How to Start a Small Bakery Business with Minimal Capital

How to Start a Small Bakery Business with Minimal Capital

As we head towards the end of the Pandemic (hopefully), more people are going out and traveling. That means small business is picking up again, and more new shops popping up too.

One of the main types of business that is now trending again is F&B (Food & Beverages) business specifically, cafes and bakeries.

These two niche businesses have a low entry start-up capital and almost anyone can open and start selling almost immediately with minimal equipment. But in this post, I want to talk more about How to Start a Small Bakery Business, and I will do the cafe part separately.

This post will be a brief guide if you had to start with minimal capital and open as soon as possible. That means we are skipping the big paperwork planning and jumping straight to hustle mode. Yes, you can open your own bakery business without the need to know how to bake.

*This is a general and global guide, add and subtract the information that may or may not be relevant to you

Checklist

Here is the quick checklist you can keep on what you need to do and have for a bakery business

  • Business name (open the Social Media Accounts)
  • Register your Business
  • Business License (check your local city council if you require one)
  • List of Products and Price (bakery goods and beverages if any)
  • List of Packaging and Cost (paper bags, paper towels, stickers, .etc)
  • List of Consumables and Cost (Flour, Egg, Milk, Oil, Yeast, .etc.)
  • List of Equipment and Cost (Oven, Mixer, Rolling Pin, .etc.)
  • List of Furniture and Fittings with Cost (tables, chairs, .etc.)
  • Recipe Book (Yes, you need one)
  • Allergy List (some countries requires this list)
  • Supply Price List (if you doing B2B)
  • Invoice Template (for B2B)
  • Delivery Order Template (for B2B)
  • Liability Insurance (subject to country and if you are opening a shop or something else)
  • Payment System (POS System, Card Machine, Petty Cash Box)
  • Receipt Book (if you don’t have POS System)
  • Accounting Software / Firm
  • Advertising Materials (posters, banners, flyers, .etc.)
  • Register Google Business (Google Maps)

Table of Contents

  1. Locate your Bakery Business
  2. Sell your Product or Sell the Product
  3. The Business
  4. Conclusion
  5. Hustle Mode

1. Locate your Bakery Business

Physical Shop, Street Market, or Online. These are the 3 main location options for a bakery business. You can select either one to suit your budget and where you are.

Physical Shop is the best option if the budget permits. But you can always start by opening a stall in the street market or just sell online.

First, identify your location and understand how many bakery businesses are nearby, and learn about the population in your area. General guide:

If you open a bakery somewhere with a low population and no bakery nearby, you don’t have enough customers to sustain it.

If you open a bakery somewhere with a high population and lots of bakeries nearby, you have too much competition and require capital or “uniqueness” to compete.

If you open a bakery somewhere with a high population and few bakeries nearby, you have an opportunity.

If you open a bakery somewhere with mid population and few bakeries nearby, you have a golden opportunity.

If you open a bakery somewhere with a high population and few bakeries nearby, you have a risk of market mismatch.

The above is just a reference for your understanding. You can still open and make money in a high population with lots of bakeries nearby, you just need to be more creative on what to sell and how to sell.

Also, in regards to the risk of market mismatch, this is particularly true in some countries and cities with multiple reasons. This can be based on the culture where they eat and preferred more meat-based or rice-based food instead of flour-based food. Therefore, always check if your market does buy bakery food.

2. Sell your Product or Sell the Product

If you are starting from absolute zero, this might be an excellent starting ground. If you have no idea what bakery products you want to sell, you are on the right track. Because there are two ways to approach this:

Sell your product

If you know how to bake and you want to sell what you can bake, make a list of every bread, cookies, cake, .etc. that you can make.

From the list, select which ones are the easiest to bake, consumes less time than the other product, and use minimal ingredients & tools.

Now, pick 5 to 10 max. For better result, pick 1

The purpose is to narrow down to the bakery product that will not cost you much in ingredients and equipment to start with. The less product you can start with, the more time you have working on promoting. Start with a few, and get the cash rolling first.

If you do pick only 1 to start with, you can work on the ‘viral’ effect or ‘special’ baker where you are famous and a specialist of the Double Chocolate Vegan Cookie in Manhattan for example. The advantage of 1 is you get to keep the cost to an absolute minimum, spend less time on making multiple products, and gain more time for marketing, and time balancing (if you are working or want free time as well).

