If you plan to seek financing for your bakery, a business plan is essential. Investors and lenders rely on the key information provided in the business plan to decide whether your bakery is a good financial risk. Even if you will self-finance, a business plan serves as a valuable road map to help you stay on track and control growth in an organized, cohesive way. On this page you will learn how to write a business plan for your bakery.
What Is a Business Plan?
A business plan combines a snapshot of your bakery as it currently exists with a clearly defined vision of your company’s future over the next three to five years. It lays out your goals, the obstacles that you expect to encounter, and your strategies for overcoming those obstacles and reaching your goals. Your business plan is a living document, and you should revisit it frequently as your bakery evolves.
The executive summary is the introduction to your business plan, although it is often written last. It helps investors and lenders quickly decide whether they are interested and should read more, so the first page must get right to the point. Include a concise description of your bakery (or bakery concept if you are a startup), a short analysis of the market, proof that customers are willing to pay for products, and an explanation of the unique qualifications that ensure your bakery will be a success.
This section of your bakery business plan provides a comprehensive look at the company’s history. Include details on your bakery’s legal structure, founding, location, and current business stage, as well as your past accomplishments and unique qualifications. Clearly explain anything that makes you a strong competitor in this market, such as existing contracts with retailers, a head baker with impressive restaurant credentials, or exclusive access to award-winning recipes.
In this section you should also give an overview of the type of bakery you operate or will operate in the future.
For example, do or will you operate a:
- Traditional bakery (selling breads, biscuits etc.)
- Commercial bakery
- Bakery specializing in cakes and pies
- Bakery specializing in wedding cakes
- Café/bakery selling snacks and sandwiches
- Doughnut shop
- Pastry shop
- Food truck selling bakery products
- Home Bakery
This section assesses that bakery industry and how your bakery fits into the existing landscape. Address any challenges that you unearth with a solid strategy for success. Also keep in mind that your market is not the entire baked goods market. Rather, it is your niche of that market.
For example, while the baking industry in the United States generates more than $30 billion per year in revenues, your bakery will only comprise a fraction of that amount depending upon your geography, focus, etc. So, zero in on the specific products and customers you plan to target and focus your analysis on those elements.
This section of your plan details your bakery’s target market, that is the customers you will serve. Note that in many cases, a bakery might target multiple market segments.
Do you plan to target brides to be? Children’s birthday parties? Upscale families who regularly hold private events for 100 or more guests?
Or do you primarily serve walk-in customers. This segment usually comprises neighborhood resident who know about your bakery, and who tend to visit regularly.
Even if you’re not a commercial bakery, you might serve local delis, grocery stores and bodegas. Clearly, it helps a bakery’s sales if it has a greater number of distribution points. The same is true in the case of restaurants. A bakery can supply breads, bagels, cakes, pastries and other products to restaurants and hence create a larger customer base.
Whatever target markets you serve, clearly define them in your business plan. Detail the demographics of each. For example, are they wealthy males and females? Are they college students? Are they local restaurants? Whatever the target customers, you need to identify and detail them so you’ll know their needs and can better serve them.
Likewise, discuss the psychographics of your target customers. Are they price conscious? Is quality the most important issues they will use to judge your bakery? Do they insist on reliability and premium service?
In addition to documenting the demographic and psychographic variables that define your target market, detail how your bakery will meet their unique needs.
This section of your bakery business plan details your direct and indirect competitors. Direct competitors are other companies who fulfill the same need for the same target market, most likely others selling similar baked goods. Your indirect competitors are those who fulfill a different need for the same target market, or those who fulfill the same need for a different target market. An example of an indirect competitor could be a nearby coffee shop.
In your plan, name and describe your direct competitors individually, and explain what sets your bakery apart from them. Create a more general category for your indirect competitors and discuss them as a whole.
Finally, detail your areas of competitive advantage and what will make you distinct. Most successful bakery owners identify products that no other local bakeries offer, such as a treat that is exclusive to your bakery and that drive customers to frequent your store. Also, based on the demographics and psychographics discussed above, you may be successful being the only local bakery selling nut-free cakes, or making vegan and gluten-free baked goods with local and organic ingredients.
Your bakery marketing plan explains how you will penetrate your target market, based on the four P’s: Product, Price, Place, and Promotion.
The Product section explains all the products and services your bakery will provide. Price refers to the price points at which you will sell each item, along with your reasoning for choosing those prices. Place explains all your distribution methods, such as your retail stores, your company website, and third-party retailers. Promotion defines the ways you will entice customers to purchase your baked goods, such as free samples and web advertising.
