How to Start a Bakery Business

Bakery business has turned out to be one of the most dynamic and popular industries worldwide in recent time. Some of the leading competitions in the global bakery industry are- Britannia Industries Ltd., BAB, Inc, Grupo Bimbo (Mexico), Finsbury Food Group, Flowers Foods (U.S), Hostess Brands, Monginis, McKee Foods, and Yamazaki Baking. According to research, the market is expected to grow at a CAGR of over 6.55% by 2020. In terms of revenue, Europe led the global bakery market recording a market share of 40%, and is expected to be the highest revenue contributor until the end of 2020. The other developing regions such as South America and Asia-Pacific are currently the growing markets. India, China, Brazil, Argentina, and South Africa are the most attractive entries on the list. The introduction of trans-fat-free or gluten-free products in the market had added fuel to the growth of the bakery market, western European countries such as the UK and Spain have emerged as the largest markets for gluten-free products.

Thought bakery business is a very profitable business idea but due to the result of rapid change in the preference of the consumer, the bakery market thus is at a high risk of failure in terms of massive competition and technological enhancement.

Well before we start let’s be clear about the time required for the implementation of the whole, that would perhaps vary depending on the type, place, and many more things, but a year of time would be decent. And the must need things to include perseverance along with dedication that is the key to success.

Be Clear About Bakery Concept

The first and foremost thing to start a bakery business is to have a clear concept of the type of bakery you want to open, depending on which one will decide how they want to get identified as and would proceed further to the next detailed steps. The few types are –

Self-Service– Self-service or counter service means serving oneself, this type of bakery concept would ease the hassle of manpower and would prove to be beneficial in cost-cutting as it runs with staff.

Sit down and Home Delivery– If you want to open a bakery that would offer a sit-down space and also offer home delivery then you need to find a good and proper location that would be spacious and reachable and do help in attracting crowd, and for home delivery, the cost of the vehicle and extra manpower should be counted in as well.

Specialization or Cafeteria– Decide whether you want to open up a bakery that would confine itself just to making and baking cookies and pastries or do want to open up with an option of the cafeteria as well. It would definitely increase the rate of your profit margin and the possibility of success.

Be clear about the type of bakery you want to open, like a bakery that just deals with cookies, pastries, cakes, and fresh bread, or do want to offer your customers a few extra ranges of choices like snacks and all. And be focused on the range of choices you are up to offer, don’t mix up, and try not to get diverted, being specific in your own genre might help you to increase your success rate.

Budget

The total approximate investment to start a bakery business is Rs 15 lakhs. However, the cost of equipment and location can lead to considerable variance in the approximate cost.

• Location – Rs 60,000 (per month)
• License – Rs 40,000
• Manpower – Rs 1,20,000 /- (including head chef *if required*, helper, service boy, cashier)
• Furniture and Kitchen appliances – Rs 6,00,000
• Marketing – Rs 30,000/ month (including billboards, pamphlets, and online tie-ups)
• Interior – Rs 3,00,000
• Uniform and other merchandise stuff – Rs 20,000 (including t-shirt, caps, merchandise boxes, and bags)
• Logo design and other miscellaneous things – Rs 15,000

Location

The next and one of the most important steps for starting a bakery includes shopping for the perfect location. The ideal location has a high footfall, shops on the ground floor that are easily accessible and visible are apt. An area divided into 2 floors which are known as double height shops can be considerable so as you can build up a kitchen on one floor and the display or the sitting zone at another, well this condition may vary in accordance of the place availability and also with your own choices.

While selecting the location for your bakery do have a check to ensure that the place has a proper water supply and drainage facility and also the area is free from flies and is away from smell prone areas. And also have a survey of the competitors and the age group of the crowd. Also make sure to get a proper NOC from the property owner and the local ruling bodies, which is a must need in the processing of your license and other legal paper works.

Market Research

Have a quick check of the current scenario of the market and as bakery market is very dynamic so having a deep knowledge about the focus groups, market competitor, customer surveys and also about the current market demands do turn out to be a great help in terms of survival in the long run. It would help you out in getting first-hand knowledge of the market according to which you can add up something that would make your bakery stand out in the crowd and will distinguish you from your competition. Shortlisting the best dealer in the town in accordance with your budget and needs would be great and last but not least is a SWOT analysis of your own bakery business.

