How to Make a Bakery Business Plan

December 19, 2019 • 19 minutes

Mercedes Diaz
Mercedes Diaz
Independent content creator for business and foodservice niches. She provides content aimed to build relationships between customers and companies.

Every business should start with a plan that helps guide their decision making and operations management. Planning can help companies grow 30% faster and identify when to pivot to avoid mistakes. 36% of respondents in a Small Biz Trends survey reported that they had a business plan and secured a loan for financing, whereas of those without a business plan, only 18% were able to secure a loan.

A business plan should ultimately keep you and your staff focused on your business goals. It shouldn't be an overused template for success. Instead, each business owner needs a plan that addresses their unique needs and the challenges that they will experience.

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Javier Delgado, who owns a local bakery called St. Pete Dessert Catering Co. in St. Petersburg, Florida, says that one of the challenges that they’ve learned over time was separating the hobby from the business. In the first few years of operations, Javier’s business plan for his bakery failed to focus on a particular niche within the dessert baking industry. Instead, his team strived to cater to all special requests the bakery was getting.

«While it was interesting to learn how to make creme brulee to handle a particular order, it wasn't part of our catering menu. As you could imagine following this approach not only resulted in a vast consumption of our time, but also chipped away a good chunk of our profit as we had to purchase special ingredients, look up recipes, and test them out before we could cater to our clients». — Javier Delgado

Having this experience, Javier advises first-time bakery owners to study their market first and create a line of products that cater directly to their needs.

«In our case, we shifted our focus to catering bite-size desserts and have in fact improved the likeliness to show up on searches when a potential client is looking for these specific products and services. Two ways this has proven to be helpful is through our internet conversions and the quality improvement of our limited products and services that we offer.» — Javier Delgado

One more piece of advice that Javier gives is that bakers should constantly perfect not only their recipes, but their processes so that the team was as efficient as can be.

Melissa Henderson, owner-operator of Caramanda’s Bake Shoppe in Lexington, Kentucky says that she didn't have a formal business plan but she has no regrets about it. She thinks that business plans are a snapshot of an imagined future and it's great to have that vision board of ideas, but a small business owner has to adapt to the nitty-gritty reality of the day-to-day operations while holding that future vision as the desired possibility.

«Soon after the launch I realised the customer dictates what they want and my bakery adapts. I've always tried to listen to their wants and needs and strived to meet (and hopefully exceed) their expectations. As an example, cupcakes were a huge trend when we started out so we jumped on that bandwagon and it remains a large part of our business today.»  Melissa Henderson

Melissa’s advice is to make a project plan and budget, allow a healthy margin for what you don't know and realise that it's up to you to figure it all out. She encourages entrepreneurs to burn the bridges to going back to their old life — a large monetary investment and a stake in the ground proclaiming that you are now a small business owner — and learn what they're made of.

Regardless of whose attitude resonates with you most, let’s see what you need in a bakery business plan if you decide to make one. This guide offers a blanket overview of what bakery owners will likely face from market research to the bakery POS software selection. You can use our examples as a bakery business plan template. Each of these sections below will play a critical role in analyzing the possible successes and risks in your bakery.

bakery business and financials

1. Executive Summary

The section is your elevator pitch, your one-shot, and you only have one page to make that impression. The executive summary is what investors, lenders, or potential business partners will look at the most. It's the front page of your business plan, and it should give a birds-eye view of your concept, and the chance for success.

Always write your executive summary last as it will ensure that you capture all of the report’s most vital information. You can quickly pull important numbers from your financial projections, and cite industry stats that will impact your business.

Things to include in your executive summary

  • Business Interest. A definition of your company that explains what you will do, how you will do it, and where you will operate. Ideally, this will only be a few sentences, and it should be very «cut to the chase.»

  • Opportunity. An overview of why this business venture holds promise and why it’s an opportunity. While many people view a bakery as an opportunity, many others view these businesses as a burden on the owners, prove them wrong. Explain what you have to offer, and what anyone involved has to gain.

