I have a question for those of you brave bakers that have made the leap from home-based licensed business to a storefront.

Just a couple facts:

I am fully licensed and insured home-based baker.

I have taken on 2 employees and will be in dire need of a 3rd by the summer

I am posting profits monthly and my net profit at the end of the year is substantial, after all fees, taxes, insurance as well.

I have harnessed and maintained the niche market in  my area, the downside is a I am a delivery based, appointment only custom cake shop; all clients are referrals or repeats. 

My business is growing, and growing fast! I have only been legal for 1 1/2 years and am busting at the seams. 

I am looking to expand to a 1200 square foot shop, obviously there is quite a fee to start-up BUT the location is an old Pizza Joint and was a start-up 2 years ago, so all plumbing, electrical etc is up to code and other than paint/style there is not much I need to change. I estimate total face-lift to be in the 15,000-20,000 price range.

The equipment itself including all accounting software, POS software, Pizza Ovens, sinks, hood vent, walk-in cooler etc is priced at 55,000, which I do think is quite reasonable.

Now, my main questions is what was the determining factor for those that have made the leap to do so? How did you decide that that was the right decision instead of keeping a home-based business in operation.  I find that I never stop working having it at home. Does this ever change? 

Also any advice to help in either way would be greatly appreciated. It's a very very scary thought and obviously failure is a fear.

Thank you so much in advance and I do look forward to hearing all replies!

I am a home baker and can't say much about the costs etc.

 But when it comes to expending a business, there a various factors to consider. I was running a business in a complete different sector before, which was also expanding fast. From my experience I can tell you this: A small business will reach (if doing well) a point where it's saturated and can't handle more than it does already. If you are happy with the profit you make, leave it as it is. If not, expand! Opening another branch doesn't necessarily double the profit as you have to invest more money to start it up and employ more staff to keep it going. You'll work more hours (at least in the beginning). I can just recommend you to have a good business plan, research the area very well as well as the potential need of another or a bigger shop.

 If all the factors are positive, a business will naturally grow and bring more profit for you at the end of the day.

I'd think twice about buying the POS system, pizza ovens, etc. for $55k.  Price out what they are new.  How much less are they selling it for used?  You're not going to use the POS system and pizza ovens.  You might use the other stuff but I can't imagine you'd use pizza ovens and I'm guessing that it's a huge part of that $55k.  The hood is expensive, but here you don't have to have a hood for electric convection ovens so you might be paying for something that you wouldn't need so I wouldn't pay for it.  And sinks?  Those are cheap compared to the other start up costs!  And accounting software?  Quickbooks is cheap. I think they're trying to sell you a bunch of stuff you don't need.  (I've owned a storefront for 6 years.)  

In terms of making the leap, that's a hard one.  A retail bakery is a LOT of work.  The hours are brutal.  Since you don't have ready to go items, you'll basically bad adding another business to your existing business.  You'll have to add staff and products to sell to walk-in customers.  So you will be faced with more staffing issues, training, scheduling and product issues (volume, variety, waste, quality, etc..)  With retail you never know how much you're going to sell!  It's one of the hardest things.  You'll get the pleasure of dealing with difficult customers.  And you'll deal with Yelpers and you'll never know when they're coming in to "review" you.  A retail bakery might help you grow your special order business, but will it be enough to justify the time, expense, headache and heartache?  My guess is probably not.  

A lot of the success of a retail bakery depends on location.  I'd look at WHY the Pizza Hut closed.  Sit out in front of the location on the days/times you're going to be open and see the foot traffic.

