I AM IN DESPERATE NEED OF A MENTOR !!!!!!!!!

I currently own & operate a store front cake/cupcake business. When I opened 2 1/2 years ago there was ONLY one other cake/cupcake shop in the area. Two months after I opened, THREE other shops opened literally within two miles of each other. Originally, I opened fully aware that my location wasn't the best but because I only had one other competitor I figured it would be a great start, especially since I started without any loans or debt. I was proud of my small but quaint shop. But not so long after opening the 3 other shops that have popped up are in far better locations therefore they are able to charge more money although my work is comparable and in most cases superior to theirs.

I have put in the allotted 16+ hour days here but have watched my competitors gain more customers, notoriety and to my chagrin even cupcake trucks meanwhile, I have been a jack of all trades trying to keep my business a float. ( I have been so busy with my business I haven't posted any new pictures on cake central in years, if you inbox me I can provide my website to verify my skill level ) My question is with my lease about to end should I concede to the not so competition or forge ahead and hope that eventually I will get the traffic necessary to advertise and ultimately grow my business. All advice is welcome, but please private message me if you are a serious prospective mentor

Thanks in advance

AWhy are you charging less because of your location? If your product is superior to the higher priced options you should be charging the same or more. People who can afford nice cupcakes don't go to the cheap place.

Hi Kikiandkyle,

I calculated my price according to the cost of material, time and overhead. I am located in an older strip mall which is set back from the street, the other shops are located near or in brand new established pockets of the community and therefore have more affluent clientele within walking distance. I absolutely don't undercut in any way and offer a fair price for my product but I don't want to price myself out of my area either.  

AThis is exactly why it's so important to do a competitive analysis and take market value into consideration when creating and refining your pricing structure.

How profitable is your business, and what are your competitive advantages? What is your marketing strategy?

Hi Jason_Kraft,

I honestly haven't adjusted my business plan since I have opened. ( I know that is terrible and believe me I am suffering for it)   My competitive advantages are as follows : I have a great attention to detail on cake design, I am the main cake decorator making sure that my cakes are consistent, everything is made here fresh and no product is store bought or frozen  I also offer exceptional customer service. My marketing strategy has been limited to public data regarding the income levels and clients in my area that may frequent my shop along with my own business data regarding best sellers, worst sellers , highest grossing months and days of the weeks for my business -( March and September) 2nd and third weeks in a month ( densely populated military personnel) , but I don't have a lot of money coming in to do any major advertising, especially with any one of  5 mobile cupcake trucks trolling the area at any given time. I am sure the business structure may be faulty but I am not sure if it is salvageable

I am considering taking a loan mainly to promote the business, add staffing to be able to take on more last minute orders and or possibly move to a different location   but with so much competition already occupying all the high traffic, high income, luxury locations  I don't know if it is a wise decision. It may be smarter to cut my losses  

AI didn't mean that you were undercutting, although I think you're probably undercutting yourself.

Does the majority of your business come from walk ins or custom orders? Do you live in an area where people mainly drive to get to their location?

AWhy not branch out? Get your own cupcake truck? Approach all the local coffee kiosks around town and ask them to carry some of your stuff? Expose yourself (heh) more! :D

A

This is a key question. Depending on the demand and your profitability goals It may be wise to cede the walk-in market and focus on custom orders in a lower overhead environment like a rented kitchen or licensed home bakery (if possible).

Plus all your competitive advantages are focused on cakes, and considering the glut of cupcake shops it may make sense to pursue custom cakes as your flagship product. Another option is a niche (ethnic, gluten-free, food allergies, vegan, etc.).

A

I'm not sure adding yet another cupcake truck to the mix is the right way to go, but pursuing wholesale business for your cakes at coffee shops, restaurants, and upscale grocery stores is a great idea.

Do you know what % of your business sales are from

walk-in clienteel = cupcakes and cakes not pre-ordered.

custom order clientele - special order cakes and cupcakes

Sometimes we keep on going on the treadmill and don't see where our $ comes from.  I think providing more information on your business would help

I live in an area where everyone drives but there are pockets of the community that are contained so that you can walk, ie. Near large mall complexes with major retail stores like Macy's and Target ect. The other places are in an upscale communities where there are townhomes, doctors offices and one is near large square that host seasonal festivals. I have a half walk ins and half custom orders. All of our cakes require preorder so possibly being able to offer same day cakes may be a solution for some of the income issues, but them my competition becomes the big box stores such as Walmart , Costco and Sams and I cant compete with their prices  

