Ugh. Should I Change My Whole Business Plan???

Business By sweetartbakery Updated 25 Jan 2010 , 12:02pm by sweetartbakery

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sweetartbakery Posted 22 Jan 2010 , 5:08pm
post #1 of 24

so here the story (in case you haven't seen my other posts). I am a legal homebaker now. my "real" job has offered me a deal to leave (I actually asked for the deal because I hate it so much). This would set me up perfectly to sell my house, move back home, and open up shop... I had a large building rent free-just had to remodel..

ok, heres the change. looks like a remodel might be so involved that I could just build a new building. because of location, I planned to do special order cakes and local restaurant supply for desserts-no store front.

now with the the new info, I could do one of two things.
1) building a bakery on the property of my (soon-to-be) house. separate building and still have the same plans with special order/business supply

2)can the above idea and rent a store front. completely switch modes to do a typical bakery store front, and of course specialty cake too. rent in the area for 600 sq. ft. is $650 a month. I'm sure there are other hidden costs with that though?????

I feel like I need something other than just specialty cakes to make enough money to sruvive. which do you think would do better. I'm leaving a large salary to do this, so I know it will be a shock, but I want to succeed!

23 replies
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snarkybaker Posted 22 Jan 2010 , 5:21pm
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You need to work backwards. How much money do you need to live, pay your bills( including health insurance that will go up about 20%per year), not be miserable, and save for your retirement ?

Let's say that answer is that you need to net $4000 per month. So to start you need a net profit of $6320 per month, since you'll need to pay all of your income taxes, state taxes, and DOUBLE your social Security and Fica, because your employer won't be contributing half.

Average profit on RETAIL baked goods is 20-25 % and 10% on wholesale, so you'll need to sell $31, 600 worth of retail goods to pay your bills, or $63,200 wholesale.

I cna't imagine getting to those numbers wothout a storefront unless you're Sylvia Weinstock or in a very large city where there are just a LOT of people with the means to buy a $500 cake.

Oh, and make sure you have enough money in the bank to not earn anything for at least a year...most small businesses fail because of under-capitalization.

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julzs71 Posted 22 Jan 2010 , 5:31pm
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it depends on what you want, but a storefront would bring in extra business. So at the same time if you have a storefront then more people would come in and interupt you so you will have to hire someone else to help man the store.

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cakesweetiecake Posted 22 Jan 2010 , 5:44pm
post #4 of 24

Great thread. Very informative, Snarky!

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sweetartbakery Posted 22 Jan 2010 , 5:47pm
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I was thinking the storefront would be better, but was going the other way because of the giant FREE thing. lucky for me, I won't support my whole family with this. Our house payments, living expenses will be covered by him for the most part. We do have enough saved too for a year (or more if we really pinch our pennies!). There isn't a single bakery in the area that I can find, with in 1 hours drive. I'm sure there are home bakers, since we are everywhere though!! The idea of storefront just wasn't in the cards originally. stink! probably is the smarter way. the cons are that I would have to hire someone if I couldn' recruit family. AND the bigger con is that I would probably have to put my kids in daycare until they are in school.

the taxes and stuff suck, right! my parents are both self employeed and have complained about it forever!

I guess if it bombs, i just take my equip and move out. no loss on the building as I would have if I built at home... thoughts on that. pros/cons???

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megmarie Posted 22 Jan 2010 , 5:58pm
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There is also the market to consider.... What's the competition? Who are the buyers (retail, commercial)? What are their budgets (median income)? Where do they go now, and are they even willing to consider using a new service? Are there talented people to hire in the area, or at least trainable, to help you handle the workload?

I think the concern should be focused on what is more likely to sell for the location versus what you prefer to do.... (But, if you don't WANT to do something, what's the point in leaving the last job anyways!)

As for the shop by the house thought, I would be concerned with working 24/7 if you are so close to home. You need a place to 'hide' and take a break from being an owner of a start up business!!

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megmarie Posted 22 Jan 2010 , 6:07pm
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Well...if there no other bakeries, I guess my post is pointless! haha

Have you talked to the local restaurants to see if there is an interest in a wholesale supplier?