Business Plan

One of the most crucial parts of opening a bakery business is having or setting a proper plan, most businesses fail due to the lack of a proper business plan. So, set a proper business plan as this is the only thing that might support you if you need any financial help from the bank or from any other indirect sources. I would suggest, don’t move ahead without having proper planning and backups. This might help you to be a part of the long run if any doubt is there trying to get help from some professional or get ahead with the relevant websites that serve and resolve all your queries. Before making the business plan does have a market study and get clear about the dealers, their rates, your competitor and their details like do they specialize in anything and every other detail related to them, also figure out what to do with the leftovers or if any situation comes like the food turns out to be bad or how to judge the right quality of the food, how to deal with such scenarios and what backup resources you have to get over with the situations. Go through every possible perspective while making a business plan, enlist the ways to generate revenue, and know your customer base as well. And once you are done with your business plan get it reviewed by your accountant.

License & Paperwork

If you want to open a bakery business you will need to apply for a bakery license from your state agency, this business license is provided by your state’s Business Licenses, Permits & Tax authority. For the license permit, your bakery kitchen will have to be approved by a state inspector and from the department of health to ensure that you meet health requirements and that the food you produce will not harm your customers. For example, the food and quality standards are being approved and certified in India by FSSAI (Food safety and standard authority of India) and by FDA (Food and Drug Administration). Get the fire license after the installation of the fire extinguisher cylinder. Similarly, get a hold on to the relevant food authorities and licenses in accordance with your country. If you include a home delivery service, then the vehicle license and permits should also be added to other paperwork.

To get the TIN license for the bakery you can call up your chartered accountant or can check on your state business license board for the same.

Financing

Well, everything seems to be fine enough till it comes to financing. To get your business finance you either need to take help either from the bank or from any other individual sources. But I would recommend you to run initially with the bootstrap, then try reaching out to the bank or any other investors. If you have a wide vision behind your bakery since the starting day then search for a perfect investor and pitch your idea to them instead of going for the bank option. And if you don’t have any such bigger plan and want to open up a bakery for the sake of survival or just want to make it a part of your daily routine then reach out to banks and apply for an SBA loan where you will easily get subsidies and grants in your loan, present your expertise in bakery and what earning you are expecting from it, if possible try to hire some professional for the projection of these facts and figures. Make sure to be very careful while applying for the same and keep your documents updated.

Menu & Pricing

A lot of people now have become health conscious so by offering trans-fat-free and organic products you can target health-conscious consumers as well. The special diet need include, gluten-free products that have initially led to the adoption of functional ingredients to enhance the products making them healthier. For instance, in recent years, several bakery products in Canada contain rice flour and chia flour instead of wheat flour. To survive the competitive market many vendors do compromise with the price, so try not to compromise with the price and quality of the food, fixing a moderate price and at times giving few attractive deals would do the job. While fixing up the price make sure to have an analysis of the ratio of price in comparison with the rates of competitors, the strength, and weakness of your competitor.

Need of Manpower

One needs to have sufficient manpower to support their business in accordance with their choice of bakery they want to open, the manpower includes- head chef, service boy, helper, cashier, and if you want to add the option of home delivery then extra helpers would be a great option. You always need to keep a backup while running a bakery business, make sure to have sufficient manpower, and also few backups as well.

Marketing

Once you are set with the paperwork to go ahead with the marketing part, to enhance reachability to a larger scale, you need to promote your business. Let me give you few cost-efficient ways of marketing your business

Networking- One of the most effective ways of promoting your bakery business would be networking, make sure to frame good and wide networking that might help to bring in more customers, be in touch with the business groups in your area and even in the social media. To enhance your networking to expand your bakery business try attending a few gatherings, gel up with as many locals as possible. It might help you in fetching some great bulk deals as well.

People usually don’t pay attention to customer retention in the bakery business, but according to Harvard Business School, a 5% increase in customer retention can increase your revenue by 25%- 95%. Save the numbers of your customers and add them to the subscriber’s list, and keep them updated regularly with the exclusive offers and other great deals and the happenings about your bakery.

Social Media- Being in the superfast technological era social media is the most powerful media platform for marketing your business. It records a large amount of reachability. Instagram, Facebook, WhatsApp, and Snapchat stories are few great examples of the same.

Write Blogs- Maintain a proper section of blogs and articles and post consistently, blogs are the most convenient and effective way of reaching out to a maximum number of people and to bag some trustworthy customers.

Print Media- Take the help of print media to let people know about your existence, distribute pamphlets, print ads in the newspaper that holds maximum reachability. If possible try out for billboards and other promotional activities outside the mall, stationery shops, school, and many more places.