Your Thoughts On Expansion

Business By Dayti Updated 15 Feb 2012 , 10:53pm by Dayti

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Dayti Posted 25 Jan 2012 , 5:46pm
post #1 of 12

Apologies in advance for the long post.

So you may or may not know I own and run a retail bakery here in Spain with some items for sale at the counter, but mostly selling custom cakes and cupcakes to order. I do have a couple of clients who I sell wholesale to, but not very high volume. I work on my own. I have been open for 14 months all in.

I have one oven that fits 8 dozen cupcakes in at once, a 20 litre mixer, fair amount of workspace, fridges, storage etc. Legally I can have 2 people work in the kitchen at once. This is no Cake Boss Lackawanna facility, but I manage very well with the setup at the moment.

I was approached today by a customer wanting 2000 cupcakes a week, to be ready all on the same day. To be packaged in their packaging (boxes of 4 I think), and they will resell. I do not know who the customer is (the person visiting was an intermediary) but I have a sneaking suspicion it is a chain of upscale supermarkets, since they were talking about luxury products, pretty packaging etc. They currently do not sell cupcakes (it's a very new product in Spain). They want a price from me. 4 different flavours would be in a box. They also mentioned cake pops but I REALLY don't want to go there.

There would be no mention of my brand or logo on any of the packaging, just theirs.

I would have to hire help to do this on top of my already (fairly) successful business. I could buy an extra oven and put it on top of, or under, the current one. But, a week before Christmas I did 2000 cupcakes over 4 days and I hired a friend so there were two of us (she baked, I decorated and packaged). We were just OK doing 125 boxes of 4 per day (I was also running the shop and doing the other normal day to day stuff). Doing 500 in 1 day would be a huge undertaking.

Part of me wants to say yes, and get help and maybe the extra oven etc, consider having a third person bake at night too. The other part of thinks I might run out of space. And this other part of me also thinks I might just be taking on too much...I have spent around $100,000 on this place, and to have to move to another bigger production place would probably kill me, especially if I only have this one large client to depend on to be able to run a bigger place. Don't get me wrong, I would be generating around $15k per month extra if I land this client. I dunno what to do!!! Should I just run away and carry on as I am? Or jump on the booming cupcake bandwagon now, cos it might be over in 2 years time.

Oh, and there are probably only 3 other licensed/inspected bakeries in my area with the capacity (now or potential) to do this order that they could go to for other quotes. They came to me first since they heard I was the best.

I know this is something that I probably have to figure out for myself but I would love to hear your thoughts, please!

11 replies
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Marianna46 Posted 25 Jan 2012 , 6:47pm
post #2 of 12

This is obviously something you're going to have to decide for yourself. What do you want out of your business? What do you want out of life? Do you like the artistic side of this or the business side of it more? If it were me, I'd want the individual, artistic part of it and the name recognition, so I'd turn it down in a heartbeat, especially if I already had a successful business that I'd put a lot of myself into (which I don't yet, but I'm working on it). On the other hand, it's a nice dilemma to have and I wish you the best, whatever you decide. If you're inclined to accept the offer, at least look into what you'll be getting yourself into a little more carefully - like where your cupcakes are really going to be marketed. You might be able to do some upscale marketing on your own and get recognized for it! If you have a chance, let us know what you decide.

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jgifford Posted 25 Jan 2012 , 7:09pm
post #3 of 12

For something that's going to cause such an upheaval in your business, I would be very cautious. It just doesn't feel right to me. Before I would quote anything or make any decision, I would have to know who the customer actually is, whether the cupcakes would be sold as having been made by them, would the order continue for a set period of time or just indefinitely, etc. Would adding another oven and a couple of employees be sufficient to handle the additional workload? Would you be able to keep them on if this customer suddenly pulled out and went elsewhere?

It sounds like you're doing very well and this order wouldn't make or break you. I would say get as much information as you can before you commit to this.

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scp1127 Posted 26 Jan 2012 , 6:27am
post #4 of 12

Hi Dayti,

I remember your posts when you opened and shared with us.