I have actually considered doing away with the cupcakes that I sell for walk up service and concentrate on custom cakes in this location after the lease is up since the rent is manageable, it will benefit me in the sense that I don't have to maintain employees to prep cupcakes every morning  but looking at my numbers the cupcakes account for 40% of my overall sales revenue ( calculated from this time last year until present day  ) and I have no clear data on product loss ( I know that is bad). I am thoroughly confused, should take on a small loan to hire a good marketing and advertising company to help me make the data I have make sense? I am currently doing almost everything no professional help just family and 3 employees ( one concentrating on maintenance/ janitorial, a prep person mainly for cupcake production and a family member that helps with paying bills email and customer service   

40 % of sales are cupcakes 60 % are custom cakes . I only take preorders for cupcakes because I don't have adequate staffing to take on walk in clientele, although this may give me a professional edge and none of my competitors are able to do it, but with the limited amount of money coming in I don't have the funds to hire more staff. Do you recommend taking out a loan to hire more staff  ?  currently, I don't accept walk in cake orders so  I don't have the data to prove if this strategy is wise.

AWhy not take on extra staff in the form of interns and see if they extra manpower helps without risking losing any money?

ADo you turn away a lot of people currently who come in asking for a cake/cupcakes right now?

Great idea, Ive had volunteers and it was helpful but I really need experienced cake decorators that can work on their own and that cost money. I will however try to take on volunteers and devote more time to training them so that I can hire them  and at that point recalculate the numbers:"no win without a try" , am I correct?!? I will also look further into possibly doing away with cupcakes after the lease is up in 7 months.

I truly thank everyone for all of your advice, I realize that perhaps I don't have the data needed to make an informed decision at this time, so I surrender myself to your mercy because sometimes when you are consumed by running a business you can be short sided, and I don't want pride to be my guide  

A

How much of your profit comes from cupcakes vs. custom cakes?

A

Hiring unpaid interns for production purposes may violate the Fair Labor Standards Act: http://www.dol.gov/whd/regs/compliance/whdfs71.pdf

I don't have exact numbers but I can guess that I turn away 20% of people because I am booked. I only take on enough cakes that I can handle within any given week, I give the cakes numbers which represent level of difficulty, this helps me to not take on more than I can handle and ultimately sacrifice detail of design. I would love to be able to take on more orders but that requires hiring an experienced cake decorator and the rate of pay is definitely more than I can afford, should I take out a loan to get the ball rolling on hiring someone and take on more orders? 

You are correct, unpaid interns does violate labor laws but volunteers are acceptable ( most although don't have the necessary experience)

A

I wouldn't take out any loans or hire anyone else until you have a clear picture of how your walk-in business impacts your profitability. You may find that you would be more profitable at a lower volume without the storefront.

I make on average a 20% profit depending on the month based on cupcake and cake sales. This includes contingencies fund for maintenance issues. For actual numbers I can inbox you

by reevaluating what your saying it sounds like I should close shop at lease end and lower my overhead becoming an at home baker. I accept that this may be the most sound advice and although disappointing may save me the headache of looming debt. I guess I was hoping there may be another way

ADon't do something because someone on the internet suggests it. You have no idea what someone else's experience is - and there are those here who simply play bakery owners/businesses on the internet.

Have you talked to the SBA or SCORE to help you evaluate where you are at and help you decide your best course for the future?

A

It may or may not be the best way to proceed...this will depend on your profitability analysis, which should be broken out by walk-in orders vs. custom orders. For example, if 90% of your 20% profit margin comes from custom orders, your decision will be pretty easy.

This information should be available in your accounting system if you have been using a relevant chart of accounts. If you don't have this info I recommend talking to an accountant, since you can't make an informed decision without it.

I would not get a loan for marketing, advertising or payroll.  In my opinion, you should only get a loan for tangible items.  I'm honestly not even sure a bank would loan you money for the intangible.

My husband and I own a restaurant and brewpub in a really questionable neighborhood.  It is on our Main Street, and is undergoing a very slow rejuvenation.  Although we do very well, because we offer a menu with freshly prepared items with a great atmosphere, there is no doubt our sales would probably double if we were in a higher traffic area of our city (near the mall).  But, we saw the potential of being in a "bad" neighborhood while rents are low, and hope that it pays off as the rest of the block is renovated and draws in more traffic.

I would spend the next six months building up wholesale business of some kind, and move to a better location if you have built up enough business to swing a higher rent.

And study up on some guerrilla marketing techniques that you can use to market and advertise your business. :)

Liz

I give you credit.  The last thing I would ever want is a storefront, for many of the reasons you have discussed.  I wish you much luck.