Starting up a home baking business

studentbaker

Hi,

I am currently planning to start a business selling baked goods. I'm hoping to sell to local shops and at local markets. I think I have most of my costs accounted for but the problem is that I have never sold before at a market so have no idea of the kinds of quantities I would sell!

If anyone sells small or large cakes, chocolates or other confectionery at local markets I would be grateful if you could give me an idea on how much I should make to sell. If I can get a better idea then I won't have as much waste.

Could anyone also give some advice on how much ( as a %) I should sell my product to local shops? For example, how much lower than the RRP.

I am also looking for local suppliers in the northeast (near Newcastle as possible) for flour, butter, sugar and eggs. I have found suppliers on the internet but would prefer to use local produce.

Thanks

paddyrg

If you're doing it at any kind of scale, domestic kit will let you down - home ovens are made to run for a few hours a week, not all day every day like commercial kit. You will also need to talk to your council about food handling certs and to HMRC to let them know you're going into business.

You talk about supplying shops - they will want 33-50% of the sale price, and will want to sell them at a price to move. You will need to provide a really reliable supply coming to them if they're to build up your market. If you let them down, it becomes more trouble than it's worth for them, so be absolutely reliable all year round, find someone who can take your recipes when you go on holiday and provide the same standard.

What makes your cakes different from everyone else on this board who wants to start a cupcake business? What's your brand differentiation? Why would someone sell your cakes over the next supplier? Why would a punter buy your cakes over the next stall? Think about these carefully as perhaps you can find a premium niche rather than going in blind and hoping to create a market. Look at your business plan (or prepare one) and all the questions you're asking here are ones you'll be able to answer yourself ultimately ;-)

googler

What Paddy said - especially about food hygiene compliance, and making a business plan focusing on your USP.

motorguy

paddyrg wrote: »

What makes your cakes different from everyone else on this board who wants to start a cupcake business? What's your brand differentiation? Why would someone sell your cakes over the next supplier? Why would a punter buy your cakes over the next stall? Think about these carefully as perhaps you can find a premium niche rather than going in blind and hoping to create a market. Look at your business plan (or prepare one) and all the questions you're asking here are ones you'll be able to answer yourself ultimately ;-)

I think this is key.

A lot of people look at the quality of cakes in supermarkets and shops and say to themselves oh i can make a nicer cake than that and sell it for less.

Well the reality is, its very hard to. Take a £2.95 cake. The retailer is probably expecting a pound of that, even before you start, then you've ALL the costs involved and listed above PLUS some way of getting them to and from the shops - i dont think you can legally carry foodstuffs commercially in the back of a car - so you're into the realms of running a small van.

PLUS ALL shops have already got a wealth of buns / cakes / etc from other local suppliers, so they're probably going to take some convincing even to allow you shelf space.

Very very difficult market to crack.

studentbaker

Thanks everyone for all the advice.

I am current in the process of writing a business plan and have hopefully answered most of the questions which have been presented by paddyrg (thanks!). The only difficulty is trying to predict how much I will sell and at what price but I think the only way is to test the market really! Its like when you see on dragon'd den, people say I forecast this much profit IF I sell this much. I don't want to over predict what I will sell and have wastage.

Atm I'm thinking there are two routes open to me, farmers markets and local shops. If I sell directly to the customers at farmers markets then my profits will be greater. However I can not predict how much I will sell, therefore I have the problem of making too much and have a lot of wastage or not making enough and loosing out on custom. Or if I sell to local shops, I will have to take a cut on my profit to allow the shop to make money too, but my product will be made to order so no wastage. Since I am only a small business every little penny will count! All profits will obviously go back into the business so each time I can afford to make more. I suppose everyone starting a food business has this to think of.

Please comment if you have any advice towards what I have just said. Thanks!

paddyrg

The most likely outcome with local shops is they'll carry your lines 'sale or return', to begin with at least. This means they will take some stock and if they sell it, they will pay you for it, otherwise you take back the unsold goods. Much like the farmers market route, you still bear the full risk of stock level management on a perishable item however the shop takes a cut in return for the shelf-space and getting items sold. The chances of a shop placing a firm order of 20+ cakes twice a week is slim, initially at least. For sale or return, offer a slimmer margin than outright sales so there is still some incentive for you to get out of bed in the morning - maybe 20-25% as opposed to 33-50% on the basis you still bear all the costs and risks.

Farmers market has less regular customers, but you'll make a few extra pence on each cake. Swings and roundabouts, but even if you make £1 on each cake after ingredients and transport and cooking and so forth, you need to shift 100+ to get any kind of worthwhile profit to remotely even cover your time.

For numbers for your business plan, remember to ground them in reality - no point planning on selling 100 jam sponges a day if your kitchen and set-up will be pushed to do 20 around doing dinner, for instance. Business plans are to test the validity of an idea, so be realistic with all your figures, then see if there's a business there at the end of it as opposed to going into business to see if there's a profit there at the end of it!

studentbaker

Thanks paddyrg some really good points for me to think about!

ferretkeeper

I have recently started baking for a local shop, their old supplier stopped and no-one else took over so they asked me to try. Broadly speaking the price I sell for is double the cost of making it i.e. ingredients and electric. They add another 40-50% on top so everyone's happy. I don't do sale or return, it's for them to promote what I sell them.

I don't bake lots, just enough to keep up with their demand, and I have started making smaller quantities, since the new year sales have been reduced. From my perspective I don't want cake going stale, people won't buy again if they get one like that and the shop haven't been great at checking how long it's been there for lately, they used to reduce it on the last day to shift it.

This does make it more of a faff although I try and combine baking with cooking something for myself. Or I do extra cake and freeze some, it's no hassle to do a double mixture, then all I have to do next time is decorate it.

I don't charge for my time just yet although I have nice little kitty of money that I suppose could be considered my wages. I started with £10 of my money for ingredients, had all the kitchen stuff anyway, and haven't put my hand in my own pocket since.

I have plans to expand and make it more worth doing as it is a bit of a hassle while it's quiet in the shop, but if it got busier and I found one or two more outlets it will be worth hanging in.

Good luck!

mummybaker

I have a few blogs about this my website is mrs bakers cake school. If you google it you will find it. I go over the main things you need to check off your list and theres a link to the cheapest food handling certificate I could find too.
You will need plenty of insurance too but it's all explained in the blog. Give me a shout if you need any more help.

COOLTRIKERCHICK

In reality no one on here can tell you how many cakes will sell in the market or in shops.

Flip if we all knew how much quantity would sell ( in any retail business) we would all be happy.

Personally I would go round your business plan from another angle. Instead of presuming how many you 'could' sell, work out realistically what you 'can' make in one day/week.

taking into account you have other day to day things to do/distractions etc.

Once you have worked out how many you can make, deduct a few from that figure, this is you now being realistic:D

Once you have the total alount of cakes you can make, then work out the cost of what each cake costs to make, not only the ingredients, the box/bag that you will give to the customer once you have sold it etc.

Personally before you go talking/thinking about approaching shops I would do the markets etc to get experience, and get customer feedback, which you can use to 'tweak' your cakes or your range with.

I would personally find a regular market, which has casual pitches and take it from there.

gb12345

mummybaker wrote: »

You will need plenty of insurance too but it's all explained in the blog.

This is a good point that no one else has mentioned.

At the very least you will need Public Liability insurance in case you give someone food poisoning or something.

If you're going to be transporting your produce by car/van then you will also need to ensure that your insurance covers business use as it is likely that your standard motor insurance won't