If you have a bakery business (or intend to), profit will be a major decision-maker. If you haven’t read my guide on how to price bread, it explains the costs involved in producing and selling bread.
But what about the costs that aren’t factored in the costing of production? How do they affect your profit and what else can be done to improve the profit of a bakery?
Let's take a look.
Costs that are not taken into account when costing bread
Here's are expenses that are not factored into the standard cost of production. They will eat into your profit margin (or buffer). It is possible to put controls in place to prevent these things from happening. Though they are likely to occur from time to time.
Accurate production planning, having simple working systems, alongside a robust onboarding process (training) reduces the chance of these problems occurring.
Here's a few:
Inefficient production quantities
If you bake bread to order for local businesses or residents you can control your waste with accurate production targets. Making the exact amount of dough that the production requires can save you a lot of money. A good recipe calculation and a decent set of scales are really important here!
This costing method works when the oven is full for each batch produced. But what if a client wants only a handful of their regular bread but nobody else does? You're going to have to make it for them yet the production will be inefficient.
You're going to forget the yeast, burn the buns or run out of the cheap flour so you have to use the expensive stuff. It's going to happen so be prepared for this.
Equipment may break, power cuts can happen or your worker calls in sick. These all cause issues that decrease productivity and increase costs.
If you sell your products in your own shop or stall you have the advantage that you're in control of your production. This is great for managing your workload and maintaining efficiency. Where it causes problems is the unpredictability of your sales.
One day you can underproduce and upset your customers. On others, it could rain and you have to throw your stale loaves away - there's only so much bread pudding you can make!
Not every member of your team is going to be effective all the time. New starters will need training, others might want to steal an extra break.
How to prevent loosing money
To prevent these unpredictable costs it is necessary to have a buffer built into your prices. In my costing formula, I add a 70% margin to every products price. This is through multiplying the cost price by a 1.7 profit index. Doing this covers further costs and allows me to make a profit provided these unfactored costs don't rise too high.
How to improve productivity in a bakeries production
Here are some tips to consider which will improve the productivity of a bakery business. Improving productivity will drive up sales with little expense.
Lowering your bills
Can you speak to your supplier about lowering your ingredient costs? Find a competitor that provides a similar product or service? Or how about searching for the best deal for your utilities? You’ve probably considered these. But a full guide isn’t a full guide without covering everything!
Controlling production across the week
There will be nights when the orders are low and production is not at capacity. This is not helpful and can eat into your margins. You can get more customers or persuade existing customers to buy more bread. Though it's easier to focus on making long-life products on these days and concentrating on the bulk of the bread production at weekends.
Once you've got an efficient production routine you'll find expansion much less painful!
Introducing new lines and customers
Sell longer life products made in the quiet days of the week. This will improve your bottom line massively! Things like cakes, pizza bases and home baking kits can work! If your existing customers are not going to buy, try and find some more.
Using the freezer
You might feel a bit sneaky doing this! But freezing some of your products to rebake when required can be a serious solution. Just not with your core products!
Lines that you only sell a handful each day can potentially be frozen without causing any harm. Croissants can be frozen before baking. Any bespoke items can be par-baked a batch once a week, frozen and finished when required.
Cakes can also be frozen! What’s great about freezing cakes is it doesn’t really lower the quality of them. It’s up to you, but it might be worth considering if you are making lots of small batches.
Use the fridge
If you are finding you’re up to your eyes on the weekends but quiet in the middle of the week, try using the fridge a little more. Some bread loves slow fermentation such as sourdough, baguettes and even bagels. The quality of your bread often benefits with cold fermentation.
You’ll then be able to ramp up production from Wednesday, allowing you more time to serve more customers.
The key benefit is you won’t need to try and find bakers to just work a couple of days a week. If you’ve tried to hire a Thursday - Friday baker before you’ll likely agree that it’s an almost impossible task to find someone suitable!
Improve your equipment
As you scale your business, you’ll realise that doing everything by hand is extremely time-consuming! From dividing the dough to doing the washing up, a bit of mechanical help can save you time, money and increase your sales.
Currently hand-kneading? A dough mixer like this one from Hobart is a fantastic addition.
Streamlining your range of products
Are you making five wholemeal mixes when you could just make two? Can you combine recipes to save you time? Would anybody mind? It’s not the most artisan approach but it is one that is taken in many small-batch bakeries.
If you are selling two similar products why not consider making five? Instead of two separate doughs, make one and roll them in different seeds or grains.
How to pay less for your distribution
Smart ideas that I've seen others do to reduce costs when selling your produce.
Make them come to you
Insist your customers come to your bakery to collect their items. It’s not always ideal for commercial clients, but if you have a good location it could work.
You could also organise a 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!
Team up with another supplier
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 setting yourself up on Just Eat, they might offer a discount for morning or afternoon deliveries?
Spreading the cost of market stalls
Instead of having your own stall 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 a few customers.
Make more revenue from your bakery
Here's a few ideas that can allow you to make more income from your bakery kitchen:
Hold baking classes
Many bakeries close production over the weekend making it the ideal time to start your own baking club. Invite people to a one-off event or start your own membership club to fill your bakeries downtime. You can even hire one of your bakers to do it for you.
Hiring a kitchen
If you are just starting out you might find that you have some downtime in the afternoons. It might be an idea to offer it up for hire. Caterers, cake makers or even a takeaway might have a use for it. As long as you have strict rules on cleaning up it could be advantageous. Others could use it to hold their cooking classes.
There are a lot of suggestions here, and there are thousands more that can help to improve the profit of a bakery. Some are a little “out there” but you never know! If you implement some of these or your own ideas to improve your earnings it may surprise you how well they are appreciated. It’s likely your customers will prefer your new ways of working!
Without taking risks and trying to expand, you arguably run the risk of decline.