Found Bakery For Sale - What's Necessary To Start Up? Long!

Business By sew4children Updated 9 May 2009 , 3:46am by indydebi

sew4children Posted 14 Apr 2009 , 12:33am
post #1 of 21

I found an existing bakery/cookie store in my home town for $15000 that includes $10000 in equipment and $3000 in inventory. If I decide to purchase this, what all is involved besides a business license and health inspections in starting your own business? I was going to start out of my home, but found this deal. The owner passed away and the family has no interest in running it.

Please help me know if this is a good deal, too. The rent is $1100 a month and includes water. They are also including over 800 email and client addresses. I would like to do a somewhat traditional bakery....cakes, cookies, candies and gifts. I would also like to teach classes and offer cookie decorating parties in the facility for kids. I know that there are a lot of variables, but does this sound like something that would make enough money to cover expenses? I have the luxury of not needing to turn a profit, just enough to cover the expenses.

Any help and information would be appreciated. I haven't researched anything, this opportunity simply fell in my lap.

Karol

20 replies
foxymomma521 Posted 14 Apr 2009 , 12:50am
post #2 of 21

If I were you I would remove where I was located from your profile... That seems like a good deal, and if anyone else in your area reads your post they might jump on it first icon_smile.gif

maryjsgirl Posted 14 Apr 2009 , 1:16am
post #3 of 21

I would see if you have an SBA near you and take any of the free business counseling and classes they offer. They even offer free courses on their website http://www.sba.gov

cakesdivine Posted 14 Apr 2009 , 2:46am
post #4 of 21

You need to look at the current owner's financials. If the bakery was making a profit currently then then $1100 mo. may not be a big deal, but there might be a lull when customers find out a new owner has taken over. Are you going to offer exactly what they offered? Were they a full service bakery (breads, cakes, muffins, pies, etc.) or were they just a custom cake bakery?

If you have no idea, check with your local HD to see what you need to do when you purchase a current food establishment. Also, what MaryJ said, learn as much as you can about running a business. Good Luck!

step0nmi Posted 14 Apr 2009 , 2:51am
post #5 of 21

I agree with cakesdivine. You are always allowed to ask for the financials before taking over a business. you don't know WHAT you may be getting yourself into if you don't see their bills and such.

kakeladi Posted 14 Apr 2009 , 2:53am
post #6 of 21

When you look at the books watch out. I did that then found they had showed me a phony set of books.
Talk, talk, talk to any and everyone in town that might know aobut this business - neighboring businesses, friends etc to see if anyone has any opinion about the 'real' amount of business this place has been doing.

-K8memphis Posted 14 Apr 2009 , 3:13am
post #7 of 21

You need to do a business plan that includes a marketing analysis.

But to get a ball park idea before doing the above--you have some number crunching to do.

Figure out what your monthly expenses will be.
How much overhead you will have.

Determine how much product you will have to sell to pay your overhead every month. From that you can determine how many employees you will need and then go tack thier salaries onto your overhead and work your figures again. Don't forget to include ingredient costs to produce that amount of goods.

To cover $1100 a month for rent plus all the other expenses means you gotta move a ton of baked goods. But honestly to answer your question no it doesn't sound like enough to cover expenses. Typically a bakery like you describe needs a business to support it, for example a lunch service or do a lot of decorated cakes or designer cakes.

Honestly, baked goods, gifts, parties and lessons sounds like a lack of focus. Just some business thoughts for you. Like how you gonna hostess a party when you gotta deliver cake somewhere and keep the gift shope open. You need to market to many different groups to bring in gift shoppers and people who buy decorated cake and people who want to have a party there not to mention the lessons. So you've just divided your marketing dollar into four tiny piles.

You need to focus on one thing that will pay the bills.
Baked goods ain't it--baked goods would be a sideline.
Decorated cake maybe. Breakfst/lunch/dinner yes.

Dude, $1100 for rent is a big deal every month. You have to have employees and writing payroll checks is a whole 'nuther migraine.

icon_smile.gif Just being for real.

CanadianChick Posted 14 Apr 2009 , 3:40am
post #8 of 21

you gotta review financials, corporate tax returns, the whole nine yards. If you don't feel comfortable with reviewing the financials, take them to an accountant who is also a business valuator.

