Bakery Has Closed

Business By RobzC8kz Updated 1 Dec 2010 , 6:48pm by loriemoms

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RobzC8kz Posted 29 Nov 2010 , 10:53pm
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Well...after just 8 months in business, the bakery I worked for has closed. I would say that a combination of many errors contributed to its downfall. I am unable to cite one specific thing that was "THE" reason why it wasn't successful. But, I've learned many good lessons from this experience that, if I ever open a bakery of my own, I can draw from!

As a result, I'm back to being a "Hobbyist" and just doing cakes from home for friends and family.

I would say this to anyone who is currently thinking about opening a bakery, "It's not as easy as it looks" and "if the idea of owning a business is more appealing that RUNNING a business, save your money."

Happy Holidays, CC'ers!!

26 replies
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johnson6ofus Posted 29 Nov 2010 , 10:56pm
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All important lessons. The talent and skill of making a cake is not the same as the knowledge and skills of running a business.

My sister is a good doctor---- and bankrupt three times because she just CAN'T run a business.

Sorry for your job loss, and congratulations on the great experience and knowledge you gained.

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-K8memphis Posted 29 Nov 2010 , 11:00pm
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Wow--hope your holidays will not be impacted too much.

Reinforces why I've never jumped off that cliff. I don't wanna own a bakery/cakery. I just wanna make cool cakes once in a while for free or charge out the whazoo. icon_biggrin.gif

Hope you find another cool gig and your holidays are bright.

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jillmakescakes Posted 29 Nov 2010 , 11:04pm
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while its a bummer that you won't be getting paid for your talents for a while, please feel free to share some things that might help people looking to open a shop. It is sometimes better to hear these things from people who have "loved and lost" than those currently "livin' it up"

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playingwithsugar Posted 29 Nov 2010 , 11:48pm
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Sorry to hear about this. Unemployment sucks.

I hope you took notes on what Not to do, along the way. And after you write them down, would you please share them with us?

See if your state has a work-training plan for laid-off workers, and see if there's a school in your area that offers baking/pastry as a career course.

That's what I would be doing right now. When you're done, that piece of paper (diploma or certificate) will mean a great deal of difference if you try to get a small business loan.

Theresa icon_smile.gif

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jenmat Posted 30 Nov 2010 , 12:02am
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like others, would love to hear the lessons learned here, even if they weren't your lessons. Best wishes in the future!

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RobzC8kz Posted 30 Nov 2010 , 12:33am
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Luckily, I kept my "day job" during the whole process! They only wanted to have me there on a part-time basis as a contract employee, so I worked my day job and then worked nights at the bakery. So I'm not unemployed...thank GOD!!

From a 3rd party perspective, I'd say the biggest mistakes they made were 1.) not working the business themselves - they hired multiple shifts of teenagers to work the shop instead of keeping that money "in-house" by being there themselves. Not only did they lose a TON of money in wages, but they lost double because these kids would let all their friends and family eat and drink for FREE on a nightly basis!!! Also, the kids were HORRIBLE at customer service and were constantly making the shop look bad.

2.) not advertising the cake component of the shop. In my opinion, cakes, especially wedding cakes, are where the money is at for any bakery.

They wanted me to pay them a percentage of my intake to go towards "advertising," but yet every chance they had to advertise for FREE, they wouldn't even mention cakes! They were featured in numerous magazine and newspaper articles, but never even said "...and we make cakes!"

The best was when they wanted ME to make small "give away cakes" and incur 100% of the expense! I was like, "I've never made a free cake and I've gotten tons of business." Considering that the work of our closest competitor was no better than my own, there was no reason why we couldnt have broken into the custom cake market in our area.

Also, I worked there part-time, at night. Doing 10 hours a day at one job, then 8+ hours at night, seriously limited my production, killed my time with the family, and had me walking around like a zombie 24/7. I recommended that they hire me full time, but the volume was just never there.

3.) Although the desserts they made were GREAT, they didnt do the basics. 100% of the menu was exotic. Everything had a twist or a new flavor combination that only appealed to like 10% of the clientele. Folks would come in asking for a regular chocolate or vanilla cupcake with plain buttercream icing, and those werent even in the building!! Our competitors, who had been around much longer, stay in business by doing the basics. I think that wed have been much more successful had we just been GREAT at the basics, and save the exotic flavor combinations for a weekly special type of thing.