Unless there is interest on their part, I'd say stick with the retail'd be the only one for miles....real potential!

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mom2spunkynbug Posted 22 Jan 2010 , 6:27pm
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My only thought/concern is...what if you start this business and it doesn't succeed, or you don't like it? You said you are leaving a job that has a large salary. Will you be able to go back? Will you be able to find something else?

I am a home baker & want to go back to work full time since dh got laid off and cannot find work. Well guess what - I've applied to over a dozen jobs and NOTHING. I used to work full time & left to become a stay-at-home-mom, and then when the kids got in school, I decided to start doing cakes. Now I'm trying to get back in the work force & it doesn't look like it's going to happen for me anytime soon.

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sweetartbakery Posted 22 Jan 2010 , 7:28pm
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oh, believe me... I will never go back to this job. the salary is grand, but it's killing me. the company is immoral and disgusting. I doubt I could go back because of the ordeal that surrounds my leaving (they tried to cover something up that wasn't right, I told on them). I COULD go back into chemistry based on my degree and connections... could. probably won't though. my husband has his MS in chemistry as well, also hates it. we'll be quitting together, he will go into computers. downsize to the max! we are fully prepared to have less money if it means that we'll feel good about ourselves at the end of the day. maybe I'm a romantic, or just jaded by the corporate world, or NUTS! money doesn't buy happiness, although I do recognize that you need enough to live. icon_smile.gif

megmarie-my dad owns a restaurant in town (there are only a handful-no chains) and he's buddies with all the others. they are all thrilled about the idea of me coming into town. small town america, gotta love it. can't believe i ever left!

for the rent of $650 for 600 sq ft..... how does that sound to you guys? the location is decent. right downtown.

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cgm_cakes Posted 22 Jan 2010 , 8:41pm
post #10 of 24

I have no "inspiration" to add, I just wanted to wish you the best of luck. This sounds like it is a very exciting opportunity for your whole family. How wonderful that you have the connections you do.

I also want to say congrats to you and your hubby for making the decision that money isn't everything. Most people wouldn't downsize their income to fit with their morales. Kuddos to you.

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sweetartbakery Posted 22 Jan 2010 , 8:59pm
post #11 of 24

thanks cgm_cakes! most people don't get it. my goal is for my kids to see me doing what makes me happy, not what makes me the most rich. I want them to see that so that they will free to make the decision to do the same for themselves. life is too short! icon_smile.gif

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indydebi Posted 22 Jan 2010 , 9:52pm
post #12 of 24

All of the suggested questions will be answered by a business plan. Do a biz plan for each scenario and see how they work out.

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CakeForte Posted 23 Jan 2010 , 12:23am
post #13 of 24

A business plan is a living don't feel like once it goes in there it has to be *final*. It's meant to help you throughout the life of your business.

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julzs71 Posted 23 Jan 2010 , 1:59am
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well, I think 650 is a good price. However, I would suggest you offer less and he could always say nope. How long has the property been on the market? What is the average sq. footage around you?

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Marci Posted 23 Jan 2010 , 2:17am
post #15 of 24

Maybe I missed it, but when the rental store front, I didn't see any mention of remodeling/bringing everything up to code. If the spot was a bakery before that doesn't mean that new equipment (ie hood system, fire suppression system, grease trap etc) doesn't need to be redone. As state and county and city codes change, any new business has to follow the new rules. It can be very expensive.

On another note, bakery ownership may be more involved then you are aware. Even working in your home, you may need to put your kids in daycare, since you will be baking/decorating 50+ hours a week for you to pull enough money to replace some of your salary. Opening a retail space, usually means even more hours.

Don't mean to "rain on your parade" just want to make sure you are prepared.


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ladyonzlake Posted 23 Jan 2010 , 2:29am
post #16 of 24

My question is, does the storefront already have a commercially approved kitchen or do you have to do this?

If it does then it might be financially better to rent the storefront. You will most likley have to hire someone to run the store if you're going to be baking and decorating. Some things you could sell are decorated cookies, cupcakes, petit fours, pies ect. You might want to have espresso also (I'm from Seatttle so everyone seems to have a latte stand).