  • Competitive Strategy. Describe your USP (Unique Selling Proposition), and briefly dive into how you are different from any of the other shops in your town or city. Your concept, menu, or method of service may play vital roles here.

Bakeries everywhere are revisiting their menu to beat out nearby competition. Bien Cuit is one example; this New York bakery provides upscale treats such as calamansi curd and bitter plum Danishes, something you’ll have a hard time finding anywhere else.

  • Economic Analysis. Identify funding sources, needed capital, and anticipated revenue. In your executive summary, you'll want to showcase the possibilities, in a realistic manner. Keep your economic analysis simple as it may not always be financially savvy people reviewing this page.

  • Founder. Give a brief outline of your background and why you’re opening this bakery. Maybe it's a lifelong dream, or perhaps you have years of experience in the food and beverage industry. Use this segment to sell yourself and emphasize your drive, passion, and skillset.

An example description of a bakery competitive strategy

The opening line of a bakery business plan template can read as follows: [name of business] will provide the [city/region name] community with [unique product or service] [emphasis statement contributing to the quality or UPS].

The new bakery will serve the city’s community by providing savory pastries made from locally sourced ingredients. It will cater to individuals, as well as businesses with baked goods that meet high standards of excellent quality, have supreme taste and unique designs. As a result of a higher standard of quality and superior ingredients, the bakery will operate at a higher price point than existing local bakeries.»

You should be detailed when you define your bakery. For example, you can define your bakery as a coffee and pastry retail establishment, luxury desert and baking company, or a specialty shop focusing on fresh bread. This section is also an opportunity to stand out; a bakery café business plan would be different from a bakery that focuses on catering.

Keep in mind as you craft your executive summary that it should give any reader a full view of what you intend to accomplish. It should show that you know how to open a bakery and explain why it is such an excellent idea in your particular case. To do this, provide key takeaways from your plan as well as insight into how you intend to use this information to achieve success.

bakery business location

2. Business

This section is the bulk of your business plan for a bakery, and it should include everything that you will need to know to get started. Most of the business plan writing process is researching your market and making decisions that will impact your company before you’re even open for business. Your business section will be split into many sub-sections so that it’s easy to read and that it’s clear what each sub-section covers.

The formatting of your business plan can help make the information easier to understand for the reader. When working through the more significant portion of your business plan, provide some white space between topics, and use visual signs to indicate when information is critical.

Your business portion should include these topics, which apply to businesses, both large and small:

  • Mission statement. This statement is a concise declaration of why your company exists. You can list goals, create a sentence, or write a paragraph. Your mission statement should keep you, and all of your staff forever focused on the core initiative of your company.

Look to well-known companies for inspiration and guidance when crafting your mission statement. For example, Apple’s 2019 mission statement was «to bring the best user experience to its customers through its innovative hardware, software, and services.»

  • Description of the business. When did the company start, when is it scheduled to open, and what will you do? These questions you will need to answer under the description of your business. Be clear on what your business is, specify if you’re creating a bakery coffee shop business plan, home bakery business plan or a different type of strategic plan. If you have multiple operation methods such as retail and wholesale, you will need to specify the description for each method.

  • Form of Incorporation. Incorporating your business is not always mandatory. Find resources through your local, state, or federal government to learn if incorporating is right for you. Many companies within the U.S. chose to become a Limited Liability Company meaning that the owner's assets and the business's assets are separate. This separation protects owners from losing personal assets through loan defaults, lawsuits, and tax collection. If you do incorporate, you will need to provide your Form of Incorporation information here.

  • Products and services. Here, you will outline what you will deliver to your customers. You don't need to list off your entire menu, but a quick blurb about what the reader should expect to find if they walk into your store. If you have various offerings such as couples baking classes, at-the-counter retail, and custom orders, give a little information about each service. In the end, refer the reader to an Appendix page where they can find a mock menu or more detailed information about each product or service.