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onceuponacake Posted 30 Nov 2010 , 12:41am
post #8 of 27

Lesson 1:

Don't partner up with anyone!!!!!! My partner left me holding the bag with all the bills! Rent, utilities and an outstanding engineering bill. Mind you, I've been a stay at home mom for 15 years before I opened up shop. Going in halvesies sounds great until one partner turns out to be totally irresponsible! I am now going on my third year, but it has not been easy.

Lesson 2: Don't take out a credit line. (Not that it would be easy to get one in this economy). From our buildout to paying for suppleis everything was cash. A local bakery (who did not do decorated cakes just homestyle pies, cakes, cookies, etc.) went out of business because their bank would not extend them more credit.

Lesson 3: Accept help from your friends when they offer! My friends would offer, but I wouldn't take them up on it, until I got really stressed!

Lesson 4: Don't let the business run you. I make sure I schedule my week out so I'm not pulling all nighters and get to spend time with my kids, hubby and friends!

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johnson6ofus Posted 30 Nov 2010 , 1:46am
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Lesson- take time to be the "business manager"- that is, reviewing expenses, costs, and income. Organizing the proper documents for the IRS, state taxes, insurance, etc. Managing the checkbook, checking the inventory on supplies, and watching for sales and discounts on supplies.

Remember it is a "cake business" so focus on the "cake' AND the "business".

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QTCakes1 Posted 30 Nov 2010 , 2:34am
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I have a question for Onceuponacake, can you explain in more detail about don't take out a line of credit. Are you saying save up ALL the money, cause the way I'm lookng at it is that I have to take out a business loan to start everything and then do the leg work so it self sustains, not neccessarily turn a profit, cause that usually takes a few years. What do you mean they went out of business, cause they couldn't get another line of credit? Are you saying they never broke eve, just kept going in the hole? I'm going at home business to store front. Scared out of my mind, but I gotta go for it.

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Stitches Posted 30 Nov 2010 , 2:52am
post #11 of 27

I once worked for a small bakery that spent an enormous amount of time and pride on it's danish. They were really stuggling finacially in spite of doing a fair amount of business.

I did a simple study for them and discovered that they spent as much on labor per piece then they sold the item for. Once you included their over head costs, they were selling (giving away) these things at a loss.

What they should have done differently: change the way they looked to a less labor intensive style (the frosting drizzle on top of them covered it's intricate look anyway). Limit the flavors they made, do only the popular ones they sold out of daily. Manage the help producing that item. They left an inexperienced young lady alone over night to make them. I swear she must have been sleeping more then making danish.

Manage help by giving them a list of products or items they must get accomplished during their shift (make it bigger then they can possibly get done). This makes them watch and budget out their time better!! If they think they can't go home until all the work is done, they'll get the work done much quicker.

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Stitches Posted 30 Nov 2010 , 2:56am
post #12 of 27

As I understood it, paying on credit costs more money then buying things with cash. Just like credit cards your paying a percentage to the banker for loaning you the money.

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jason_kraft Posted 30 Nov 2010 , 3:29am
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If you start out slowly with a licensed home bakery or a rented commercial kitchen with no retail storefront, your startup costs -- and ongoing overhead -- should be very low. We started our business (in Northern CA, one of the most expensive places in the country) with less than $5K. If your business does well, you will accumulate enough money to expand and open a retail shop. If you can't make enough money to open a retail shop, you probably shouldn't be opening one anyway.

The issue with taking out bank loans (aside from the added interest expense) is having enough liquidity to make the loan payment each month...that requires good cash flow management. It is certainly possible to have a profitable business but mismanage cash flows so you don't have enough to make a loan payment, and once that happens you're in trouble.

Using credit cards to pay your business expenses is actually quite advantageous, as long as you pay off your balance every month. It's essentially a 30 day loan with a rate of negative 1% (since most cards give you rewards).

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scp1127 Posted 30 Nov 2010 , 7:13am
post #14 of 27

Best advice I can give... open debt free, especially in this economy. This is most important when opening with little or no business experience. It may take awhile, but everything needed to open can be purchased and stored. When you have purchased every piece of equipment, start saving for the construction. It always costs more than you plan. Your overhead when you open is much more manageable in this scenario.

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QTCakes1 Posted 30 Nov 2010 , 3:32pm
post #15 of 27

So the next question I have for storefront owners, did you buy your storefront or lease? Here you can do both. There is an up and coming area that is under great development where they will either lease the property or sell the property and it's not sky high prices either. Not much more then a house where I am located. What would you guys choose?

