3 Most Common Reasons Your Small Bakery Business Will Fail

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Are you missing these 3 important things in your small bakery? If you are, they could be detrimental to your bakery business. Can you guess what 3 mistakes most people make when starting their bakery business? There are 3 most common reasons your small bakery business will fail.

  1. Marketing and branding your bakery
  2. Understanding and tracking your financials
  3. Master your pricing

Marketing and Branding Your Small Bakery

If you do not have a marketing and branding plan for your bakery you are doomed to fail. Marketing is one of the most common reasons your small bakery business will fail. You can have the best products in the world, but if people don’t know you exist, they will not find you. 

It is not an “if you build it, they will come situation”. You will need to put in the hours to create and execute a marketing plan from hitting the pavement and spreading the word to creating a digital footprint for your bakery. 

We have created these 50 different ideas to market and promote your bakery [here].

It is best to try to revisit your marketing plan every month to brainstorm different ways to help people find your bakery. One of the ways that we have drummed up foot traffic into our retail store is by using the power of social media. We have worked hard to create and nurture our online community. 

Many people find online marketing and branding to be overwhelming and just don’t know where to start. We know what that is like, and that is why we created a social media marketing and branding course [here] so that others could start harnessing the power of social media for their business. 

Our last big tip for marketing and branding your small bakery is to find something that you do well that helps you stand out among the others. Maybe you make colorful bagels or maybe you make lavender and sage bundt cakes (I don’t know just pulling things out of thin air). The important thing is that you find something that you do different and better than most other bakeries to help you stand out. 

Then you use this difference as leverage in your marketing to help attract customers to your unique perspective on items. Try not to focus on too many items that make you stand out. For example, flavor profiles are important to us. We are not a bakery that focuses on cutesy, decorative items. We focus on create unique flavor experiences that you cannot get at other bakeries.

This allows us to stand out among other bakeries and allows our customers to know exactly what they will get. We are not giving them mediocre flavors and mediocre designs. We are giving them basic designs with unexpected flavor experiences. 

Understanding and Tracking Your Financials For Your Small Bakery

We have spoken about this extensively in our blogs, books, courses, lives, YouTube channel, and podcasts. It is so important that you understand where your money is, where it is going, and how it was spent. Understanding and tracking your financials is one of the most common reasons your small bakery business will fail.

Our pastry chef, our mom, spent 20 plus years in the accounting field before leaving the corporate world behind and becoming a pastry chef. Our business has been built on a stable financial foundation because of her. 

Through our journey, I can personally tell you how important it is to keep your personal and business finances separate, tracking all income and expenses, and understanding how money is flowing in and out of my business.

It can be a slippery slope in your business if you do not set up separate bank accounts to keep your personal finances and business finances separate. However, it goes even deeper than that. You need to be recording every dollar you make and spend in your business. This includes money tied up in inventory such as the flour and sugar used in your business and the additional stock of products such as the frozen buttercream and cakes in your freezer. 

You need to know what you donated, what product was used for marketing, and what product had to be wasted so that you can recoup the costs of these items in your taxes. You need to capture the costs of the ingredients used to make products to ensure you price your products correctly and to see if there are any money leaks that can be stopped in your business. 

Understanding your profit and loss, cash flow, income, and expenses can be the difference between you closing up shop or staying open to grow into a large successful bakery. 

We understand not every small bakery business has the extra expendable cash to put into accounting software when you are just getting started. That is why we created our Profit and Loss workbook. 

This excel workbook is the same workbook we used in the beginning of our business. It allowed us to track income, expenses, and waste so that we could see exactly where our money was flowing in and out of our business. 

You can get your copy [here]

Pricing To Make A Profit In Your Small Bakery Business

Last but not least, the thing that we preach about the most is learning to price your products so that you can recoup costs, pay yourself, and earn a profit to grow your small bakery business from a bakery with no storefront to the #1 bakery in your region. This is the #1 most common reasons your small bakery business will fail.

Yes, the #1 reason your small bakery business will fail is because you have not priced your products correctly. Now before you go any further, I do not want to hear about how industry standards say to just times your food cost by 3. If you want to start a business on industry standards, then know this; 1 in every 5 bakeries fail

Yeah, how do you like those odds? 1 in every 5 bakeries fail so we choose to grow our business outside of industry standards. 

This means we DO NOT just multiply our food cost by 3. We don’t just roll the dice and hope that we make it. 

No, we mathematically calculate our price, compare it to the market, and set prices that we know will cover our food costs, cover our overhead, pay our employees, and provide a profit so that we can grow our business from a farmer’s market to the bakery in town. 

How do we do that? Well, we actually have a free mini pricing course where we breakdown how we approach pricing in our bakery business. You can register [here], but we also have a pricing tool that we use in our business. 

We know this pricing tool works because we use it in our business. As a matter of fact my mom, (full charge bookkeeper turned pastry chef) is the one who created the tool for our business, which you can buy [here]. Whenever, we have a new product, we start by using the tool to determine the absolutely lowest amount we can sale the product to ensure we are successful. 

Then we do a market research to see where we are in comparison to our area. Now… and this part is SOOO important… we do not do the research to see if we should lower are price. ABSOLUTELY NOT!!!! We would never lower our price. Instead, it is to make sure we are not selling ourselves short. 

No, we are not looking to be the cheapest on the block. We have more pride than that. We know that we are worthy of compensation for the product that we have created, and we expect our customers to recognize the value that we provide. 

So, when we do market research, it is actually to decide if we should raise our price to make sure that we are with others in the market. Never to lower our price. Read that again. 

So it is important for your bakery to go from small struggling bakery to a large successful bakery is to learn to market and brand your bakery business, understand how money is flowing in and out of your business, and to know that you have mastered your pricing to recoup costs, pay yourself, and grow your bakery business. 

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