I have been on a wild ride since I started my business last year!! This whole time I have been renting kitchen space from a Business Incubator and it sucks! They charge $10 an hour for use of the kitchen plus a monthly rent! Plus I have to share the kitchen with several other businesses that quite frankly are pigs! I have to schedule my time around others and if the kitchen is booked, too bad! I do everything my self unless I have a huge order of cupcakes, then I hire my sister and a friend to help. I have been collecting equipment all year in hopes that an opportunity will arise to buy my own place. Well yesterday that happened!!! The same time I started my business another cakery started in their own place. The doors to her shop have never opened though. She called me and asked if I would be interested in her place! Are you kidding me!!! I met with her yesterday and she said she just doesn't want to own a business! The place is AMAZING! It is literally what I have been dreaming of!! So your saying DO IT DO IT, right? Well I am scared!! As it is right now I work alone in the middle of the night when my kids, 1 and 4, are sleeping and my husband is home. If I do this it is a total commitment! I'll have to hire employees to make the rent and utility payments. I am not worried about getting business, I have that and have to turn down at least 10 orders a day. I am worried if I can keep up, if I can pull it off, if I and be there all day and be mom at the same time! And then there is the business plan!! I have been putting that off for awhile but now I've go to do it, no only for a loan but for the visualization of my business! Oh and the loan, that scares me too! I have never borrowed money, I don't like to! I have paid for everything myself because I don't want anything hanging over my head! I just don't know what I should do at this moment. If there has been anyone in this position, some advice would be greatly appreciated!
all is can say is congratulations on the opportunity and whew...that is a tough situation. I just got my 'break' with finding a kitchen to rent from and i had to think about weighing my kids needs and the chance of this opportunity to come around again. With me, the monthly rent and financial risk is low enough that i can hold on for a year or so to see how it pans out and keep it a part time gig. While this is my own situation, I quit my professional career (PR and Marketing) to be home with my boys when they are young. I wouldn't want to have a full time job right now, even if it were a great situation.
I guess i'm getting at these are the questions you have to find the answers you are most comfortable with. Can you and do you want to take on a full time+ job of not only doing your baking and cakes in addition to running a business with employees and everything that managing entails. It becomes much more than doing cakes, but running a small business. Is that what you want right now? (if so, congratulations again!)
Do you have the experience to run a business? If not, you are risking your assets, future income, and your credit rating. Running your shared kitchen business is not the same. I think the number is about 80%...how many businesses fail in the first year. And very few of the 20% make it to five years. With little experience, getting a bank loan may be tough. Not trying to rain on your parade but I have seen this many, many times. I used to work for a newspaper in advertising. New businesses would call and ask for a rep. After our initial consultation, we would write on the corner of the contact page, how long we thought they would be in business... three months, six , a year, or they would make it. We were very seldom wrong. Running a business requires a good knowledge of accounting, especially COGS, tax, employee issues, marketing, and a low enough debt load to make it viable. In this economic market, I would suggest going into this debt free. People with no debt are struggling. The lady who is selling may have found this out and knows to get out.
It would be interesting to run the numbers on how much you're currently spending on kitchen rental against the loan payment. Would you have to hire employees if you didn't treat it as a store front? What if you did it as a custom cake shop, by appointment only?
I think the business plan is priority number one. Going from just making cakes on your own to having employees just totally shifted your day to day duties and income and expenses. You may find that you become more business manager and less cake decorator so you may want to weigh that as part of the equation.
Also would the amount of the loan be enough for you to convert your garage or a separate building on your own property to commercial kitchen? There is a house for sale near me that not only is an awesome house but it has a 950 square foot workshop that would make the PERFECT commercial kitchen. The idea of being able to be home but still have a licensed kitchen is a dream but it may cost you less than the store front you're looking at now especially when you mention employees...just some more things to consider.
These are all great points and somethings I have not thought about! I appreciate all the comments!! Thank you!
I have 5 kids (youngest is 4) and I would still jump at that opportunity in a heartbeat. In fact I am in the process of making it happen anyhow.
I also have a degree in accounting so the business side comes naturally and I have that working for me.
I read posts about people opening their own places or wanting to and you read a lot of positive "you can do its" from people, then you read the comments that seem like such a punch in the gut. The failure rate comments, the "its such hard work" comments, etc. I understand that these peole are really there to play devils advocate and they point out some very useful things (sometimes), things you might not have thought of. Try not to let negitive comments discourage you. I used to let them get to me. Use them as constructive tools because yes, it will be long hours and hard work but if you love it then it is worth persuing.
Sometimes the hardest things are the most gratifing.
Get your ducks in a row, write that business plan and if you really dream about it, do it. If you are turing down 10 orders a day I would say you've got a better chance than not of being a success.
Best of Luck!
Jewels710, your education and mine are the same. I went into marketing out of college and have owned three startup companies. I have seen over 100 people start businesses because they got an inheritance, home equity loan, loan from grandma, etc.. Without solid business knowledge, these businesses always fail. And to start with a bank loan is even riskier. The first thing that happens when cashflow gets tight is to decide to just double up on IRS payments "next month". Then "next month" never comes. Now the initial investment is lost, the income is lost, the old job is lost, the credit report is bad, ant the IRS interest and penalties will be with them or 10 to 13 years (the IRS has 10 years to collect after assessment, except in tax evasion which does not have a limit).
If I paint a bad picture, it is for a reason and I hope it makes someone stop and think. A good background in at least bookeeping, some tax knowledge, employee law, fixed and variable cost control, and a plan for unexpected big expenses is a must. Today, with the declining work ethic, you cannot depend on an accountant. My husband has had four in four years. Because we have accounting knowledge, we have found huge errors from each one. While perfecting your cakes, go to adult ed classes, take a few college courses, and read everything you can about the financial side of running a business. Get information from tax offices, the labor board, anything you can gather to learn to run a business. Get familiar with Quickbooks. And make sure you are familiar with labor laws. Get pricing on unemployment fees and workers comp percentages for your industry. You will also have other insurances, such as product liability, building and equipment, and automobile.Go to the IRS and state tax depts to find the amount of taxes you will be assessed and to gain information on payroll witholdings. You will need current rates for advertising you plan to buy. Go to your Chamber of Commerce and get income demographics for your area. Thoroughly analize your competition. Find out all requirements for the health dept. Get contractor estimates for any work needed. THEN do your business plan!