Being a terrific baker is great, but to convert this skill into a viable home bakery business, you must first prepare a solid home bakery business plan that guides you through all of the difficulties of business management.
Truth is, many terrific bakers like you have struggled to make the successful shift from passion to business venture.
The reason is simple; there are many parts to a business venture than simply baking a mean pie. Thankfully, a solid home bakery business plan helps you to stay organized and properly navigate the complexities of the business world.
In this article, we’re going to discuss the benefits of a detailed business plan for your home bakery business, and how you can go about writing one.
Why is a Home Bakery Business Plan Important?
1. Helps You Find The Right Partner
For many new home bakery business owners, the business is an entirely one-man business where they play all of the roles needed to keep it running.
But this could change quickly if your business begins to thrive and begins demanding much more of you than you can handle.
Should you need a partner at any point in your business, a good business plan can help you find the right one. How so?
A quality business plan documents your vision for the business in vivid details. It shows potential partners where you’re headed and how you hope to get there.
Armed with a good business plan, you’d be able to attract the right people with the right values who believe in your mission and vision.
A good business plan will also help you avoid the pitfall of selecting a partner simply because they’re a friend, spouse or family member, by helping you identify the values you seek in a partner.
2. Helps you gain clarity of purpose
Your home bakery business is very likely going to be a one-man business. This means you’re everything from the baker to the logistics personnel, supply chain manager, inventory manager, etc.
Unfortunately, many soon get lost in all of these tasks, forgetting the key components required for business growth and success.
A proper business plan offers you clarity. It provides you a roadmap to follow, and acts as your North Star, guiding you when you run into problems.
Essentially, it becomes a reference point that helps you identify what’s most important and give them the maximum attention they deserve. This is going to come in handy whether you’re looking to stay small or you wish to expand sometime in the future.
3. Helps You Attract Investors
If you have any hopes of expanding through external investment at any time in the future, a business plan is a must-have.
This is true whether the investment you seek is from family and friends, banks, or even angel investors…
A business plan helps the investor see how their money will be spent, and how you intend to make their money back.
It shows them that you’ve considered every aspect of the business, and are fully aware of what it takes to succeed in this business.
Everything from your SWOT analysis to your marketing and targeting plans, help investors build trust in you and your management skills.
Steps To Writing A Fail-Proof Home Bakery Business Plan
Having considered why a business plan is important for your home bakery business, it’s now time to get into how you can write a business plan that stands the test of time.
In this section, we’re going to be covering the essential parts of a quality home bakery business plan. At the end of the section, you should know all the right questions to ask when developing your own business plan – and how to answer them.
Let’s dive right in!
1. Your WHY
Most successful businesses discover their ‘why’ early on, and you should too.
Why are you creating this brand?
There is certainly no shortage of bakeries in the world. I could walk into any grocery market or convenience store and get the bread I need. So, why you?
The key to answering this question lies in identifying the problem you’re trying to solve. You must also identify a clear vision of what you’re trying to create.
A good example of this was one of my students, Makayla, who created her own doughnut store – Frankie D’s Doughnuts. This doughnut store soon became the most popular in her town. Why?
Not only do they bake one of the best doughnuts around, but they also have a great community.
For Makayla, her brand was more than just doughnuts. It was about building a community where people felt safe enough to talk about their mental health issues.
As a result, she carefully built a brand with a close-knit community of friends who both love her product and cherish her mission.
2. Your Team
Identifying the background of your team members is an important part of your business success plan.
In the bio section of your plan, you want to identify what makes you and your team (if you have one) that much more likely to succeed than others.
Makayla, mentioned earlier, had zero experience as a baker before she began Frankie D’s Doughnuts. However, she was running a successful online coaching business, and boasted an amazing problem-solving ability.
She also understood the intricacies of building a community by harnessing the power of human psychology. And, she understood the power of motivation and how to get people to push past their hurdles by understanding their “why”.
These skills were what she transferred over to Frankie D’s Doughnuts’ community. They also allowed her to position herself for success and gave her the confidence to approach investors to invest in her and her business.
Your bio could also include extras like your network. For instance, having someone who owns a farm and can provide you with necessary ingredients at fairer prices adds to your profile strength.
As you consider your personal bio, you also need to consider the bio of any (potential) team members. Who are they and what do they bring to the table?
