Every business owner should have making a profit as a high priority in their goals. And a bakery business or micro-bakery isn’t any different. If you are really struggling to achieve your sales and loss targets, you could be wondering is a bakery business is profitable at all? And well, in some locations, it cannot be easy. If you want to work on ways to improve your bakery’s profit, this guide has several suggestions for you to use.
To start with, you’ll need to sell your products at the right price, but how can you ensure that your costing is correct and your bakery is profitable? How can you control your expenses? And what about the costs that aren’t factored into your costing? How do they affect your profit, and what can be done to improve the profit of a bakery business? Let’s take a look at these in detail.
The best way for your bakery business to make more money is to sell more stuff! There are many ways to do this. You can sell to businesses, introduce a new bakery marketing plan, bring out new lines and plenty more!
See how to increase sales in a bakery to delve into these strategies (and others) in more detail.
But if your days are already packed out, adding more workload isn’t going to help! If you want to make your busy bakery profitable, there are things you can do. Here are a few things to consider that will improve your bottom line.
Many new bakeries or micro-bakery businesses get started without properly costing their products. Knowing how much your products cost to make means you can charge the right price for them. This is one of the most important ways to prevent your bakery from running at a loss.
The topic of costing is vast, so grab a coffee and head over to the how to price bread page for a full explanation.
When you calculated your selling price, it was based on the oven being full for each batch. But if you continually make half loads, you will be losing money.
Baking in small batches reduces profitability. Not only are small batches less efficient, but they also take your time away from doing something else that could be making you money. You still have the weighing, kneading, shaping and proofing to do in a small batch.
If a client only orders a couple of units of one bread and nobody else orders, running an unprofitable bakery is where you’ll be heading! It would be best if you looked to address this issue right away. Options to consider include:
If you take orders before you bake, you should be controlling your waste by using production targets. Make the amount of dough needed by using a baker’s formula to produce your daily recipes based on the number of loaves ordered. Doing this will reduce waste and time.
If you sell your products in a shop or stall without taking orders, your sales will be more unpredictable. One day you can underproduce and miss out on sales or potentially upset customers. On others, a lack of footfall can lead you to throw your products away at the end of the day.
There’s only so much bread pudding you can make, but you can use old brioche or croissants in clafoutis or make something savoury with the breadcrumbs.
Carefully record sales and monitor opportunities to see how you can maximise sales whilst limiting waste. Keep abreast of local activities, the weather and seasonal events such as school holidays to help you make decisions in the future.
There will be nights when the orders are low, and the baking team has some time on their hands. This is not particularly helpful and can eat into your margins.
You could try to generate more customers specifically for your quiet days. It could also provide time to get ahead for the busier days by making longer-life products or using the fridge/freezer to store par-baked products.
Once you’ve got an efficient production routine you’ll find growing sales much less painful! A great benefit of this method is that you won’t need part-time bakers – who are very hard to find!
Making longer-life products will improve your bottom line massively! And it doesn’t just have to be ordinary lines. Things like cakes, pizza bases and home-baking kits can work!
If your existing customers are not going to buy them, find some new ones.
Not every member of your team is going to be effective all the time.
New starters need training. Others might steal a cheeky extra break!
It’s always worth investing time into training and engaging your team. This will make them better in their role and motivated to work harder for you.
You’re going to forget the yeast, burn the buns or run out of the cheap flour and have to use the expensive stuff!
It’s going to happen. But if it’s happening too often, look at what you can do to reduce the possibility of making these mistakes.
A few suggestions:
Equipment may break, power cuts can happen and workers call in sick. Temporary problems like this decrease productivity, which leads to a drop in sales or an increase in costs.
Create a plan for how you can lower them. Ideas include:
Tip: It is necessary to have a buffer built into your budget and product price. In my costing formula, I add a 70% margin to every price. This is by multiplying the cost price by a 1.7 profit index. This covers further costs and allows me to make a profit provided unfactored costs aren't high.
Power is one of the biggest costs of running a bakery. Reducing the amount of time your ovens are in use by just an hour or two a day will make massive savings in your running costs. Adapting working hours so staff work together instead of throughout the day is a great way to do this.