HTH.

i thought so too -- you could equip a bakery with all brand new equipment and software for a fraction of that -- unless the pizza ovens are deck ovens but still a brand new cake oven is only a few thousand dollars $55k is a ton of money

If you're doing well I'd be very wary of scaling it all up, overheads are a nightmare & the more staff you have the more cost & headache, taxes holidays etc etc. Waste  is a factor too a retail shop needs to be well stocked to look good & it won't all sell.  I have just closed my shop & am going to bake to order & deliver, no overheads as my bakery is my own property, it's a weight off & I'm actually enjoying some free time I've not had in years. Tread carefully 

do you have a good setup where you are -- why not invest in remodeling the basement or the garage or something -- give yourself some more elbow room or something like that? yes that's so true a retail bakery is worlds different than a to order set up -- what about raising your prices to lower the demand and workload but raise your profits

not to mention multiplied congratulations on your lovely lively success there too -- brava

Thanks for the input guys! I was just doing some more research and I agree with the pricing advice on the equipment. I looked at it again and have been researching #'s what not to put in a reasonable offer. Also... I have been researching the stone ovens and quite a few bakers actually prefer the ovens... I am taking that with a grain of salt until I try them out myself(2 weeks) if they don't work, they won't be in the in the offer.

My current set-up is in a 14 x 14 room, with an added storage room but that is also completely separate.  I have several corporate contracts that pay-my-bills so to speak, and I have more stores, restaurants etc interested in purchasing weekly products. I just do not have the capabilities to service them. I have staff right now, and could use more but just do not have the space, so I cannot take more contracts if I do not have the labour to service them. We are moving houses right away, and the original plan was to have a larger kitchen, more staff, etc and keep it in the home but the only difference in doing that is the lease $$, as I would have to COMPLETELY remodel again in a larger space, would need the hood, ovens, more tables, coolers, etc to meet the demand. And we are doing 10+ custom cakes a weekend, sometimes over 20..... 

Note: This does not include weddings which is a HUGE part of my business. Wedding season I am booked at 5-9 for most weekends and the larger wedding weekends are less as I evaluate all cakes for all weekends. 

Gah, I am rambling. My issue is.. with having to remodel an in-house kitchen from scratch which will inevitably be more expensive as a start up than this venture; would it be worth it to take on the lease.... it's 3 years so I thought I could try it, and if I hate it... move back into a home-based operation. Our next house is also not the final house either so we would have to comepltley remodel and take out again and put it back to what it was to sell it, which is what we have to do where I operate out of currently. Where i live they have the most ridiculous laws so our in-house location has to be very specific.

Again, thank you so much everyone for your response. It is greatly appreciated as this is something I have been struggling with for a few months now...

Our province health laws are extremely stringent. to move to another location would ultimately be a MUCH larger upfront investment than the storefront... short term anyway.

My prices are high... quite high in comparison to others... 200+ more expensive than the other licensed decorators in the area for the exact same basic wedding cake, and somehow I am still booked solid.  And most of the corporate clients have switched from them to me.... which is GREAT but also making my life's decisions a little more difficult....

oh pizza ovens with stones -- you will probably love them -- 

what if you moved to another location and did not have a storefront but kept it the way you have it just got more elbow room -- just a thought to toss in the mix

If you are that busy you should consider upping your prices.  You could be doing less work - which would eliminate the need for another employee - and still make the same amount of money

I know this is a side point, but a bakery in my area started using a room inside of their shop to do special events in, renting it out by the hour. This has generated quite a bit of revenue for them. They are doing it all wrong, and their cake tastes like dry corn bread, but I liked the idea! They also host ladies nights where they have a crafting project with coffee and cake! They charge by the seat there. Once they're full, they're full. It's a pretty neat idea!

Anyway, you are living out my dream! I hope to be as brave as you some day. Lol! That day is not today. Now, back to my 8-5 job where i pretend to work and dream of what cake I'm going to do when I get home after the kids go to sleep!

Ah yes!!! I used to teach night-classes at the Culinary Arts School where I live, and that is something I have always wanted to do privately, just never had the space to do so. This would inevitably allow that as there is a HUGE kitchen space with lots of benches:) I loved teaching and would love to do night classes with wine and cheese etc! Would be great fun!!!

Gah! Lots to think about... my husband would prefer if I kept it in the home... and I want it out! It's too easy to work all the time... and I do. haha.

Think long and hard.  I don't know many retail owners who work less than their at home colleagues.  Can you rent the space but not do retail?  Just do your special orders and classes?