cost for leasing a standard facility in good and centralize location – $200,000
- The cost for remodeling the facility and construction of a commercial bakery – $100,000.
- Other start-up expenses including stationery ($500) and phone and utility (gas, sewer, water and electric) deposits ($6,500).
- The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000
- The cost for start-up inventory and commercial bakery equipment (Baking ingredients (flour, yeast, dough, sugar, butter, milk et al), Packaging materials supply, Standard commercial oven, Proof boxes, Baking Sheets and Racks, Mixers, Work Tables, Sinks, Slicers, Scales, Cake decorating Tools, Ingredient Bins and baking utensils, Filing Cabinets, Noticeboard and Staff Uniform et al) – $100,000
- The cost for store equipment (cash register, security, ventilation, signage) – $13,750
- The cost of purchase and installation of CCTVs: $5,000
- The cost for the purchase of furniture and gadgets (Telephone, printing machines, flat screen TVs, sound system, computers, tables and chairs et al) – $25,000.
- The cost for building and hosting a website – $600
- The cost for opening party – $8,000
- Miscellaneous – $5,000
You will need an estimate of seven hundred thousand Dollars ($700,000) to successfully set up a medium scale but standard bakery business in the United States of America. Please note that this amount includes the salaries of all the staff for the first 3 months of operation.
Starting a small scale but standard bakery business that can only concentrate in baking cupcakes and other flour snacks and with fairly used baking equipment in the United States of America will cost about fifty thousand dollars to one hundred and fifty thousand Dollars ($50,000 to $150,000).
Please note that this amount includes the salaries of all the staff for the first 3 months of operation and with a distribution network that covers just the immediate community.
When it comes to starting a standard and large scale bakery business with several distribution outlets in key cities in the United States of America, a bakery business with the intention of selling franchise and also baking bread and all forms of baked flour like snacks and cakes, then you should look towards budgeting well over two million dollars ($2 million). Please note that this amount includes the salaries of all the staff for the first 3 months of operation.
Choosing a Suitable Location for your Bakery
Choosing a location for your business is not what you should do without due consultation. The truth is that if you get it wrong with the location where you have decided to pitch your business tent, you are more likely going to struggle to make headway with the business.
One of the major reasons why businesses struggle, fail and eventual close shop is the fact that the owners decided to choose a wrong location for the business. Therefore in choosing a bakery location, the following must be taken into cognisance,
- Busy business district
- The downtown area in cities
- In a drive through
- In a retirement home
- Government offices
- Institutions of learning etc.
50 Catchy Creative Bakery Business Name ideas
Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business. When it comes to choosing a name for your bakery business, care must be taken to ensure that the best name that suits the industry is chosen. Here are some catchy business name ideas you can choose for your bakery company;
- Sweet Sensations bakery
- G & C bakery group
- Always There Bakery Inc.
- Kids’ choice bakery ltd.
- Williams & sons Bakery
- Johnsons Bakery
- Rite bakery Inc.
Choosing the Best Legal Entity for your Bakery Business
No doubt starting a bakery company is indeed a serious and competitive business which is why the legal entity you choose will go a long way to determine how big the business to can grow. Choosing a legal entity for a business such as a bakery company is a bit complicated especially if you decided to grow the business big.
You need to consider how you will set up your business. There are pros and cons for different business structures, and it is up to you to decide which works best for you. This could include been a general partnership, a limited partnership, an LLC, a “C” corporation, or a “S” corporation.
It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice on the legal structure to build on.
List of Legal Documents You Need to Run a Bakery
In The United States of America and of course all over the world, the bakery industry is amongst the industries that is highly regulated so as to avoid costly health breaches in the country. If you are considering starting a bakery company, then you are expected to meet the legal documents requirements as stipulated in the constitution of your country.
These are some of the basic legal document that you are expected to have in place if you want to start a bakery company in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company Bylaws
- Operating Agreement for LLCs
- Insurance Policy
Is Professional Certification Needed to Start a Bakery?
The bakery industry is one of the industries that is highly regulated so as to prevent costly health breaches that might arise if not properly taken care of, as this could endanger the health situations of a country. It is for this reason that if you are looking towards beginning a bakery company, then you should acquire relevant certifications with the appropriate bodies.
While it is safe to say that, there are necessarily no professional certifications required for this industry, it’s indeed a necessity that you get acquainted with the following industry regulators in the United States of America.
- American Bakers Association
- Retail Bakers of America
- Progressive Baker
- Independent Bakers Association
- American Society of Baking
- American Culinary Federation
The Best Insurance Needed for a Bakery
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own bakery company in the United States of America;
- General Liability Insurance
- Commercial Auto Insurance personal travel
- Workers Compensation Insurance
- Professional Liability Insurance
Starting a Bakery Business – Technical & Manpower Details
If you about starting a bakery company, you must be concerned with getting state of the arts equipment and also ensure that your products meet the taste of the consumers.
When it comes to choosing between renting and leasing an office space, the size of the bakery you want to build, and your entire budget for the business matters a lot. Though it is always better to have a large facility to ensure large production.
