What Are the Finances of a Bakery?
The finances needed to open and operate a bakery vary greatly depending on the size of the business, its location and the type of baking equipment that will be used. Achieving profitability is also a challenge for a bakery due to the niche the business operates in and the relative low cost of its products compared to the expense of creating them.
Other People Are Reading
-
Purchasing Bakery Equipment
-
Bakery equipment is essential to starting and running a bakery. As an owner you must decide whether you want to purchase new or used equipment. This decision depends on several factors including the funds available to you and the size of your business. For example, a used single outlet convection oven costs $2,500, while the same model costs $4,500 when new, according to Bakery Equipment's website. The choice of new or used can have a large effect on your finances as you start your business.
New or Existing Business
-
Purchasing a new or existing bakery business carries varying costs. A new business has higher start up expenses, while an existing business may have old debts which you must assume when you purchase the company. A new business must also build its customer base from scratch, while an existing business may have an existing niche in the market, providing an instant source of revenue. Deciding which business route to pursue depends largely on your existing finances. According to "New York" magazine, a small bakery in New York City needed $38,005 in start up capital to pay for equipment, inventory costs, rent, building modifications and permits when opening their new business.
-
Getting the Money
-
Almost every small business needs at least one loan to get started and open the doors. Securing a bank loan can be the most difficult aspect of starting a small business, as most financial institutions are hesitant to lend large sums of money to an unproven business. Avoid signing any agreements until you're certain you have a commitment from your financial institution to lend you the necessary start up capital. In 2006, New York City bakery owner Erin McKenna almost lost her business before it started when she signed a lease agreement before her bank's $120,000 small business loan was in hand, according to "New York" magazine.
Finding the Profit
-
Cost and profit are at constant odds with each other in a small business bakery. According to "Forbes," as of 2008 the average bakery showed an average pretax profit of negative 0.9 percent. This means that a bakery commonly operates at a loss or spends more money than it makes. Finding that sweet spot of spending just enough on ingredients and charging enough for your products to make a profit is integral to helping your bakery succeed and sustain growth.
-