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-K8memphis Posted 30 Nov 2010 , 3:58pm
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Mind, I never jumped off that cliff but I have started several (many) businesses including a tea-room & bookstore. I really like the JasonK formula for caking. It's the acquisition of an adequate facility that's the big deal but it's a real solid plan if you can jump that hurdle.

Going retail off the start in this economy is beyond risky to me. I didn't do it when times were good clearly I would not do that in this day & time.

This mindset of mine is because I like the baking and the process and the bang of caking. I don't wanna make a business out of it and all that good juju that I like become an extension, a post script to what I wanna do. Due to the business side of it being so overwhelming, so time consuming.

Huge conundrum of my life. I have a brand new DeLuxe Radiant Ray Cake oven sitting right over there <<<'bout six feet away--never been used. Maybe we'll bake in retirement. Maybe we can bury me in it. icon_lol.gif

Overhead sucks in the caking business. Avoid it at all costs is my mantra. We shoulda moved but all our peeps are here. <sigh> icon_biggrin.gif

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-K8memphis Posted 30 Nov 2010 , 3:59pm
post #17 of 27

But I think the subject BAKERY HAS CLOSED--
I just wanna quip--

Elvis has left the brownies er agh building. icon_lol.gif

Although let me hasten to edit that I don't think the bakery closing is funny at all--no no no no that's gut wrenching truly! Just trying to make a tiny funny...

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QTCakes1 Posted 30 Nov 2010 , 4:31pm
post #18 of 27

I would really appreciate hearing from those with an actual bakery business, cause not all businesses are ran the same way.

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-K8memphis Posted 30 Nov 2010 , 4:44pm
post #19 of 27

I had a home cake business for years & years until I learned I could not be legal where we moved--way before cake message boards were born.

I meant I never jumped off the retail bakery ownership cliff outside the home here in Elvistown--because of the uber business aspect with employees and all that would be necessary to keep it going--don't want that.

I've run bakeries and had my own home bakery in several localities and I'm a professional cake decorator and baker.

Running a business is running a business. That's the point.

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littlecake Posted 30 Nov 2010 , 5:05pm
post #20 of 27

overhead is the worst part of your butt off to just give it to someone else, you must love it or you'll quit.

my son moved here and joined me in my lil bakery this year, till then i was a one man show, we are going thru growing's been a hard year...we're moving to a cheaper place, so that's cool...we are rehabing it mostly ourselves on our days off....i'm wore out ...just slept the whole day thanksgiving.

i've been toying with the idea of adding seems to me that might be less labor intensive, and add to the bottom line....

it is WAY more work than people i'm 53....still kickin, but not near as high.

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ccalvin Posted 30 Nov 2010 , 5:41pm
post #21 of 27

My Husband and I own a Bakery and Cafe and I would say by far the biggest headache would be employees (personal issues,not on time,complain-not to mention just being able to find someone to work and stay with the job !)

I would have perfered to have had just a "bakery" doing specialty cakes,cupcakes,pies ect...and having really only myself doing the baking/decorating ect without employees.
We had to have another source of income and that being the "cafe" part.We would certainly not be able to pay the bills (overhead,lease,equip,suppplys,food,taxes,ect...)if it weren't for us serving breakfast and lunch,as well as doing donuts and other pastrys in the morning.
When you first open up it will take some time for your community to catch on to the fact that you can do these "great cakes" even though you advertise,people just don't seem to read,there more visual.
People are creatures of habit,and they know what they like,so keep it simple or you had better sample the hell out of somthing different !

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lyndya Posted 30 Nov 2010 , 7:52pm
post #22 of 27

My husband and I are getting ready to open a small business. Just cakes and cupcakes. We have posted our 'coming soon' sign before remodeling even begins, and aleady have the local magazine wanting to do a story on our new bakery. 600 sq feet, half bakery and the other half retail. very cozy. my husband has a business background, my sister (the only employee) a catering background, and the decorating will at first be up to me, with my sister i am quite sure very quickly surpassing my abilities. Everything looks great on paper, wish us luck!!

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tavyheather Posted 30 Nov 2010 , 9:48pm
post #23 of 27

I'm so sorry icon_sad.gif My mom lives in Corona...I know Riverside county has been hit really hard icon_sad.gif

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loriemoms Posted 1 Dec 2010 , 5:36pm
post #24 of 27

Ok, you asked and you shall receive!

I ran a home bakery for 5 years. Everything was cash...if I didnt have the cash, I didn't buy it. During the summer, I did nothing but wedding cakes and grooms cakes. Turned down a huge amount of orders, because it was just me and I could only do 8-10 cakes a week by myself. So we had the opportunity to rent a store front, that didnt have much foot traffic. I didn't care for the foot traffic, because most of my work was by internet and word of mouth.