Questions to look at include after tax income, how much was the owner paying himself, is the $10,000 in equipment the cost or the depreciated/amortized value, what condition is it in.

Is it a place you would buy a cake from? What is the reputation of the place? What type of work did they do? If that clientele list is expecting standard euro-style bakery items, single tier cakes with buttercream, pies and that sort of thing and you want to create towering fondant wedding cakes, it might not be the right fit - you may lose your client base!

Would you be buying the assets or the shares if it's an incorporated business? If the former, does the price include sales tax, or will you be stuck with a bill later? If it's the latter, are they offering clearance certificates stating that there are no known tax liabilities?

If only it were as simple as forking over $15,000

sew4children Posted 14 Apr 2009 , 6:04am
post #9 of 21

I thought that I would specialize in decorated cakes and cookies/cookie bouquets and possibly later branch into homemade candies (molded, filled and dipped).

It just scares me because I keep thinking that I would have to gross at least 2K to cover expenses. Anyone out there with their own retail business able to do this? Is it reasonable?

heyhihello70 Posted 14 Apr 2009 , 6:32am
post #10 of 21

I am in business now one month, of a budget of $10.000, in supplies and in this business it comes and goes, im working out of my home, and it is great, no rent, thats alot of rent, but the business is there, you need to ask around first hand, the area, how much in demand will you be, in that area ,their isnt but three other places around me,, so its an ok, starting for me.. but i have no rent, and even when i do, do good from week to week, its a turn over right back into my business.. always needing supplies advertising... its the helpers,delivery guy, i pay as well, comes out of pocket, its tough, do alotta home work on the area and the busniess first.. hope it works out for yas,, ~cindy kay~

-K8memphis Posted 14 Apr 2009 , 12:39pm
post #11 of 21
Quote:
Originally Posted by sew4children

I thought that I would specialize in decorated cakes and cookies/cookie bouquets and possibly later branch into homemade candies (molded, filled and dipped).

It just scares me because I keep thinking that I would have to gross at least 2K to cover expenses. Anyone out there with their own retail business able to do this? Is it reasonable?




You're way low. You have to crunch numbers. See my post above.

I had an opportunity to rent a place with another decorator and we would be two independent businesses. I told her to figure her break even point and she was not able to do that and so we never moved forward.

If you don't have and can't get your break even point then you can't do this. The math and the pressure are for real. This is the easy part.

FromScratch Posted 14 Apr 2009 , 2:05pm
post #12 of 21

2K is low balling it... way low balling it. Reading your post and reply makes me think you haven't the slightest idea what you would be getting yourself into. Rent is just the beginning of the equation... you have taxes... utilities (which will be a lot more than you are thinking believe me)... payroll taxes, because you will not be able to do it by yourself and make ends meet and stay sane and healthy... it's easy to think "$1100/mo isn't all that high, but then factor in everything else and it quickly gets VERY forboding.

Is it possible... definitely... but it won't come easy and there will be months where you will wonder why the F you decided to make the plunge and why the F you can't cover the bills... especially in the beginning.

If you haven't the foggiest idea of what it takes to run a business then I suggest waiting... taking some classes and reading some books before you get into it so you know what you expect... even then it will be hard. GA will license your home kitchen I believe... start from there and go forward. That's what I'm doing... for now. The baking is the easy part... running a business is HARD.

mixinvixen Posted 14 Apr 2009 , 2:15pm
post #13 of 21

i would definitely agree with everyone else on crunching numbers...without those, you're going into it totally blind!

we were just in your town a couple of weeks ago for a friend's wedding and a groom's cake delivery...they got married at the atlanta motor speedway! the not so fun thing was the absolute pouring rain all weekend long!

you may be familiar with the bride's salon, "texture salon and boutique"???

FromScratch Posted 14 Apr 2009 , 3:03pm
post #14 of 21

And make sure you ask to see their tax returns... not just the financials they have. The truth is in the tax returns.

mkolmar Posted 14 Apr 2009 , 4:12pm
post #15 of 21

Don't forget that if you have a vehicle for your business to do deliveries for your business your insurance for that vehicle will practically triple.