In addition to describing the four Ps in your bakery marketing plan, you should explain how you will retain existing customers through loyalty programs or other methods. Also, in this section of your plan, particularly if you are startup retail bakery, you should detail the design and display of your location.
Clearly, your bakery’s storefront should be designed in a way that attracts walk-in customers. Consult an interior designer to get insight on how to create a warm and inviting ambience in your bakery.
The operations plan explains the processes by which you will turn your vision into a reality. It includes the everyday short-term processes involved in physically baking your products, managing your retail space, packaging your baked goods, conducting sales transactions, choosing and working with vendors, and delivering the finished products to your customers among others.
Your operations plan must also include the long-term processes involved in growing your company, such as introducing new products or retail stores, achieving specific sales milestones, and hitting other important business-oriented goals such as hiring new employees, launching new locations, etc.
This section provides biographies of the key members of your company’s management team, with an emphasis on strong business skills. Focus on educational background, previous experience with successful start-ups, and other elements that demonstrate your and/or your team’s ability to build a company. A strong advisory board can help make up for weaknesses provided you clearly articulate how your advisors will directly impact the company’s growth.
The financial plan is often the most difficult part of the business plan to write, yet it is the section that potential investors and lenders spend the most time analyzing.
Provide a list of all revenue streams, including their relative importance and timeline for implementation, as well as the amount and expected sources of outside funding. Include a summary of past (if applicable) and projected Income Statements, Balance Sheets, and Cash Flow Statements. The assumptions made in these documents must be reasonable and verifiable based on an analysis of similar companies.
Make sure you don’t miss anything when putting together your financial projections or you could lose credibility in the eyes of readers of your plan. For example, make sure you adequately enter costs which most bakeries incur such as space (owned or rented), equipment (planetary mixers, cylinders, gas stove, cooling fridge, deep fridge, storage utensils, etc.), electricity and water, staff, furniture and décor, licenses, insurance and legal fees.
The appendix includes your full financial projections, as well as any other documentation that supports the claims made in the business plan. For example, it might include a list of key existing customers or letters from potential partners. Likewise, if you’re a startup bakery, including sketches of the proposed store design should appear in your appendix.
Keys to Success
The above bakery business plan template showed you how to create your plan. Hopefully you will be able to complete your plan and raise funding if needed. Once you begin operations, remember that for any bakery to succeed, it’s critical to focus on your customers. You want to build a loyal base of repeat customers. So, make each customer experience positive and memorable. Get feedback from your customers, talk to them when serving them, and always ask them for new recommendations.
Other Items to Consider
When opening a bakery, your detailed planning should be evident in your business plan to impress potential investors. The following three steps should be planned well in advance of opening.
The menu you will offer will be an extremely important decision. There are many ways to go about this decision, as long as you pick the strategy that matches your overall business strategy. If you seek to gain business by being unique in the market you serve, you should think about how the menu can set you apart, even if it is just with unique names for tried-and-true baked goods. If you seek to make profit through selling baked goods in high volumes, encourage this through bulk discounts. If you will spotlight a signature product, make sure you offer enough alternatives and complementary products to fill out the menu for those who don’t want it or want more.
Equipping and Designing Your Bakery’s Kitchen
The decisions for kitchen equipment should flow from your menu choices and your projections for what your most popular items will be. Consider the storage space, prep space, oven space, and refrigerator space that will allow you to operate at capacity. The kitchen is your mini-factory and high quality ovens and mixers which help you bake faster or in higher quantities can save a great deal of money in the long run. However, it is no use to be able to bake a thousand scones a day if you have no space to store them. Pay special attention to any menu items that will require specialty equipment, especially if it will be bulky or require its own space. Make sure that it will be worthwhile to offer those items.
As soon as your business gets busy, you can learn from your bakers any specific problems with your kitchen design. You may not be able to foresee these specific constraints, but you can try to make your kitchen design modular and flexible rather than affixing items to the walls. This can let you continue to experiment to improve the flow of the space.
Consistency of your operations refers to the ability for a customer to buy a scone one day that will taste the same as a scone they buy a week later (and hopefully the taste is good, too). If customers notice the products are good sometimes and a bit off at other times they will most likely go to a competitor rather than gamble each time they visit your store that it is a good day.
Having clear, standard recipes and baking procedures, as well as standards for how long items are kept before they are discarded, are important steps to maintain consistency. Part of this means staff training and part relies on your suppliers to providing consistently good ingredients.
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