Having Trouble Figuring Out The Numbers Of This Biz...
Business By Tomoore Updated 20 Feb 2009 , 3:44am by snarkybaker
My DH and I had a serious talk a couple of nights ago of me doing my cake biz full time. I am really excited about the idea of this, but just tried playing with numbers and am trying to figure out how to make this work.
Can those of you that are in business advise me on how much of your revenue per cake goes to the following areas:
(an estimated percentage would be great)
Labor
Supplies
Savings
Advertising
Research and Development (of new products and recipes)
Equipment
Rent
ETA: Thanks in advance for your help...I really wanna figure this out and make it happen!
General guidelines from the industry.
20% for labor + supplies
6% advertising
Equipment is gonna depend on what you already have and what you need.
Rent is going to be market driven.
R & D you do in the general course of your biz. I wouldn't have thought to break in out separately.
When you do your biz plan you will create financials and that will help you get a handle on what you can and can't afford.
Assuming you are considering a comm'l location .....
Categories to also consider:
Utilities
Insurance(s)
Vehicle cost/maintenance
Misc stuff such as dumpster expense, linen service/laundry (towels) & fire protection. If you have an exhaust hood, there's a semi-annual or annual cleaning/serving that yoru insurance company will probably require.
Professional services .... accountant, bookkeeper, CPA, lawyer, consultants
Under labor, you also have payroll taxes
Professional memberships (chamber, networking groups, ICES)
Indy: I was considering renting a kitchen until....
Leahs: that figure freaks me out! How do you make it on 20%?
Let's have a business for dummies conversation here: When you "the owner" are doing the work, you pay yourself a salary, also known as labor, right? ...and that should only be 20% of revenues?
When you "the owner" are doing the work, you pay yourself a salary, also known as labor, right? ...and that should only be 20% of revenues?
I think this is the biggest mistake we make when we work out of our home (and even sometimes when we move to a shop). We think (note: THINK!) that if we are the ones doing the work, then it's not costing us anything, an illusion caused by the fact that you're not writing a payroll check for your time.
Always, always think of things this way: "If I had to pay an employee to do this work, how much would I be putting out in payroll?" This forces you to think about "when would the employee clock in and clock out? How many hours would I pay them to run across town to buy supplies? How much would I have to reimburse them for using their personal car?" It's all a legitimate expense .... and we tend to overlook this stuff when it's us (the owner) doing it.
Because at some point in your life, you want to be able to delegate that work to an employee so you can manage the business instead of work the business. When you set your pricng and expenses today, you need to consider your total cost ... and that includes a labor factor whether it's you doing the work or an employee (real or imagined!) doing the work. 
You need to think of it both ways. Your labor costs should be a percentage of sales. It's not a good idea to have labor costs be all over the board ... 20% this month; 58% next month; 34% next month, etc. This makes it hard to plan and project. Likewise, if you know you have $400 a week in payroll, you need to know if your sales are going to be $4000 a week (or whatever percentage you've determined).
For each catering job I take, I generally use about 10-13% of the total invoice in labor costs. So if I have a $3000 catering job, I figure $300 for staffing costs. At $10/hour, I can have 30 man-hours (or 5 people for 6 hours each .... or 4 people for about 8 hours each). If the job is complex and I think I might need more than 4 or 5 people, then I need to add an add'l labor charge and explain to the bride why her event requires extra staffing.
If I price each job right, then I should come out ok at the end of the month. (Now THERE'S a nice little theory! 
) 
Tomoore
Thank you for such an excellent question and thank you to all who have answered! I was just talking to my DH today about how I cannot go much longer like this.....working full time and doing this PT out of my home....it's killing me....I'm always stressed and not giving 100% to anything. I'm at the point where I'm so busy that I can't keep up with both but I'm not making enough money to quit my real job.
I've even considered not doing it any more but my husband and family tell me not to quit this dream and what my true passion is.
Anyone ever been in this position and want to share how to handle? Tomoore-are you in this position now too?
Thanks!
Anyone ever been in this position and want to share how to handle? Tomoore-are you in this position now too?
Thanks!
Being on the bubble is the WORST feeling in the world. Too busy to handle it all the way it is .... not busy enough to support itself.
At some point, you have to actually jump in and start swimming. Scary thought, I know.
Mine worked out well. I told my boss in March, that I would be leaving by the end of the year ...12-31. Fortunately for me, the company went thru a downsizing in November, so since he knew I was leaving anyway, I was one who got laid-off, saving the job of another co-worker who WASN'T planning on leaving. And this way, I got unemployment for awhile! 