At first, I went crazy and hired a bunch of people! Then I found I was taking all my money and paying payroll and couldn't keep up with the bills So I got rid of a lot of them and kept it down to three of us. The two girls I have bake, decorate and do the customer service, etc. We only do cake. We have avoided all the "traps" of people begging us to do cookies and breads and such. We have cupcakes out front that aren't super exciting and coffee, but its really just there because we are a store front. I don't make much money off of them. We also put out small cakes with icing so people can ask for a quickly decorated cake. But our main business is still the weddings and with the help I have now, I don't have to turn down the party cakes. We do about 20-30 cakes a week now, which still isn't enough to pay for this place. But I have only been here 4 months and I am hoping when spring rolls around, it will be less of a burden.
It is is hugely expensive. Rent isn't bad, but the other stuff is. We had to take out a loan to do the uplift and that hurts every month. But we do squeeze by. The pros and cons? Well, I now get alot more sleep. I was killing myself working from home, I had to do all the work myself and answer the phones and such. I can now get my paper work done, and the girls bake and such, then I can do the decorating. I can now spend time with my family, do consultations during the day instead of on Sundays (now have Sundays off) I haven't made any money since I opened the store, but again I didnt expect to. I hope next wedding season will proove different. And we have our house back. We actually got to sit in front of the fireplace the other night. (it has been hidden behind racks for cake pans for years)
If you are wondering if you should do this, then don't do it. Any doubts will only bring failure It is HARD. Its expensive. Your credit score will go down. Just because you can decorate cakes or have the best recipe in the world for moms apple pie does not make a business. You need to have a good business head. You need to know what kind of advertising to do and what kind not to do. You need to know how to balance your expenses, what to pay and what not to pay on a bad week. You need to be a good, no, an INCREDIBLE sales man. You need to know how to smile and laugh even when you are dead tired. You need to work when you are sick, when you are in need of a vacation. You can't turn down work because you are tired like when you are at home and don't have this beast to feed. And it is a beast. Rent, utilities, loans, taxes, breakage, alarm systems, phone (the phone is CRAZY!) internet access, equipment, supplies, employees, insurance..its not a few hundred a month. its THOUSANDS a month. You also have to NOT be afraid to charge what your product is worth. it is less work to put out 10-200.00 cakes then 200 10 dollar cakes. Take every course you can get your hands on at the SBA and at adult freebie classes. read everything you can.
If you have small children, and have these dreams of a pretty little bakery with pink curtains and you in a frilly apron with everyone happily coming to buy your home made goods, then I really suggest you think of doing something else. Because it isn't that way at all. And I agree with do products people like. We have some exotic stuff, but most of our cakes are simple and delicious and that is what the public wants.
Another thing, develop a very thick skin. When you are out in the public like this, people on the whole will LOVE you, but there are a few who will complain that your prices are too high or why you cant do a cake in five minutes and you have to kind of smile and tell them that you are sorry, but you are a different kind of bakery, etc etc. and move on.

Good luck to you! If you have any other questions, feel free! And Happy Holidays!

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tracycakes Posted 1 Dec 2010 , 5:54pm
post #25 of 27

I ditto Loriesmom, all the way.

I didn't start out in the home, rented a donut shop (for a month) and then got better space. BUT, we are working on the business plan to open our own storefront - and it overwhelms me. We are only cakes and cupcakes right now. I've thought about cookies but I have to do my business plan and see where the pricing comes out. Because the money is in wedding cakes and they seem easier to decorate, we are going to focus more on wedding cakes for the coming year. We had a good wedding season this year, even 2 wedding cakes in December this year and 5 already booked for next year (deposit paid or paid off). They seem to be more money and less work than party cakes. The party cakes kill me, even though I get to be more creative.

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pat90807 Posted 1 Dec 2010 , 6:06pm
post #26 of 27

Sorry to hear another business in the Riverside area has went away, but do you know if they have any equipment they are going to sell.

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loriemoms Posted 1 Dec 2010 , 6:48pm
post #27 of 27
Originally Posted by pat90807

Sorry to hear another business in the Riverside area has went away, but do you know if they have any equipment they are going to sell.

Unfortunately, there are a lot of places going under these days. You may want to check our your local auction house and see if you can get on a mailing list/web site that lists their auctions. You can find some pretty good deals!!

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