Our board at 720 Sweets, which just got bought out, for example, had Brian – a successful entrepreneur and awesome operations manager. We also had Tim who is one of the biggest distributors for bubble tea supplies in Western Canada.
As partners, these guys brought in qualities that made the team so much better and made us a more attractive prospect to investors. This should be your goal when adding any new team member.
3. Your Target Market
Identifying the target market is a critical part of any business’ success. Who are you looking to solve a problem for?
Without understanding who it is that you’re serving, providing the right solution becomes a lot more complex. You simply can’t solve a problem for everyone, regardless of their age, background, or unique life situation.
People’s problems are as different as their circumstances in life, so it’s important you streamline your target.
As you begin to form assumptions on your ideal customer, take the time to build up their profile. How can you do this?
Think of profiling as a way to get to know your customer intimately.
Who is this person and what do they want? How old are they? Where are they currently in their life/career? Are they married or single? Do they have kids?
What are their specific interests – sports? Yoga? Workouts? What brands do they like? Do they associate more with Whole Foods, No Frills, or Walmart?
Sounds like a lot of assumptions, right?
It is! And that’s how thorough you need to get.
But how can you possibly learn all of this about your target market? The short answer, survey.
Before setting up 720 Sweets, we conducted over 2000 surveys in order to identify our target market. By the time we were done, we knew who our customer was and what drove their purchasing decisions.
While we favored the idea of conducting physical surveys, you may not have that luxury. In that case, feel free to take advantage of online surveys.
Survey platforms like Survey Monkey make it easy to create a survey and send it out to your target market. You could also take advantage of social media platforms like Instagram and Facebook.
Taking your time to identify your target market helps you attract investors to your business as they’d see – and appreciate – your meticulousness.
And if you’re not looking to get investors, properly identifying your target market will be important as you begin your marketing campaigns to build awareness about your brand.
Confused on how to create a solid target avatar?
Understanding your target customer is a critical business fundamental. Messing this up will mean you’ll run the risk of creating a brand and menu that won’t appeal to the people you want it to. And that could be a costly mistake.
Because it’s like talking to your customers in a whole different language! They don’t understand you and you don’t understand them.
That’s why I created the Foodiepreneur’s Finest Mentorship Program to teach you how to properly do your target market research and other business fundamentals. That way you’ll be able to create your own target avatar that works and be confident that you’re speaking and selling your customers what they WANT and NEED.
So if you want to start a food business and start it on the right foot, so you know exactly what your customers want and appeal to them, then join me and other food entrepreneurs in the Foodiepreneur’s Finest Mentorship Program!
4. Your Location
At this point, you’re probably thinking the answer is fairly obvious… A home bakery will be located at home, yeah?
Well, while that might be true, you still need to determine your location. How so?
To answer the question, you need to think of how you plan on fulfilling your orders. For home-based businesses, there are a few options you could consider.
1. Pick Up Model
The first is a pickup model.
If you’d be adopting a pickup model, then you must recognize that finding your location could prove problematic if it’s not easily accessible.
For instance, imagine you live on the 29th floor of a high-rise building. How convenient would it be for your customers to find their way up in order to pick up their delivery?
Now contrast the above with someone who lives in the corner of a street with a parking lot which is both easy to locate and convenient to access. The location in these two scenarios could be the difference between success and failure.
In order to beat the location problem, I’ve seen home bakery business owners partner up with restaurants, convenience stores, or just any business location where they’ve got friends. Customers can then be directed to pick up their delivery at a specified time at this location.
2. Delivery As A Service
A second option would be offering delivery as a service.
If so, how much would it cost you, and what location radius would it apply to? How much can you possibly charge for it in order to recoup your expenses?
As you answer those questions, be sure to factor them into your business plan. This would be important for your pricing model, and would show investors your level of detail.
Your final option would be getting a stand for your operation.
With this comes a number of other options. For instance, many home bakers have found the farmer’s market to be an excellent distribution option. They simply rent a small booth here which serves as a pickup location while also exposing them to other potential customers.
Others work with cafés. This is usually easy as most café owners love independent bakeries and enjoy displaying their goods in their shop in order to boost their own average order value.
Should you choose to work with cafés, you may opt to sell your products to the café owner, who then proceeds to sell at a slightly higher price in order to make some profit.
