VIDEO: 9 Reasons Why Bakeries Fail
One of the most intimidating things about starting a business is the potential for failure. From small failures like dropping a wedding cake on the ground to the worst possible failure, bankruptcy, nobody is immune. The point of thinking about this sort of thing is not to discourage ourselves by dwelling on the worst possible scenario but to maintain a realistic perspective at all times. Because if we don’t examine the things that threaten our business then we can’t work to curtail those threats.
As a bakery consultant, it’s my job to examine businesses in terms of their potential for success versus failure. There are a handful of things that keep popping up so for those of you who are in the bakery business or considering getting into the bakery business, here they are.
I encounter too many bakeries that are not taking the time to cost out their products. This is one of the hardest but most necessary tasks of running any business in which you are selling a tangible product. We absolutely must know how much it costs us to make a thing, not just so we can sell that thing at a profitable price but also so we can adjust the recipe or packaging to position the product strategically within the marketplace. If you are not sure how to do this, then check out 125 Building Blocks for Your Bakery Business, which is full of solutions.
I am surprised at how many bakers in business are still using supermarkets to buy ingredients and supply shops for buying packaging. Because when it comes to manufacturing, we should be seeking to avoid buying our supplies at the retail level. At retail stores, we end up paying extra for merchandising and frills and we don’t want that. We want to be higher on the supply chain, purchasing stuff in bulk from distributors or better yet, from the source itself. The goal is to cut out as many middle men as we possibly can. At the very least, we want to compare costs so we know for sure that if we are buying at the retail level, we’re doing so for a reason, because that’s where a particular ingredient is the cheapest.
It’s really hard to launch a business without any investment capital. Without capital, we can’t afford to buy the kind of equipment we need to achieve production efficiency. Without capital, we can’t afford to purchase ingredients and packaging in bulk, which helps to lower our cost of goods. If we can’t reach a low enough cost of goods then it’s impossible to turn a profit at a fair market price. We don’t make any progress that way. It’s like trying to swim upstream instead of with the help of a current.
Sometimes I meet business owners who have tons of things going for them. They have a smart concept and plenty of experience. They might even have a decent chunk of financial capital so they get ahead of themselves and dive head first into branding, trademarking and packaging a single product line that has not been market tested widely enough to justify such a big investment.
Ideas are a dime a dozen. Especially nowadays, when we all have access to an internet that is saturated with recipes and gimmicks and designs. Even if you are innovative enough to come up with a great idea, it’s only a matter of months before someone else will be selling it and blogging about it. Being a successful business is so much less about having good ideas and so much more about finding ways to execute your ideas swiftly and effectively while keeping up with a rapidly evolving industry.
Sometimes I work with bakery owners who have a fabulous concept, which they also know how to execute, but they haven’t taken their local demographic into account. For instance they want to make custom cakes but the median income where they live as not at a high enough level to support that sort of business. Part of the work involved with starting a bakery involves researching your surrounding cities and towns, looking for what’s in demand and meeting that demand. Sometimes that process involves letting some of your most darling ideas go because that corner of the market is already saturated or simply not in demand.
I see a lot of people getting into business because they love what they do, which is a great reason to go into business. I mean that’s the dream, right? To do what you love for work. But too much passion has a way of making us blind. If we love it so much that we look at it with googly eyes then we are more likely to encounter disillusionment down the road. When it comes to business, we need to take off our feeling hat, put on our thinking glasses, and harness as much objectivity as possible.
Once we turn a hobby into a job, it becomes work, which means it stops being quite as fun. I call this baker’s remorse. I see it a lot around the 2-3 year mark. It’s fair to say that there is a little bit of a grieving process involved with letting a hobby go. It’s a pretty big sacrifice when you think about it. Some people make the mistake of trying to maintain that feeling of baking being their hobby by avoiding all the things that aren’t fun about running it as a business like costing, pricing, and analysis. If you are suffering from baker’s remorse, my suggestion to you is to find a new hobby. Getting to create and sharing your creations is probably what you used to love about baking so try looking for new avenues of expression. There are so many other creative things you can do. Make time for those things. Always do art for yourself.
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