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julzs71 Posted 23 Jan 2010 , 2:34am
post #17 of 24

can you use your dad's restaurant to bake in?

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vickster Posted 23 Jan 2010 , 3:01am
post #18 of 24

As you make your decision, take some time to really look at your demographics. What is the average income of folks in your area? What is the culture for cakes in your area?

I had seven orders today. Every one was under one hundred dollars. There is nearly zero market in my community for $800 wedding cakes and $200 birthday cakes. People around here just don't make that kind of money.
I keep my cash flow up by selling cupcakes and ice cream. This is only possible by having a store front in a decent location.

If you go to the nicest restaurant in my town, you'll see the most expensive entree on the menu is under 25 bucks. I think that is a really good way to judge what kind of money people in your town have to spend. Go out to the nicest restaurant and see what the most expensive meal is. Whatever a couple could dish out for a really nice meal at your local hot spot is probably what people will dish out for a special occassion cake, like a birthday or baby shower.

This is my theory. If you've got some restaurants in your town where a couple could drop one or two hundred dollars for a nice meal, then there's probably a good chance you can make a decent income just making cakes. If it's more like 40 or 50 bucks, you'd better plan on it being a supplemental type income or you better think about retailing more than just cakes.

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Mensch Posted 23 Jan 2010 , 6:33am
post #19 of 24

I posted this in another thread. There are most likely things I have forgotten/repressed, so you other bakery/storefront owners chime in.

These are just overhead costs, not even counting any baking ingredients.

monthly costs (some of these are once a year, or even just 2-3 times a year):

rent, insurance, loan payments, electricity, telephone (land-line + cell), broadband, cleaning supplies (floor cleaner, glass cleaner, universal cleaner, paper towels, dish soap, hand soap, hand disinfectant, dish detergent/drying detergent for dishwasher, toilet paper, toilet cleaner, mop, broom, dustpan, laundry detergent), credit card machine + fees, company credit card fees, assorted bank fees, sidewalk salt, alarm system costs, accountant, garbage collection, office supplies (paper, pens, paper clips, staples, post-its, scissors, mat knife, paper rolls for cash register/credit card machine, ribbon for cake/pastry boxes, stamps, envelopes), edible image ink cartridges/sheets, packaging (cake/pastry boxes in different sizes, bread bags etc), cost for yearly HD inspection, garbage bags, advertising/marketing (business cards, brochures, website), bridal show fees, fees from city planning office for sidewalk signs, telephone catalog ad, take-away cups/lids for coffee drinks, light bulbs

basic start-up:

purchase of premises, renovating costs (plumber, electrician, carpenters etc), oven, telephones, refrigerators (3 are required); including a special 'dry' fridge for fondant cakes, freezers (2 are required), 2 hand sinks, cash register, credit card machine, double sink, commercial dishwasher, commercial espresso machine (2-group), commercial coffee mill, take-away cups/lids for coffee drinks, 20 qt standing mixer, safe, broadband, locksmith, alarm system, computer, printer, scanner, edible image software and printer, office supplies (stapler, staples, paper, pens, paper rolls for register/CC machine, ribbon for cake/pastry boxes, stamps, envelopes), food handlers license (for me and all employees), cost for HD inspection, display cases, trays to display product, SS work bench (2½ meters long, special order), trash cans, garbage bags, recycling bins, marketing materials (business cards, brochures, magazine ads, website), work chairs (pony chairs, 2), counters, shelves, AC unit, rolling rack, microwave, hot plate, sidewalk signs (plus fees from planning office), signs on building (plus fees from planning office), flags, packaging (cake/pastry boxes in different sizes, bread bags, etc), telephone catalog, all different kinds of bowls and spatulas etc, hand mixer, food processor, lighting fixtures, light bulbs, telephone catalog ad,

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cheatize Posted 23 Jan 2010 , 6:52am
post #20 of 24

You say it's a small town. My town is a small town and I don't think the market here would support a storefront. I've heard (haven't checked it out yet) that a cake decorator was going to move in and share space with the coffee shop. When I heard that my first thought was, "There isn't enough market there for that." Maybe there's a reason there isn't one in your town.