I am in the same position as you are. I have now been approached for the third time to go national with some of my products. I will give my thoughts and actions on the offers as they pertain to you.

The first was to ship scratch through a well-known and successful online company. I would never know if one order would come in on a particular day or 200 would come in. My company was in no position to take on this type of offer as the lack of control of the baking calendar would have been our downfall.

On the second offer, I not only agreed, but one line of my products are already being sold throughout the country. This offer was different because it was a controlled growth, although I had to be willing to grow with the demand, which will eventually, maybe by summer, cause me to invest in more equipment.

The distributor will add accounts to the product line in a planned growth timeline. I will have to hire employees as the time progresses, but only for this project.

Remember that your equipment sits in your bakery 24 hours a day. Are you at capacity all 24 hours? You don't need to expand until this happens and you outgrow your space around the clock. You will actually maximize your investment if you look at a 24 hour production plan.

My third offer has also been accepted and this week I have had health dept meetings and I have set up my FDA inspection. This will turn part of my business into a manufacturing business due to the packaging. If I have to eventually move this one aspect off site, the money will be there for the expansion because I don't need to take the money for any of these projects. In this scenario, the product will be contracted to be in certain stores and the actual product will take several months to ship.

If you already have a successful business, you have what it takes to make this work. You also, from a profit standpoint, need to look at the issue of "highest and best use". This is a term mostly used to evaluate square footage and to maximize every square foot to its highest profit potential, getting rid of the products occupying space but having the lowest return. I have also applied this to myself to remind myself not to do the menial things if there is an opportunity for me to spend that same time block doing something else that maakes more money. A simple example is to hire someone to clean up. Another is to hire an accountant who can do something quicker and more correctly than I would do it.

There is nothing wrong with being successful. It sounds like you have captured the attention of someone who can offer you a big opportunity. When you talk to them, know how much you can bake until you outgrow your space and ask that a graduated production schedule be put in place so that you can properly hire and train extra employees.

These employees can be hired just for this job. That is what I am doing. This way, the wages are in a direct relationship to the income.

Lastly, do you want to do this project and will you be happy with your decision? In my case, I absolutely love these new projects. I look forward to doing them as much as the regular baking job. Actually more. I think this is the biggest deciding factor and that is for you alone to make. What is your net income on that $180K and how many hours do you personally have to work to get it? Maybe that little math equation will help you make your decision.

I was contacted just like you with a proposition, then a meeting, sample delivery, and finally a plan and contract.

Good luck to you and please keep us informed as you progress through this opportunity.

edited for typos

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Marianna46 Posted 27 Jan 2012 , 1:09am
post #5 of 12

Wow, scp1127, I'm in awe! You're inspiring in your outlook on business and you've made me sit up and take notice! I'm not saying I would go for it, if I were ever offered the chance, but it's wonderful to read about someone who has the business sense, the stamina and the enthusiasm for this. And congratulations on your well-deserved success!

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MimiFix Posted 27 Jan 2012 , 2:28am
post #6 of 12

Apti, there are some unknown variables to your possible expansion. Plus this takes your business in a different direction. Those are important points you need to exam.

Yes Marianna, Susan (scp1127) is amazing. A true successful business person. Posters in the business forum are lucky to have her expertise and (blunt!) feedback.

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scp1127 Posted 27 Jan 2012 , 10:35am
post #7 of 12

Thanks Marianna and Mimi.

I don't go into a lot of detail about my expansion, but I would like to stress that when a business is honest and a master of their trade, which so many of you on CC are just that, it can be noticed by companies bigger than you. Dayti is a perfect example. All it takes is for the right person to cross your path and realize the marketability of your product.

My website has prompted the inquiries and I can't stress enough that in this day and age, that your site is your first impression and your only opportunity to entice a client to consider you for a purchase if they have not been referred or tasted your product. It is your opportunity to declare and back up your expertise in your product and express your integrity.