Know that once you make that leap, you'll be amazed how much easier it is to handle the work load. Home kitchens are not designed for high volume activity and when you have a full commercial kitchen at your disposal, you will just be amazed at how much more you can get done in less time. Plus the cost savings when you can start buying in real bulk now that you have a space to store it.
indydebi
sounds like things really worked out great for you....we are having lay offs right now but I don't feel ready to volunteer
I know things will eventually work out but I need to find some way to have a balance....I think maybe I should learn how to tell people "no"...I have 6 orders for next weekend so I'm taking 2 days of vacation at work to do them...I will not be able to do that ya know every weekend or I will loose my job
Spponful...I'm just at a point where I am not happy working for others and want to stop talking about this and make it happen. I understand it will be a ton of work, but I feel like right now I'm putting 60 hours a week into someone else's dream...when I'd rather be building my own.
I have a very supportive husband, but like anyone, he needs to know that I'm going into this sensibly and wants to see a full business plan. That's where I am right now...I want to understand the ins and outs of the financial piece and put everything else together before making the leap.
I decided that i will probably have to work a part-time biz to supplement my take home pay from business, cause I just don't (yet) see how the business will be able to replace my current salary for the first couple of years.
tomoore... i am in the same boat...
i work a job that thank goodness lets me do cakes... so i have both...
but i would like to leave working, but i teach(at a technical school)... and i love it... but i love love love cakes... i applied for a program that helps businesses start, and as soon as i get approved (fingers crossed) i hopefully be able to leave work and focus on cakes
so i am too at a loss for what to do, bc in the economy as it is now, i am afraid of letting go of my steady income... you know... bc i dont think that cakes can replace my current income completely either...
indy... i think you are the bomb... i would love to be you... i think that it was great that you saved someone their job... that was real awesome of you...
... i think that it was great that you saved someone their job... that was real awesome of you...
It was actually kinda funny .... as I was cleaning out my desk (you know how they give you "10 minutes and a box" when this happens ) and people were doing the "oh I'm so sorry!" thing .... I was telling them, "no! this is a good thing for me! besides, if it wasn't me, it would be one of you guys, so aren't you glad I told him months ago I was leaving anyway?"
One lady shrugged her shoulders and said, "Well .... thanks for taking one for the team, Deb!"
I got outside, called my husband and said, "Good news!! I was laid off today!" 
I felt that it was God's little push .... no safety net for me now, it was do or die!!
There are months I'm happy when I can keep the lights on, and if I had it to do over, I'd sure have a lot more cash in reserve before I jumped in. But the good side of the whole thing is my biz plans were already in progress, so when the corporate job disappeared, I already had something in the works.
And I know not many people are that blessed when they lose their job.
thats true...
sometimes god gives you what you need... i used to work in a hospital 12 hours a day 4 days a week... and was dying... pulling sometimes 18 hour days... and up until 3 am finishing cakes... my knees were really hurting ( bc i have to have knee surgery and the hours on my feet were killing me ) so i left, and then my reserves were almost gone ... and i got a call from my old professor that is now the program director at a school... and she wanted me to teach... and when she told me that the hours were 7am till 2 pm... with an hour paid for teacher planning, i jumped up and down...
i am now working on two things that i love, and having a blast... and now students and other teachers are becoming customers... and its been great for business...
oh, and when i left the hospital, the week after they gave ten people their pink slips... so glad i didnt get one... i hate to get fired...
indydebi-sounds like your situation was a blessing and God's way of moving you along to the right path....I feel like that's about to start for me too. We are in the middle of lay offs and I really don't think I'm too much at risk but I do think I could end up getting my hours cut....which to me would be a blessing....I'm praying that it works out that way...then I can still have a steady income and get this business going. Weird to be hoping to get my hours cut during this economic crises....well...back to work at my real job
Happy Monday!
Tomoore - I am in the process of getting all my ducks in a row to open a bakery. My background is trading stocks on Wall Street, and left to go to culinary school....so needless to say I have pretty much no idea how to write a business plan and forecast sales and all that stuff. You should go online and check www.score.org. It is a non profit organization affiliated w/ the SBA. You can meet w/ a counselor who is a former small business owner. I did that, and the person I met w/ had a wealth of information for me. And the cost to meet w/ them is NOTHING!!!! Totally free. You should definitely check it out. What have you got to lose?
Your percentages for various items will depend on the type of business you plan to run.
Will it be a custom " by order only " bakery ? Are you operating out of your house ?
In general in the food business you want your food costs to be in the 20-30 percent range, similarly you want your labor to be in the 20 to 30 percent range. Your fixed expenses should be no more than 20% leaving you with a 20 to 30 percent range for pure profit .
Some things, like say bottled soda in your case can have a higher food cost, because there is no waste, ever, and there is no labor cost involved.
My husband is a maniac about knowing the labor costs associated with various products. The truth is that it is impossible to accurately calculate labor until you have the staff in place. I may be able to make 150 cupcakes in an hour, but my kitchen manager may only be able to do 95.
Thanks so much for your reply, txkat! I visited your website and I love it!! How far is chapel hill from charlotte?
about two hours away. Less if you drive like me 
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