If you go with the storefront, rent will be an ongoing cost. If you build on your property and pay cash that's one less expense. I was at a home show a few months back and walked into a few sheds. They actually come fairly large now. I wondered then if that would be the way to go to have a separate building to cake in. Of course, I'm cheap like that. LOL Think about it. Buy the shed, get second hand cabinets and sink and such. $6,000 for the shed. However, my brain got stuck on the cost of getting water and sewage stuff to it.

The less expenses you have, the more freedom you will have. A building on your property means you can get the kids on and off the bus, check in on the buggers when they're too quiet, and have more freedom to decide which orders to accept. Storefront is a whole other ballgame.

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indydebi Posted 23 Jan 2010 , 7:16am
post #21 of 24
Originally Posted by cheatize

When I heard that my first thought was, "There isn't enough market there for that." Maybe there's a reason there isn't one in your town.

My hubby is always saying this, when I share some threads about "my area won't support those prices".

He feels that some areas WON'T support the proper price needed for custom cakes. That doesn't mean the caker should charge a price that puts them at a loss. It means the idea of opening a cake business in that area should be shelved.

There's a reason Neiman Marcus doesn't open a store in every po-dunk town in America. The market in those areas won't support Neiman Marcus pricing. Neiman-Marcus doesn't lower their price .... they just don't open the store.

Many people don't want to hear this, but sometimes the reality of it is that your business idea just won't fly in that area.

Kinda like opening a snow ski shop in Florida ..... it's just not going to fly, no matter HOW excited the business owner is about selling snow ski equipment.

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sweetartbakery Posted 23 Jan 2010 , 1:18pm
post #22 of 24

so many good points! thank you everyone. it's really helping me hash it out in my mind. either route I have to sink in the cash to buy bigger equip, it's the on going style of work that gets me. My husband is thrilled about the store front idea. we actually found a few buildings (all would need work) for less than a nice car. Apartments on top that we could live in until our house is built... he thinks it's the way to go.

then again, i'm building a house anyway...why not just build a kitchen to match. ugh.

The old bakery in town was damaged in a fire in 2005. they were an old couple and didn't rebuild. the area is pretty poor, but the bakery is missed. I think i would do ok on the store front sales, but I would have to try to bring in the $$ by target the fancy pants town that is 20 min up the road. Hm..

love the list of expenses mensch! I have most of those now, but sure is a nice way to keep it all in a list! nice and scary!

indydebi- I did have a business plan for my original plan. i hadn't thought about making the other and using it as a comparison. thats a really good idea, and a great way to compare. also, as you said i don't believe a bakery will work in all areas, thats why when my job is over I won't say where i am. i wouldn't succeed in my present spot. no market for it here, thus the move where i think it would do better!

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vickster Posted 23 Jan 2010 , 3:45pm
post #23 of 24

Ditto on Indy Deb
I'm still waiting for an Ikea to open in Little Rock.
Well, I had already opened my place when I figured out the price scale that I could charge in my area would not support "professional wasges" decorating cakes. So, I expanded to offering cupcakes and ice cream and am about to purchase a middle of the line coffee machine.
Cupcakes have a pretty decent mark up and are low labor. Ice cream is really low labor.
There are other compatible retail products you could offer. You might consider party supplies. You might want to full out cater parties. If you have room, you might find renting out for parties to be profitable. Now days, a lot of folks don't want the headache of having a party in their house. I regret not sizing my shop a little bigger because I get inquiries all the time about parties. But I can't host anything over about 10 or 12 at this point.
But, in my opinion, if you're skills are decently good, you can make supplemental income making cakes almost anywhere.

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sweetartbakery Posted 25 Jan 2010 , 12:02pm
post #24 of 24

Well, it looks like I'm 90% locked on retail now. few building up for sale that are affordable to buy. more money up front, but they have apartments on top which we could rent to pay for the space... thanks for all the advice and warnings. I'll keep everyone posted on that process! I'm sure I'll need more advice and there isn't a better place for it. I love that people tell it like it is and don't sugar coat it (no pun intended)! icon_smile.gif

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