FromScratch Posted 14 Apr 2009 , 5:06pm
post #16 of 21
Quote:
Originally Posted by mkolmar

Don't forget that if you have a vehicle for your business to do deliveries for your business your insurance for that vehicle will practically triple.




true dat!

icon_cool.gif


And to the OP... we certainly aren't trying to scare you straight... just making sure you think about EVERYTHING involved. There is so much to consider when making this leap. Do some market research... go to businesses in your area and ask them how times are... particularly food establishments. Don't be shy and go when things are slow so you aren't a pain is the heel. I am in the phases of doing this very same thing... trying to do some market research and build a business plan. It ain't easy at ALL. Don't forget to think about liability insurance for the biz too.

cakes22 Posted 14 Apr 2009 , 6:24pm
post #17 of 21

You guys really give a lot of insight to this, a lot of the things you mentioned would never cross my mind or include in my numbers, which is why I'm not an owner of a bakery/cakery/cupcakery. The advice CC'ers give is great (minus the odd drama posts).
The one thing I was told when I was considering opening up shop, was cash flow. How much was needed to sustain my current way of life. How much did I need to have to cover my home mortgage, utilities, insurance, life in general. This money would have to be saved over a period of time, cause I figured that I wouldn't be making a whole heck of a lot in the begining. The more I thought about it, the more I backed off from it. Saving money is hard, especially nowadays. The other pp's are bang on on their advice. You really need to look at the numbers and err on the side of caution.
Good luck....... thumbs_up.gif

dixiekisses2823 Posted 9 May 2009 , 2:59am
post #18 of 21

if u are talking about the cookie world usa shop in mcdonough ga on jonesboro rd then email me...i have somethings to tell you about that place..is worked there b/4 it closed down.....

email me at [email protected]

-K8memphis Posted 9 May 2009 , 3:05am
post #19 of 21

Oh the plot thickens!

But don't tell any state secrets or anything...unless you feel you must--lol.

sew4children Posted 9 May 2009 , 3:19am
post #20 of 21

how ironic, I originally wasn't thinking of that place. there was a place in Ellenwood/Stockbridge that was auctioned off last week. I couldn't do it because they didn't really have road frontage and I didn't think that I could draw in enough business to survive w/o walkins.

Last week one of the other tenants in the same shopping center told me that Cookie World was for sale and that I couldn't probably get it cheap. I sent the owner an email, but haven't heard anything yet.

indydebi Posted 9 May 2009 , 3:46am
post #21 of 21

Just want to concur with the great advice so far.

If you are thinking income of $2000 a MONTH, with a rent of $1100, you are way low in your thinking. Let's "assume" the common theory of "times 3" (which I just do not believe in). THat means you're going to spend about $650 a month in supplies to make $2000 worth of product. My gas/elec combined, on a slow month, runs $300-$400.

$400 + $1100 + $650 = $2150. You're already in the hole and you haven't made payroll, car insurance, property insurance, liability insurance, office supplies, gas for the vehicle, water bill, sewer bill, monthly and quarterly taxes, accountant fees (to handle your payroll), advertising, phone, internet, monthly dumpster bill, misc operating expenses, like cleaning supplies, toilet paper, towel/apron service and everything else I haven't thought of.

To borrow the phrase used above .... not trying to scare you straight, but I've observed that the transition from selling a few cakes from home to maintaining a comm'l location is WAY different that what people think it is. What is considered "good income" when baking from home with no or little overhead .... that same income is suddenly low enough to throw you into bankruptcy when you have to work it like a (pardon the phrase) "real" business.

To give you an example ..... just on the car insurance (someone said it doubled or tripled? yes, ma'am, it sure does!). We had 3 cars on a personal auto policy and our annual premium was a little over $900 a year. We moved 2 of them to my commercial policy and THAT premium was $2200 .... just for 2 of the vehicles. And it's more restrictive. On a personal policy, if I loan my car to anyone and they wreck it, it's covered by my insurance because the person was driving with my permision. On a commercial policy, the driver HAS to be a listed driver on the policy or they are not covered, period.

You mentioned you didn't have to make a profit ..... just cover expenses. Does this mean you have the money in the bank to pay cash for this biz and won't have any loan payments or any debt of any kind? Do you mean "no profit" before or after you factor in your own pay?

Do a biz plan. When I did mine, it was a real eye opener and a great educational experience.

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