Why start a bakery?
Bakeries are popular businesses because the sale of baked goods is not hugely affected by economic factors. Products like bread will always be required, and in large quantities. They are also popular for first-time entrepreneurs because of the (comparatively) low start-up costs. It’s also easy to specialise – adding an additional service as a USP, such as wedding cakes, to bolster income and stand out from the crowd.
Situated in the old Chocolate Factory, North London, The Celtic Bakers have been lovingly crafting an array of organic breads and pastries on site for years. From pecan and cranberry sourdough, brioche burger buns, and Italian-style focaccia; to Portuguese custard tarts, luxury fig flapjacks, and triple chocolate brownies – the artisan bakers (quite literally) cater to all tastes. Managing Director Toby Mitchel shared the reason behind starting up his bakery and why they decided to base it in a collaborative space:
"I wanted to use knowledge and techniques passed down and finessed over countless generations. We bake from scratch using natural ingredients, and all our bread is shaped by hand. We see what we do as something that's creative, something that's artisan, something that needs to be crafted and shared, and there's always a chance of bumping into likeminded people here at The Chocolate Factory – be that in the café or the lobby area.
“I think an artisan bakery, although it's not perhaps a usual Workspace tenant, actually fits in really well with the whole ethos of the place."
What types of bakery are there?
The most common type of bakery will offer a selection of fresh breads, along with savoury goods like sausage rolls, and sweet goods like cakes and pastries. This wide product range helps create a substantial target market and increases the amount of business open to you. Some bakeries specialise in services, such as making occasion cakes. These require more specialist equipment and skills and can be costlier to make in terms of time and money, but if you can build up a reputation it’s a good way to supplement the day-to-day income of the bakery. Deciding on what services you want to provide is key when considering starting a bakery.
The Celtic Bakers operate on an independent customer basis. The London-centric business supplies baked goods to small sized owner-operated cafes, right through to larger chains, top-quality restaurant groups and food halls – all situated within the M25.
"We love to supply to farmers' markets too," says Toby, "and we're a part of roughly eight or nine farmers' markets every week." And, priding themselves on the fact that they bake from scratch using natural ingredients, the wholesale bakery draws upon knowledge and techniques passed down through the generations to produce the perfect loaf.
The perfect mix: What skills will I need?
Like setting up any business, starting a bakery requires general business skills. Plus, the obvious ability to bake. The former includes such things as managing profit and loss, keeping on top of the books, negotiating with suppliers and understanding cash flow. Without focusing too much on the negative, read our six reasons why new businesses fail to help you avoid common pitfalls.
Your ability to bake is key because, in the early stages when things are tough, you need to be able to manage the shop yourself. If you have to hire a baker/manager, your costs will skyrocket while revenues remain the same. Baking skills also allow you to understand the market more effectively, build stronger relationships with your clients, and innovate.
Buying an existing bakery
Buying an existing bakery can be a good way to start, especially for first-time entrepreneurs. You get the benefits of a successful business, alongside the ability to ‘make it your own’ by, for example, introducing new products and services.
The most important thing to consider is the location – somewhere where there is foot traffic to ensure enough ‘walk in’ trade, alongside your regulars who make a special journey. Baked goods are often bought at strategic intervals (breakfast, lunch). Another consideration is access; if the road is congested cars won’t be able to park, which will severely limit your trade.
The building must also be up to scratch commercially, which means it must abide by regulations, including health and safety regulations – make sure you check its latest Food Safety Report. Is there disabled access? Are there parking spaces for you plus your employees? Also check to see if the building is freehold or leasehold, as this makes a difference to not only the price and the length of time you ‘own’ the property, but also the regulations you must comply with.
Get a lawyer to check over the contract carefully. It could save you enormous amounts of money and stress in the long run if they find something that needs attention.
The cost of starting a bakery will depend on a variety of factors, including the range of products you’ll offer, any renovations or redecorating that needs doing, equipment etc.
There’s no easy answer and you’ll need to carefully consider your budget, so you can buy all the essentials, leaving the luxuries until a later date when you have more cash.