Regarding the number of employees that you are expected to kick start the business with, you should consider your financial capacity before making the decision. But good enough, you don’t have to maintain a large workforce if you run a bakery company; you can recruit and train employees when you have the need to.
Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Security Consultants and Associates (Different areas of specializations as it applies to your business), Business Development Executive / marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.
The Service Process Involved in the Bakery Business
The services process involved in the bakery industry though general, but depends on the niches of the bakery services you are into. On the average, the process involves the following:
- Step One: Ingredient Selection & Scaling
- Step Two: Mixing
- Step Three: Primary Fermentation
- Step Four: Divide and Pre-Shape
- Step Five: Bench Rest
- Bread – Step 6
- Step Six: Final Shaping
- Step Seven: Final Fermentation
- Step Eight: Scoring
- Step Nine: Baking
- Step Ten: Cooling.
After the processing, it is thus time to package and then sell the baked products to consumers, retailers etc.
Starting a Bakery Business – The Marketing Plan
The bakery business is a business that requires a lot of advertisement and marketing, as there is lots of competition in the market. It is needless to say that, marketing rules in the bakery industry. Here are some of the platforms you can utilize to market your bakery company;
- Advertise your business in relevant business magazines, TV and radio station and also make yourself available for food/health related talk shows and interactive sessions on TV and Radios)
- Leverage on the internet to promote your business
- Create different packages for different category of clients in order to work with their budgets.
- Engage in direct marketing, referral marketing and also email marketing.
Possible Competitive Strategies for Winning your Competitors in the Baking Industry
It might be challenging competing as a new entry into the bakery industry especially in a highly organized market like that of the United States of America, which is why you must be deliberate in choosing your brand and the type of baked products you offer.
As a bakery company, if you have the required expertise and equipment to produce good products, then you are likely not going to struggle to compete in the industry. Hence, ensure that you produce best products always; likewise creativity should be your watchword.
Lastly, ensure that your organization is well positioned and if possible form strategic partnership with other key stakeholders in the bakery industry; it will sure give you competitive advantage over your competitions.
Possible Ways to Increase Customer Retention for a Bakery
When it comes to business no matter the industry you choose to pitch your tent in, one of the easiest ways to increase customers’ retention and perhaps to attract new customers is to satisfy your customers always. If your customers are satisfied with your services delivery, they can hardly source for alternative service provider or products. Some of the things that can be done to ensure this include the following:
- Be original: These two words might seem like generic advice, but to survive in the bakery world, you can’t be a carbon copy of your competitors. “Be the best, the first, or the only one baking the kind of treats you make,” Know what kind of competition you have in your area and work to set yourself apart too.
- Be prepared to market your product: You can spend all day and night in the kitchen creating the next best cake, but if no one knows about it, it doesn’t matter how great it is. That’s why you have to set aside time and money to market your business. “Being a fabulous baker doesn’t guarantee success, “You also have to be a fabulous marketer too.”
- Write a blog. To promote your business, you need to devote some time to blogging.
- Use social media. Social media is a great way to promote your business. If you’re short on time, pick one social media site and post consistently
- Focus on your customers: Your customers are your key to success. Happy customers become repeat customers, so work to make each customer experience. In fact, you should make your customer experience count.
Strategies to Boost your Brand Awareness and Create a Corporate identity
When it comes to creating brand identity for a bakery business, the calibre of customers and the quality of your products over the years matter a lot.
It is pretty important to work with your consultants to help you map out publicity and advertising strategies that will help you walk your way into the heart of your target market. First and foremost, you should ensure that your brand is visible and well communicated which is why you should make provisions to work with different class of people in the society.
You should ensure that, the best publicity experts handle your business for you. Below are the platforms you should leverage on to boost your brand awareness and create a corporate identity for your bakery company;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, community leaders, schools, hospitals, hotels and government offices in your target area.
- Advertise your business in relevant magazines and websites
- Promote your business on satellite TV stations and radio stations.
- Engage in direct email marketing
- Leverage on the internet (social media platforms and your official websites) to promote your business
- Ensures that your workers wear your branded shirts at all times during working hours and also make sure you brand all your company’s official vans, trucks and cars et al.
Creating a Suppliers / Distribution Network for your Bakery
The nature of the bakery industry gives room for bakery companies to network amongst themselves. This is because there are many perspectives to it, and having partnership with other established persons in the industry.
It is important to state that, it is only when bakery companies liaise among themselves that they can maximise the opportunity that abounds. For example, you may have need to get some other products from other bakeries to meet up with the demands of the customers
Tips for Running a Bakery Business Successfully
The fact that, irrespective of the kind of business you run, the ability to get all the members of your team on same page at all times is one of the keys you need to successfully run the organization cannot be over-emphasised.
As the chief executive officer of the company, it is you responsibility to give direction to the business. Part of what you need to do is to ensure that you create time for office meetings; a time where challenges, feedbacks, projections and relevant issues are discussed.
The meetings could be daily, once in a week, twice a week or once in a month. Summarily, there should be consistent meetings. You also need to train your employees regularly
Lastly, you should keep your doors open for suggestions from members of your team and your clients. It is very important to reward excellent performance in your organization; it will go a long way to encourage healthy competition in your organization.
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