  • Pricing strategy. Determining pricing is complicated because you're estimating expenses, which usually rule food establishments pricing methods. You’re starting from scratch but you can use margins rather than specific menu prices. Rather than explaining, «Cookies — $4.99 per dozen,» you can choose to approach the strategy as «Cookies 3x margin» to show your markup.

  • Suppliers and distribution strategy. Will you ship out premade items, or are your treats only available in store? If someone puts in a large catering order, do they have to pick it up, or will you deliver? This section must address how you get your supplies and how your customers get their finished products. It's best to research supplier options before writing this section thoroughly.

  • Management. Bakeries are one of the few businesses that can run with a small management team. If you're the manager, then go into your skillset and experience here. If you will hire a manager, give details about the knowledge, skills, and personality you expect to hire.

  • Key personnel. This subsection should cover how many employees you intend to have and their duties. You may say, «John Johnson, owner, will complete all managerial duties as well as necessary accounting tasks.»

  • Location of business. Even if you don’t yet have funding, you should have your eye on a site. Find out the size of that location, it’s history as a business, and you’ll need to do a traffic count. Collect and analyze data about foot traffic, vehicle traffic, and busiest times of the day.

  • Application and expected capital. In a few sentences, explain where you will obtain your capital, or where you hope to get capital, and what you will do with it. Break down what you will receive from banks, investors, and mention your contribution as well. Give an estimate on when you intend to pay back loans, and how you will offer a return to investors.

A business section of a bakery business plan sample to follow

In the following example, you can easily see a plan to obtain money, pay it back, and then possibly, take out another loan in the future: [company name] requires [dollar value] in capital to open. [dollar value] will come from personal contributions, [dollar value] will come from private investors including friends and family, [dollar value] will be pursued in [limited time, e.g., 5-year] loans. The bank loan will be paid back in full by [year X]. Investors will receive preferred payments in small portions over [X years]. In [year Y], [company name] may seek out additional loans in efforts to expand the business to new locations.

cake in a bakery

3. Marketing

How will you get the word out? Marketing is an excellent way to build hype before you open and to start building your local reputation. Address both traditional marketing (print ads, mailers, sponsoring community events), and digital marketing (social media, Google Business, Yelp). Even a catchy bakery name can help you promote your business.

  • Industry analysis. Give a concise overview of the state of this market. Mention why people love baked goods and maybe deliver a few stats to support your claim, such as how often «#cake» was used in the last year on Instagram.

  • Market analysis. List exactly where you intend to serve, will you have one location, multiple, or maybe you'll use clever marketing tactics to bring in tourists. All you need here is the population, industry value, and market growth for your local area and industry.

In 2019 the bakery and cafe industry saw a total revenue of $11 billion and has seen an annual 2,9% growth since 2014.

  • Customer analysis. Talk about your ideal customers, give them a persona, assign them a trope, and explain how you cater to them.

Saying «celebrators and soccer moms, ” in a customer analysis may call for a focus on people hosting parties, celebrating holidays, or anniversaries. But, it also includes families, particularly busy families. Highlighting „celebrators and soccer moms“ is an effective and concise way of pinning down a customer analysis.

  • Competitor analysis. Deliver an in-depth look at your competition, including both direct and indirect competitors. Bakeries don’t just contend with other small-shop bakeries. They must compete against grocery stores and superstores that offer less expensive and ready-to-go cakes or baked goods.

  • Advertising and promotion strategy. It should include everything from how you will advertise locally, what you intend to spend in online advertising, and if you want to utilize loyalty or rewards programs.

92% of people trust the recommendations they receive from friends and family over all other forms of advertising. You must get people talking!

  • Product and service strategy. Falling under your market strategy will outline your USP more thoroughly that what is in your Executive Summary. Will you rely on seasonal sales, and how will you survive between your busy periods? These questions can produce a well-rounded strategy.