My site has a 100% clickthrough rate. This means that everyone who happens upon my site, interested or not, clicks on more than the first landing page. I like to think my site is like the Sears toy catalog where you go through and wish you had that product.

So if I can give any advice on this subject, make sure your site portrays your ability and expertise both in words and in design. Be mindful of branding in every aspect of your company. Be enthousiastic and proud of your product and let that enthousiasm be contageous. And never stop learning and perfecting your trade. You will find yourself rising to the top of your competition.

Edit for typos. The page where you type your post causes me some eye strain, even the preview, so I usually have to edit after publication.

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Dayti Posted 27 Jan 2012 , 10:09pm
post #8 of 12

Thank you all for your input. I would like to go ahead with this project but I do need to iron out some kinks first.

I need to change my license so I can use my bakery after 11pm, and I hope there is not a truckload of paperwork to do for that. IF I can bake at night, ideally I would hire 2 people (3 if necessary) to do all the work a couple of nights a week. I also think the I would be better off if they got 1000 cupcakes twice a week, rather than 2K on one day. The client would benefit too, since the cupcakes they sell will be much fresher. Cupcakes would need to be picked up before I open the bakery in the morning - 1K or 2K cupcakes in boxes of 4 takes up LOTS of space. They also make a lot of mess, and since my kitchen is glassed off I'm not sure I would want my customers to see everything that goes on for large orders like this, so another advantage of doing it at night. I mean, if I could fill this order with minimum disruption to the normal day to day business, I would be happy.

Anyway, I don't have any more to go on yet. She was supposed to come by yesterday to pick up samples and called and cancelled saying she was busy, said she would come by today and didn't show. If she doesn't come tomorrow morning I will call her. I just hope she's not a dud...if she is I will do my hardest to find out who she's working for and go straight to them with a proposal.

Susan, congratulations on all your current and upcoming big projects!

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Dayti Posted 14 Feb 2012 , 9:32pm
post #9 of 12

Just a FYI if anyone is interested, I have turned this project down. The woman who came to see me has a cake/cookie website, full of other peoples photos and photos bought from istockphoto or similar. She just hires people to do the grunt work and takes the credit. Doesn't even photograph their own work but steals other peoples nice photos icon_evil.gif

I went along with her for as long as possible in the hope that I could find out who her client is but there was no way she was telling me. I will not work for someone with absolutely no ethics in what is, at the moment, a fairly small industry in Spain. In fact, I won't work for someone period. I did that for long enough in my corporate job and was one of the reasons I set up on my own.

I have probably shot myself in the foot economically, but she can find someone else to do it, and I don't wish her any luck at all.

Oh, and I contacted the bakers whose photos she had stolen - gotta love Tineye. Her website is now down for "refurbishment".

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Marianna46 Posted 15 Feb 2012 , 4:41pm
post #10 of 12

Wow, way to go, Dayti! You know you're going to be a lot happier doing things your way, and I'm so glad you found out what a sleazeball this person is before you committed. I'm sure that this is not the last time you'll have an opportunity like this, and I wish you the best at finding one that's a good fit for you.

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KoryAK Posted 15 Feb 2012 , 6:45pm
post #11 of 12

It really sucks that this didn't work out as you'd hoped (I just saw this post now and was going to tell you to go for it) but GOOD FOR YOU in being able to spot a huge problem and avoid it! icon_smile.gif

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Dayti Posted 15 Feb 2012 , 10:53pm
post #12 of 12

Thank you, I do think I did the right thing. She would have marked my price up to her client, when she is actually doing nothing apart from introducing me to the business. She wasn't even going to come and pick them up to earn her money (if I had gone ahead with it my delivery guy would have been happy though). And she wouldn't sign a contract with me, at all. When I told her I would have to buy equipment and hire people and what if the deal only lasted a month because the guy couldn't shift the cupcakes, she said "you'd just fire them". Honestly I can do without her. Oh, and I would never, ever be able to tell anyone I was producing the cupcakes for her. What? I think she's a bit crazy actually. Oh well!

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