Sell the product

What I mean by this, is to identify your location and see what other bakeries sell, and find opportunities to sell what they don’t have or lack of options. This is an option if you don’t know what to sell, you can always sell what the people want.

For example in the city of Liverpool, with 4 bakeries in the area, they all sell plain Croissant but none sell Nutella Croissant and the area has a high population of teenagers. This is a market opportunity.

Another example is a suburb in Peru that has 1 bakery shop that sells donuts and pastries. The next bakery shop that sells types of bread is 5km away. If people are traveling 5km to buy bread, there is an opportunity to open a bakery shop in the suburb.

One more great example, there are many cafes and restaurants in the area but not all sell bakery goods on their menu. This is a wonderful opportunity to become the bakery supplier for the area.

3. The Business

Now you have identified your location and what product to sell, you can now do the business part. That is to lock your business name, and social media accounts and register your business (if necessary).

Business Registration and License

In some countries, you are required to register and have a business license.

If you are opening a street market, you may need to check with your local council or market management if you need to pay for a permit to open a stall in the street market.

Therefore, check this matter with your local council first and for most physical shops, liability insurance is required and recommended.

The lists

From the checklist, you may see there are multiple types of lists. The list explains itself and will help especially on two factors:

i. Capital – The amount of money you have invested to start
ii. Profit – The sale you make for the period

It is also good to know and be reminded how much money you have invested and how long it will take to get that money back through the business operation cost and revenue. It can also help determine if your business is running at high operation cost or low operation cost.

For a quick example, if you have invested $1,000 to start, you make $100 per day in revenue, and cost you $10 for ingredients and packaging. You make a $90 profit. In about 11+ days, you will make over $1,000 in profit and that covers back your investment.

Knowing this, you now have a goal and understanding of the numbers of your business.

Payment and Accounts

Determine if you are going to have a POS system or manually through a book to track your daily sales. Because by the second year, you may require to submit your accounts for tax purposes.

You can do yourself the bookkeeping and submissions through the accounting software or, for the extra cost, hire an accounting firm who can handle this and you save time for something else.

B2B

If you going for the supply route, be sure to have the delivery order and invoice template ready. As this is the most common practice and helps you track orders and payment dues.

Price List

I don’t talk much about this as generally, the price list for bakery goods is different from country to country. In some countries, the price of bread is significantly high due to the cost of flour while in some countries the price is low.

Therefore, the bakery business can be a high cost of operation with a low margin in certain countries and the other way around. You will need to research and set the pricing based on your own research.

Recipe Book

Why would you need a recipe book if you doing your own baking?

It is a good practice from the start to have a recipe book. It will not only help with the costs, but it will be easier down the road when you are in an emergency situation where you can’t bake for the day. Someone else can always jump right in and cover the day with you as long as there is a clear instruction.

Additionally, when you have staff, they can get to work faster.

Advertise

Additionally, with social media marketing, a bakery shop must have a banner or poster at their shop/stall. A brochure must be ready to be given out.

The best brochure for a bakery shop is the one with a list of bread and bakery goods they serve daily. Customers will keep this handy brochure and help with their decision-making of bakery shopping for the day

4. Done

That is it! that is all the basic needs to start a small bakery business anywhere in the world. If you find this article to be useful to someone you know, please do share it and like us on our social media!


5. Hustle Mode

Now some readers might want to start a bakery business fast, here is a hustle mode guide:

I can bake

Use any standard home oven, find a recipe that you know or online that is easiest to make like a cookie or white bread, and add an extra ingredient to it. Open a table at a food market and sell at a price slightly above the rest.

Because your food has 1 extra ingredient compared to the rest of the same product.

Get the initial sales flowing in and expand your product range and buy a bigger oven when ready.

I can’t bake (option A)

Find a bakery supplier (ideally out of town) that sells products that can’t be found in a cafe & restaurant, contact them and tell them you want to be a reseller. Create a website and social media accounts as Bakery Reseller selling unique bakery goods in town.

Contact every cafe and food business in town you have and provide a list of bakery goods for their viewing with pricing. Inform it will be next day delivery with ‘order before’ time.

Get the orders in, go to the bakery supplier early morning, and delivery the orders right away.

I can’t bake (option B)

Find a food market that does not sell bakery food or product that can’t be found. Apply to open a stall in the market and buy all the bakery goods from a bakery supplier or home baker.

Start selling and expand to new locations when ready