4. Financials

Your financials section of the business plan for baking will give you, and anyone who is reading your plan, a clear understanding of financial risks, and opportunity. Ideally, you'll show the risk, realistically, and then present anticipated sales and revenue figures which address that risk. Here you don't want to be dreaming. You must ground your financial section in well-researched and thought out projections that make sense for your market and industry.

Possibly the most essential piece of your bakery shop business plan is the financial section. You must justify your business with reliable, bottom-line figures, which will stand as realistic and achievable goals.

Include each of these in your financials portion, not every section needs a written explanation; in many cases, you will simply provide a statement, chart, or projection:

  • Sources and uses of funds. You should layout where every dollar of your capital will go so that you, investors, and lenders know what will happen to your initial investment into the business.

  • Capital assets. Capital assets will mainly be a small table that shows the value of your business assets that stem from that capital. Examples include equipment, your POS system, a delivery van, and even building signage.

  • Break-even analysis. The formula for calculating your break-even is Fixed expenses/contribution margin percentage = break-even sales. Your sales forecast will provide what you need to figure this, but remember that these are elaborate estimations.

  • Financial assumptions. Using this subsection, you will separate your sales, COGS, labor plans, loan payoffs, depreciation, and other expenses with insights into each item.

For example, 50% of wholesale revenue can be received the month prior and 50% collected at delivery. 25% of specialty orders can be received the month prior and 75% collected at delivery. Markup on retail products: cakes 4X, cupcakes 4X, pies 4X, beverages 5X, wedding Cakes 5X»

  • Sales forecast — Project your sales forecasts for at least the first two years of business. Do your best to plan around holidays, busy seasons such as wedding and graduation season. Estimate your sales in dollar values, not units.

Brandon Gaille gives percentages for the bakery industry product segments: 32% bread sales, 19% roll sales, 15% in frozen cakes, and 10% in retail bakery sales, then the rest divides across other baked goods. Knowing these numbers can help you realistically plan for your sales by product line.

  • Balance sheet. You will need one in-depth balance sheet for year one, and an overview balance sheet comparing your first three years. Balance sheets must include your assets, liabilities, and equity.

  • Pro Forma income statements. This section combines your income and expenses. It should provide a realistic image of how your company will perform during the first three years of business.

  • Pro Forma cash flow statements. The cash flow statement is the most crucial financial projection because it projects the ebb and flow of your business account. This section allows you to anticipate and plan for cash shortages and identify when there is excess cash for investing.

  • Loan amortization table. If you’re taking out a loan, or hope to, then you need a month-by-month payback schedule that accounts for interest payments, principal payments, and tracks the ongoing loan balance.

  • Gross margin calculation. The gross margin calculation will have a cost and markup for each product or service you offer. You should provide the cost — markup to have tentative prices for each product.

The Gross Margin Calculation should be a simple table that lists your products across the top and then addresses the cost and markup underneath to explain how you intend to price each product and the cost to you.

In total, your financial section should stand as an ongoing guide for your operations and financial goals. Although you're using estimations now, when you begin operations, you can rely on these projections to determine if you're on the right path. Financial forecasts are necessary for securing a loan and bringing in investors.

Writing a baking business plan is a time-consuming job, and not everyone is up for it. You should be a large part of the research and writing of your complete business plan for a bakery. If you're confident in taking on particular sections, then you should take on full responsibility for writing them. However, if you know that your skillset isn't suited to that part of the plan, then consider collaborating with others.

Tackling your financial section or doing research on foot traffic might seem exceptionally difficult. You might want to speak with a professional for finances. You could also hire a consultant for planning your marketing strategies, hiring a management team, or developing a menu.

Ultimately, you shouldn’t pass up the chance to create a business plan. It can give you a substantial advantage over your competitors and help you set realistic business goals. While researching for your business plan, you'll also find yourself making critical decisions for your business, such as which suppliers are best for you and which POS systems deliver the features you and your staff will need. Get started on your business plan now and take your first real step toward opening the bakery of your dreams.

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