Or, you may decide to rent a space in your chosen café. Your stand can then serve as a pickup location while also exposing you to other potential new customers.
A great example of this can be found in a doughnut shop called Plates by Payt. Rather than get a single stand, they host regular popups at different cafés. Customers are then pointed to the right café to get their product at any time, while their potential market constantly expands.
5. Your Menu
The sample menu is a critical part of the business plan of any food business. This menu defines what exactly you’d be bringing to the marketplace.
To be clear, your sample menu is one of the most important pieces of your plan, and goes a long way to shape your success. You must be intentional about it.
AVOID the trap of selling something simply because you enjoy it!
This is a rookie mistake that has cost many new food businesses their success – selling food you and your family enjoy without considering what the customer wants (and is willing to pay for!).
Before settling on a menu, hit the streets to find out what it is your customers would be willing to pay top dollar for.
Your menu determines your success. Treat it as such.
There are three key elements to consider when creating your menu.
1. Average Order Value (AOV)
The first is your average order value (AOV). This basically refers to how much you hope to get per transaction.
For example, if you sold a cookie for $3 and most people buy just one, you’d need 333 customers before you made $1,000. That is a lot of cookies you need to sell for just 1000 bucks.
If, on the other hand, you changed your pricing structure and sold the cookies in a box of eight for $20, it’d take you just 50 customers to hit the $1000 mark.
That’s 283 fewer transactions!
2. Complimentary Items
The second key element to consider is the complimentary items that go with your product. Used properly, complimentary items can improve your average order value.
Let’s assume you’ve chosen to go with the box of cookies model which is really perfect for gifting those who are celebrating personal milestones, birthdays, etc.
You could easily tack on a $10 extra for which you’d add things like a card, ribbons, cutting knife, sparklers and candles. This way, I wouldn’t need to order all of those extras separately from Amazon when going over to celebrate with a friend.
3. Cost of Goods Sold (COGS)
Your third and final consideration should be your cost of goods sold (COGS). This is particularly important for you as you determine the right price to sell your product.
Unfortunately, many just don’t do the math to figure out their average cost of goods sold (COGS). At the end of the year, they then realize that they’ve spent all this time working without making any money.
Quickly working out the cost of goods sold serves as a two-way barrier. First, it prevents you from losing money by underpricing your product. Second, it prevents you from driving away your target customers by overpricing your product.
In all, you want to ensure your target customer would be willing to pay the right price for your menu items. Once again, you can validate any assumptions you might have by surveying the market.
Tell those who fit your profile what it is you’re selling, and ask if they’ll be willing to pay for it. Find out how much they’ll be happy to pay. And, inquire what they’d consider as good complementary items.
Survey, learn, adjust, and survey some more until you arrive at the best possible pricing solution.
Besides helping you set the right price, a good survey will also help you when discussing with potential investors who will be confident that your price will be accepted in the market.
6. Your Branding
First off, branding does not equate to a logo.
Okay, with that out of the way, what really is branding and how can you build an attractive brand?
Everything about your visual and psychological positioning make up your brand. Everything from your logo (yes, the logo is only a part of the brand!) to your website, social channels, brand colors, your brand encompasses them all.
It’s the way you make people feel when they hear your name or see your colors, and the way you talk/respond to your audience. Branding is a living thing.
Your brand is essentially the character associated with your business.
Your logo, brand messaging (with emphasis on the tone of messaging), selected brand colors and graphic styles, and even your naming patterns should all convey that feeling/emotion.
If you’re to fully harness the power of proper branding, your branding must be consistent across all channels, from your Instagram to your website, Yelp Reviews, and even your menu items.
When potential customers move from your Instagram to your YouTube, for instance, they shouldn’t begin to question whether it’s the same person in charge of both accounts.
A good example of a well-thought-out brand image is that of Big Stick Willy’s, a food business in New York that put a special spin on the original mozzarella cheese stick.
For their brand image, they decided to go with something that is fun, mean, and yet humorous. This image bleeds into everything from their graphics to their messaging, naming patterns, etc.
By the time you’re done curating your brand image, you should have a clear picture (on paper) about what your brand should look like. You should, at this point, have settled on a name, a logo, packaging designs, menu design and naming, and everything else that gives life to your brand.
7. Your SWOT Analysis
Identifying your strengths and weaknesses early on is key if you’re to truly succeed at your business.
