How To Start A Bread Bakery Business In Nigeria – When reviewing the costs of running your bakery, it’s important to identify your variable costs separately from your fixed costs. Variable costs are those that increase and decrease in direct proportion to how much food you bake and sell. Fixed costs remain constant. In general, the higher the ratio of variable costs to fixed costs, the less revenue you need to generate profit. Knowing your bakery’s variable costs can help you price your food products and prepare your small business budget.
Ingredients are the foods you use to make your baked goods and are the most easily identifiable variable costs. Examples of ingredients are flour, sugar, yeast, wheat, barley, salt, spices, flavorings, seeds, butter, eggs and oil. For example, suppose your small business spends $10,000 on ingredients this month. If you bake 10 percent more food next month, the cost of your ingredients can also be expected to rise by 10 percent, or $1,000.
How To Start A Bread Bakery Business In Nigeria
The costs of materials and supplies used to make and package your baked food vary. Such items may include bags, twist ties, labels, stickers, ribbons, tape, boxes, plastic wrap and foil. For example, if you spend $200 on packaging and supplies to make and package 1,000 cupcakes, you would spend double that, or $400, to make 2,000 cupcakes.
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Labor costs are variable only if the amount you pay your employees changes with their output. If you pay bakers based on the amount of food they make or pay commissions to a sales team based on their sales, these costs are variable. If you pay your staff a fixed salary, this labor cost is fixed. For example, suppose you pay your bakers a salary, but pay a sales force a 10 percent commission on the bread they sell to grocery stores. Only the commissions are variable.
Electricity is an example of a cost that is only partially variable. The cost of electricity to run the equipment you cook on – such as ovens, blenders and deep fryers – varies. When you bake more food, you use this equipment proportionally more. The costs of running other electrical items – such as lights and air conditioning – are fixed. You run these regardless of the amount of goods you bake.
Your bakery may have other variable costs, depending on your business. If you accept credit cards, the transaction fees you pay are variable. If your small business is a franchise and you pay a percentage of your sales revenue to the company that grants you franchise rights, this cost is variable. Some property leases also require a store to pay a portion of its sales revenue to the property owner. If your lease is structured this way, this part of your lease is a variable cost. Have you always wanted to open a bakery? If you’re always impressing friends and family with your amazing cakes, or if you’re good at making your own doughnuts, you might just be able to turn your talents into a full-fledged business venture.
The retail baking industry is currently growing at 2% per year, rising to 5% for craft baked goods, according to the Craft Baker’s Association, meaning there is currently a significant market out there for your baked goods.
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If you’re willing to work very hard (and you don’t mind the early starts that often come with this type of job), running your own bakery business can be the sweet life. In this guide, we’ll show you how to open a bakery, including:
First things first: what kind of baked goods do you plan to sell? Before planning to open a bakery, you need to decide which products to focus on and how to make your creations stand out from the crowd. Is there a particular product you can make to a higher standard than anyone else out there?
If you’re just starting out, it’s best to start small with a simple product offering. Our advice would always be to focus on your passion and lean into your talents – this will ensure you produce the best product you can. So whether you have a real knack for decorating cakes or baking the best sourdough loaf, pick a specialty and channel your energy into it.
However, you don’t necessarily have to focus on just one thing. Many companies offer a variety of baked goods, but also have a few flagship items that set them apart from the crowd. For example, some bakers decide to make high-quality organic ingredients their USP, or offer baked goods for specialized vegan or gluten-free diets. By catering to a specific target group, you can give your bakery business a competitive edge.
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Researching a location: is there a demand for your business in your local area? There’s no point setting up shop in a part of town where there won’t be a market for your baked goods, so do some research on your chosen location to get an idea of what the average customer might be looking for. Similarly, if you plan to supply your baked goods to other local businesses – such as providing bread to a cafe or restaurant, for example – you need to determine if there is enough demand in your area.
It will also help to do some research on nearby competitors. For example, you will make your job much more difficult for yourself if you open a vegan muffin shop when there are some similar businesses already nearby. Likewise, a cafe-bakery that offers pastries and coffee may well thrive in a commuter district, but not if the area is already saturated with competitors and it doesn’t offer them something new. So do your research and choose a product that suits the local demand.
Once you have an idea, it’s time to put pen to paper and create a business plan for the bakery. This is a comprehensive action plan for setting up your bakery and should cover all aspects of your business, including:
You’ll rely heavily on your bakery business plan in the early years, and you’ll likely need to show it to investors or lenders when seeking funding as well. So do it as carefully and in detail as possible.
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There are several different business models for a bakery. As part of your business plan, you need to identify what type you want yours to be.
In addition to a production kitchen where you whip up your treats, this type of business also has a front-of-house bench and seating area where customers can enjoy their baked goods along with a hot drink. Serving drinks – both sit-down and take-out – is a great way to supplement the income you’ll earn from your baked goods. But this type of coffee shop requires a larger upfront investment, and you also need front-end staff to serve customers and make drinks, which will increase labor costs.
In a retail bakery, you have a complete production kitchen as well as a counter where customers can buy goods for takeaway. Food is not consumed on the premises, meaning this type of business can be operated under an A1 Retailer’s License – see our licensing section for more information on this. If you make products to order, this is also where customers can pick up the finished goods. There is no need for a seating area which helps keep the cost of the venue down.
A wholesale bakery supplies baked goods to local businesses, restaurants and cafes and may also sell at markets. There is no customer-facing unit, and there is no need to hire staff, which keeps costs down. However, to meet commercial demand, you probably need to be able to mass-produce lots of products in a short period of time, so you may need to invest in more machinery and equipment. You also need to spend time building relationships and securing business with local businesses.
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Many bakers will kick-start their business by working from their own home kitchen, at least initially. This is good for bakers who want to start their business with a smaller budget, because you don’t have to pay for a new premises. If you prefer to start a bakery this way, take a look at our guide to starting your own catering business from home.
Pricing Your Products One of the most important parts of writing your bakery business plan is devising a pricing strategy for your products. This will help you set a budget and give you an idea of how much revenue you need to generate to cover the other costs of running your bakery.
When designing a pricing strategy, you need to consider the cost of the ingredients used as well as the time and labor required to manufacture your products. You should also add a little extra to cover the cost of your premises, your equipment and the time you spend on marketing and administrative aspects of your business. This
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