You’ve probably considered many of these, but a complete bakery profitability guide isn’t one without everything!
Some of your products may be able to be frozen and baked a few days later without a loss of quality. Croissants can be frozen before baking. Baked cake sponges freeze well too!
Many items can be par-baked in batches, frozen and when required, individually defrosted and finished.
As you scale your business, you’ll realise that you are running out of time to do everything!
From dividing dough to washing up, a bit of mechanical help can save you time, money and increase your sales.
For example, if you are currently kneading with a small dough mixer like a Hobart, upgrading to a larger spiral mixer will allow you to save time by producing bigger batches.
Giant refrigerators can be a lifesaver!
If you are finding you’re up to your eyes in dough during specific periods, you can make and store the dough in the fridge when it’s quiet. An hour or two before you are ready for them, remove and proof, before baking them fresh.
Many bread types, such as sourdough, baguettes and bagels, love a slow fridge fermentation. You can use fridge fermentation/proofing to produce a larger range ready for opening too.
Alternatively, use this method to ramp up production on quiet days so you can produce more on the busy ones.
Could you combine recipes to save time? Are you making five wholemeal mixes when you could make two? Would anybody mind?
Whilst it’s not my preferred artisan approach, it is one that is followed in many small-batch bakeries.
It works the opposite way to produce more lines too. If you are making two similar products, why not make five? Roll them in seeds and grains, or divide the dough at the end of mixing and add herbs or cheese to one portion.
Would your customers notice if you reduced the amount of butter in your brioche by 10% or replace extra virgin olive oil with regular olive oil? If you can’t taste the difference, then it is unlikely that they will!
Try and reduce the volume of expensive ingredients in your recipes or find cheaper alternatives.
If you are delivering your bread to your customers, there are a few innovative ideas that I’ve used or seen others do to reduce costs when selling your goods:
Insist that your small-ordering customers collect their items. It’s not always ideal for commercial clients, but if you have a good location, it can work. You could also organise a local drop-off point for your customers. Could a shop or one of your customers hold the bread for you for a small charge or discount – hint – pay them in bread!
It could be that your smaller customers or ones far away are not worth being your customers. It’s a tough decision to take but dumping customers to concentrate on the profitable ones is a sensible choice.
Can you team up with another supplier in your area to deliver or share the deliveries of your goods? How about the greengrocer or butcher? You might even find joy in setting yourself up on Just Eat. They might offer a discount for morning or afternoon deliveries!?
Instead of having your own stall at markets, could you team up with another seller to share the load? It can be a great way to lower your costs, free up some time and share customers.
If you spend a lot on advertising your business, could you spend less and use cheaper options, such as social media? Once a bakery is established, it usually generates enough new custom through word-of-mouth and reviews.
Don’t cut short a successful campaign, but it is worth reviewing the return you receive from your marketing activities.
Here are a few ideas that can allow you to make more income from your bakery kitchen:
Many bakeries close production over the weekend, making this an ideal time to run your own baking club. Invite people to a one-off event or start a membership club to fill your bakery’s downtime. You can even pay someone else to do it for you!
If you are just starting out, you might have some downtime in the afternoons. It might be an idea to offer your bakery up for hire.
Caterers, cake makers, culinary teachers or even a takeaway might have a use for your premises. As long as you have strict rules on cleaning up, this could be advantageous.
There are a lot of suggestions here, and there are thousands more available that could help you to improve the profit of a bakery. Try not to adopt too many changes at a time. Significant changes in profitability come when you complete two or three fully.
Some of these profit-increasing ideas might seem a little scary! But if do you implement them, it may surprise you how well your customers appreciate them while also improving revenue. Your customers may prefer your new ways of working!
So let me know if you found this guide helpful. I’m also interested if you have any ideas that I’ve missed? Let me know in the comments below!
If you’ve enjoyed this article and wish to treat me to a coffee, you can by following the link below – Thanks x
Hi, I’m Gareth Busby, a baking coach, lecturer and bread fanatic. My goal is to help you become a better baker.
Suite 2646 Unit 3A,
34-35 Hatton Garden,