Thankfully, SWOT analysis comes to the rescue.
A typical SWOT analysis helps you identify your strengths, weaknesses, opportunities, and threats (SWOT).
Strengths here refer to that which makes you special. Essentially, you want to know what it is that gives you an advantage over the competition.
This could be the ingredients you use, your never-before-seen recipe, your suppliers, or even your food costs.
Your weaknesses are the advantages your competition enjoys over you. This could be their distribution network, brand name, business size, etc.
Next, you must identify the opportunities that get you super excited about this space. Perhaps you’re looking to take advantage of the growing vegan trend by creating an exceptionally delicious vegan doughnut; this is your opportunity.
Finally, there are the threats. These are the things that could kill your business. For your home bakery, these could be challenges with licensing, saturation in the industry, or whatever else you identify.
A good SWOT analysis gives you a complete overview of your business, letting you know the areas to focus your energy and the areas that require extra caution.
8. Marketing Your Home Bakery
With your business all but set, it’s time to zoom in on how you intend to get the word about your business out there.
What marketing strategy are you adopting, and why? Would you rather go for influencer marketing, Instagram marketing, TikTok marketing, or perhaps Facebook ads to help your home bakery business gain traction?
Now, your choice of marketing strategy mustn’t be flamboyant or expensive. In fact, earmarking something as much as $5,000 on Facebook ads for your home business is a major red flag to any good investor.
This is because you’d hardly get any results going that route at this stage of your business. And, even if you did, the costs would far outweigh the revenue it generates due to your low average order value.
However, trying to gain organic followers within your target location on social media could be really powerful, allowing you to gain traction without spending so much.
9. Your Financials
The final part of your business plan involves you putting the numbers together and identifying the message they carry about how you can run your business successfully.
For this part, you need to conduct your research and determine everything from how much you’d be spending to how you can get that money back.
You’d also need to determine your burn rate and how long you can keep your new business afloat (given your current capital) before you start getting those huge orders.
Along with these, you must also prepare a cost-benefit analysis. This would help you figure out whether your products are going to truly be profitable, or not.
How would you be getting all of these numbers?
Not to worry! You won’t have to simply manufacture numbers through guess work. Good research can give you just the right numbers for your projections.
Of course, this is fairly easy with your expenses. You could simply head over to the produce market and determine the cost of the ingredients needed for your products.
But it becomes trickier when trying to project sales. Still, good research can come to the rescue.
For example, before renting a space for our ice cream shop at 720 Sweets, we went over to our target location and spent hours observing the environment for three different days. This included a weekday, a weeknight, and some hours during the weekend.
During our watch, we observed the level of traffic around the area. We also took note of how many people were going to the competitor’s ice cream shop and what they were ordering. We tried to take note, too, of what these people had in their hands when coming out.
And we logged in everything!
By the time we were done, we knew our target customers fairly well, and could make more accurate projections about our potential expenses and revenue.
In addition to your projected revenue and expenses, you also need to identify your setup/overhead costs. How much would you be spending on machinery? What about renovation and design?
Handling your financials correctly keeps you from running into unexpected costs.
It also shows your investors how you’d be spending their money, as well as your clear pathway to recovering their investment and getting them into profit.
Writing a business plan is a conscious process that helps you completely grasp all there is to your home bakery business. To ensure the process serves its purpose, it’s important that your final home bakery business plan is solid enough to prepare you for any eventualities.
But this can be a confusing process, particularly for beginners. While the thoughts captured here are enough to set you on your way to a fail-proof business plan, they’re far from exhaustive.
Confused or overwhelmed with how to start your home bakery business?
I get it. There’s a TON of things you need to think about when it comes to starting a home bakery business. And it can easily get crazily complicated.
That’s why I created the Foodiepreneur’s Finest Mentorship Program so you have the blueprint to start your food business with confidence. The 12 week program will go through creating your target market, your menu, pricing your items, setting up your Instagram for success, and launching!
So even if you don’t have much or ANY experience with running a food business, the program will be there to give you all the tools you need to succed. Tools as in fillable worksheets, templates, and a private community where you can ask questions if you get stuck and see what other like-minded food entrepreneurs are working on.
So if you want to start your home bakery business on the right foot, then join me and other food entrepreneurs in the Foodiepreneur’s Finest Mentorship Program.