- Licenses and legal: if you want to do things properly, you may wish to set up your bakery as a legal entity by registering with Companies House. Health and Safety regulations, including sale of food and food preparation, will be needed. Check with the Health and Safety Executive to see what you require. You will also need a lawyer to check over any contracts, such as with your landlord. A budget of between £500 and £1,000 should cover you for licenses and legal in the early stages
- Equipment: The amount you need to spend will depend on the products and services you’ll offer. If you want to bake and sell occasion cakes, you’ll need specialist equipment. And if you sell bread, you’ll also need a slicing machine. An initial budget of around £5,000 should be enough to buy what you need to get things moving. As you grow, you can supplement your equipment
- Start-up supplies: these include raw materials for your baked goods, packaging and advertising collateral. Budget around £2,000-£3,000
- Renovations and decorating: budget around £2,000 to make any changes to the location, although this could climb if the location needs a lot of work. If it does, try to negotiate a rent discount. If you are buying an established bakery this figure will obviously be much lower
- Rent deposit: you’ll need a deposit on your rent when starting up, which is typically a month’s rent in advance. Depending on the location, this could be anything between around £500 and £2,500
Insurance is essential for any business but especially so for those selling food to the public. Bakeries must have both public liability insurance and professional indemnity insurance. If you hire staff, you should also have employer’s liability insurance to protect yourself against any legal action taken against you by a former or current staff member.
Mistakes can happen, is your business covered? Check your insurance policies carefully to protect yourself, customers, and staff.
A thorough business plan is essential if you want to start a bakery. But first, check to make sure you have the skills necessary to start one. Do you need to brush up on your general business skills? Or perhaps ensure your baking skills are sufficiently well-rounded? Once you are sure you wish to proceed, a business plan is the first stage; without one, you won’t know how your business will turn a profit or what goods you’ll be selling. Read our Guide to business plans to help you get started.
The location of your bakery can make or break your business. Learn about tenancy agreements to ensure you can hold your own during negotiations. Don’t rush to rent a property, as you may realise it has significant disadvantages at a later date. Take your time – it’s probably the most important decision you’ll make when starting a bakery.
Breadwinners: Tips to help make your bakery a success
Once you’ve done all the hard work to get set up in your bakery – surprise, there’s plenty more to do! But this is the fun part where you can bring your passion and hardworking to make a success of the business.
"It's all about passion for the food, really," says Toby. "Every loaf that leaves our bakery has been carefully hand-shaped. And with some sourdoughs taking 48 hours to produce, it’s quite a journey from start to finish. They are very lovingly crafted things."
- Pricing is key: products must be competitively priced but must also give you a decent profit margin. Because you are selling low-value products in quantity, it can be easy to think that pricing is not that important, but every penny must count
- Décor and cleanliness: getting repeat custom is very important for bakeries, especially because they need to compete with big supermarkets for custom. Ensure your premise is clean and welcoming
- Learn from your customers: catering to peoples’ needs is essential if you want to beat the competition. Keep a note of what you sell each week and ask people for their opinions. Develop new products based on what is successful. Constant innovation is important as you’ll need to keep people interested and – by extension – coming back to you
"The thing that excites me most about this business – I know this sounds like a cliché – is our customers," says Toby. "Our customers are some of the best eating and drinking establishments in London."
- Develop a USP: successful bakeries often differentiate themselves by offering uncommon services. This can supplement the standard revenue stream. Wedding cakes are popular as an additional service, or – in the case of town-centre bakeries – providing special meal deals at lunchtime can help draw a regular crowd. Don’t choose a USP based on what you want to do; choose one based on what is right for your location and customer base.
The Celtic Bakers are on a mission: recycling as much waste product as is possible. "If we over-bake a batch, we recycle this into animal feed, for example," says Toby. "We also work with a charity called Breadwinners and they work with refugees. They run two or three market stalls a week staffed by refugees and we’re one of the suppliers of bread," says Toby. "It’s really good to work on a project that isn’t 100% commercial. And an important part of our philosophy is to leverage business for the good."
Exploring your options
Alternatively, you could look to set up a café rather than a bakery. This can be a profitable and rewarding business to run if you're a people person and enjoy the 'cafe culture' vibe. Find out how to set up a cafe business here, along with the associated costs and benefits.
As well as The Chocolate Factory in Wood Green, Workspace has offices all over the city. Discover our other locations here. Is your business looking for a new and inspiring space, or is coworking more your thing? Why not check out what we have to offer?
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