If you are considering starting your own bakery business or micro-bakery, one of your biggest questions will be, “Is it going to be worth my while?” Before designing your recipes, countertop and kitchen, knowing whether you can expect a return on your investment is important. So, if you want to learn how much money you could make from starting a bakery and if a bakery business is profitable, let me try and answer this (relatively vague) question the best I can!
The short answer to whether bakeries make money is that they can be quite profitable, but you will have to work hard at it. Whilst it’s tempting to bake your favourite products, they might not be the type of product your customers will want to buy. Selecting the best products for the people nearby or selecting the perfect location for your business premises to match the local market will be key to your success.
You’ll then have to look at ingredient cost, how many products you can make with the staff you plan to have, a bakery marketing plan, whether you will sell an iced americano or sea salt coffee with your baked goods, and plenty more.
Until you get started, it’s hard to tell which products will sell and how many you can expect to sell. For those entrepreneurs that get it right, a bakery business can be a roaring success.
How much do bakery owners make? The earnings of a bakery owner vastly vary. Depending on the bakery’s success, a bakery owner is likely to earn around £30-60K, but for many, it’s a lot less.
When researching this post, I reviewed several trading accounts in my local area via a company check website. The approximate findings for revenue and what the owner can expect to receive in the format of salary and dividends are:
|Business earnings (£)||Owner earnings (£)|
Note: The above data offers insight based on research, experience and assumptions. Actual results will vary depending on finance costs, profit margin on the main products sold, and the climate serviced. It’s a guide, nothing more.
Selling profitable bakery items not found elsewhere in high volumes is the best way to success. To determine your price and marketing plan the four P’s of marketing is a simple strategy that can be used., The method revolves around using Price, Product, Promotion & Place as your determining factors on which products you produce at what price.
If you can produce bakery products that excite a big enough audience, you can quickly build a loyal customer base for your baking business.
When considering the cost of ingredients used to make bread, you’d think it would be easy to succeed with a home bakery. But making a reasonable living from running your bakery business is a challenge!
Let’s say you have factored in your ingredient and utility costs. You’re baking bread in full ovens to maximise efficiency. You’ll make around £2 gross profit from a £3 loaf.
To generate the average revenue to make yourself the average wage in the UK of £31,772, you’ll have to make a lot of dough each day!
31,772 / 2 = 15,886 loaves a year
15,886 / 52 = 306 loaves a week
306 / 5 = 61 loaves a day (based on working five days a week)
And that’s not considering delivery costs, insurance, marketing, or equipment finance! Running a micro-bakery can be profitable. It’s unlikely to make you mega-rich, but it could be a stepping stone to a larger operation.
I like a once-a-week baking business option. It’s a great way to supplement an existing income by making bread and cakes on your day off.
Running a profitable bakery business is challenging; sadly, many competent bakers fail. The issue is always balancing food costs with expansion and cash flow. As sales increase, you’ll want to hire more staff and time-saving equipment to cope with the workload. These costs destroy your profit, making it hard for bakery businesses to scale.
A solution is to go down the wholesale route. This leads to big regular orders, less marketing and delivery costs and the ability to forecast your cash flow.
You might want to try a farmer’s market concession. These are great ways to build up your reputation and generate new customers in your local area.
Another is to sell products that don’t take as many resources. Additional products such as coffee, alcohol, sit-down meals or partnering with other suppliers to offer related products alongside yours are popular ways to increase profitable sales without draining baking resources.
Can a traditional bakery be successful without these extra sales routes? Sure, but you need to get your location spot on without it costing a ridiculous amount in rent. Aim for rental costs to be below 10% of your expected turnover, cost your products effectively and maintain a strict budget.
The fundamental key to running a profitable bakery is to sell your products at the correct price. If you use my bakery costing plan you’ll learn how to include all of your expenses in your cost price and base your selling price on how many products you expect to sell.
Once your prices are set, you must run your bakery as a lean business. The equipment that you purchase must give you a financial return. Getting a new toy that makes life easier is tempting, but you should consider if your business will benefit from a sales boost.
The same can be said regarding new lines. Expect product requests from your customers, but before you bake them, consider if making them is a good use of your time and whether it matches your existing range/brand.
Whilst baking your own products is rewarding, becoming a profitable business is difficult.
Aside from making baked goods, it requires a complex skill set, including the ability to sell, negotiate, control costs, and (perhaps) manage a team. Starting a bakery business is an exciting option if you have those skills.
The cost of equipment and location lead to considerable variance in the cost of setting up a bakery. A micro-bakery can be set up for around £5000, whereas larger operations will have start-up costs from £100k.
£5000 is the minimum budget to buy an oven, work surfaces, utensils, a small dough mixer and the necessary costs to make an area suitable to produce food hygienically. Don’t forget to include a portion of your budget for storage devices and enough ingredients to get started.
Lastly, it can take a while until you build your sales high enough to generate a profit. As mentioned earlier, you might also invest in equipment or staff to meet production demands. This can offset your profit until your team and equipment become established.
You will need funds to support yourself during the first year of a bakery business. Whilst this is not essential in a solo-run micro-bakery, it will be challenging if you plan to have staff in your first year.
When you are running low on money, it often leads to stress and making bad decisions. Ideally, have a year’s running costs in the bank before you start.
Because of the overhead expenses involved in running a bakery, you must plan well before you launch. Know your products, suppliers, pricing, how you will deliver your products and plans for expansion.
You’ll need to have a bakery marketing plan written so you know who you will sell to and how you will find them.
As long as you can keep your costs in line with your budget and offer a great collection of bakery products, you have the best chance of success!
I’ve shared many considerations when starting a bakery business. In summary, the question, “Is a bakery business profitable?” Yes, a bakery can be profitable, but it takes planning and ongoing business management to achieve. Will it be worth working towards doing what you love for a living? Absolutely!
Let me know if you liked this article, and ask any questions in the comments below. Thanks for reading!
Hi, I’m Gareth Busby, a baking coach, head baker and bread-baking fanatic! My aim is to use science, techniques and 15 years of baking experience to help you become a better baker.
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