3 Reasons why your small bakery business won’t last one year

At Amari we offer baking classes to individuals and have been doing so for the last eight years.

We love hearing back from our former students of their successes, as well as their challenges. This helps us come up with effective training lesson plans and additional business training workshops as well. One major challenge bakers and bakerettes seem to face is sustainability; the ability for a small baking business to start and stay open continuously for a long period of time. We ourselves have encountered such challenges in the past, so we know how it feels like to go through them.

Some bakers start small businesses as a side hustle, as they’re still employed, but they lose momentum over time and their business slowly goes silent. Others start it as a full time business but get overwhelmed and end up closing the business within the first 8 months due to many reasons. If you have ever gone through this or if you want to start a small baking business and you want to avoid closure within the first year this post is for you. Click here if you would rather watch the video.

Today I will give you the top three reasons a small bakery business closes and how you can avoid those pitfalls in your own baking business. This will help you have a sustainable business that will be positioned for future success as you grow and get better at running an effective small business.

1. You don’t have a marketing plan

I will forever stress this point on this blog to any small bakery business owner. If you don’t market your business, you won’t get sales. Without sales, your business will close – it’s as simple as that. The baking industry is a very competitive one; therefore, you need to have a marketing plan – even a simple one, on how to attract and keep customers coming back.

SOLUTION: Identify where your target customers are (where they live, shop and visit often) and then market to them appropriately. Have a monthly marketing plan which you can execute and start attracting customers. Review it every month and see how effective it is, and if you need to make any changes, check analytics, etc. Make sure to have a budget for your marketing plan; you have to spend a little to get a lot ^_^ Experiment with your marketing and be innovative; give free samples at your church or group (chama) or to foodie influencers with a following. You can also market online or participate in Pop-ups or Baking fairs. Find out which marketing activities work for your bakery business and make sure you do them daily, weekly and monthly for guaranteed success.

2. You are mixing your personal and business finances

This is a major challenge for most small business owners in any industry; and especially for bakers who start their businesses at home. Bakers find themselves mixing their money from cake orders with their personal money; especially if you deal a lot with MPESA transactions. I can personally attest to having this problem the first 6 months of starting my baking business. This is a problem, since it gets to a point where you can’t tell which money you used to buy your ingredients for business; or how much you have taken from your business to fund personal purchases. Over a few months, this can be the downfall of your small baking business.

SOLUTION: Find a different way to collect money that is meant for business in order for you not to mix your personal finances. If you have to get two purses/wallets or even envelopes in your bag to separate business and personal – do it! I also suggest getting a ‘Lipa na Mpesa’ Till for your small baking business in order to track all your customer payments – you can get it from Kopo Kopo; the Till system creators. You can also make sure you have a business bank account in which you can deposit money into once you get paid either physically or through Mpesa (a lot of banks have this facility these days). This will also control how you spend your business money. Once you start separating it from your personal finances; you will be more careful of where you spend it.

3. You don’t track your bakery business finances properly

This is another pitfall for many small businesses. You might find that a bakery owner may be tracking money that is coming in (sales), but he/she doesn’t track money going out (expenses). This is such an important part of achieving business success. Most small baking business owners look at their sales (e.g. August sales = Kshs. 50,000) and they get excited and just figure that they’re making a lot of money. What they don’t realize is that they spent Kshs. 55,000 in the month of August towards their small baking business. Their business is going at a loss but they’re not even aware of it.

SOLUTION: Make sure you keep all the important records required in your business. Ensure that you are tracking money coming in (sales) and money going out (expenses). If you have a written record of all these transactions, you will be able to come up with a profit and loss statement at the end of the month that will show you the financial health of your baking business. It will show you whether you’re making a loss or a profit. Track every aspect of your purchases (i.e. Ingredients, transport – both for your business activities and for getting ingredients to your bakery, phone credit, internet bundles, etc.)

The above mentioned are just a few of the reasons why a small baking business doesn’t last a year; there are many more, these are just the most common pitfalls. The best way to deal with a lot of those downfalls is to set up systems in your small bakery business. No matter how small you may think your business is; you should start setting up systems in your bakery in its early stages. Systems are certain processes, activities, guidelines and/or procedures that you follow in your daily activities that help you run your business efficiently and effectively.

Systems can be as simple as having a standard recipe for your baked goods e.g. how to measure, what measures to use, how long to bake and at which temperature. How to cool your baked goods, how to pack them and label them as well.  This is an example of a simple production system. It will enable you to make the same delicious cake for any customer who orders it, every time.

If you would like to know more about the 5 most important systems your small bakery business needs in order to be successful; and in order for you as a business owner to run your business without feeling lost and overwhelmed – click here for a brief summary.

Hope this has been of help to you. If so make sure to leave a reply on what you thought of the post below, thanks ^_^

We offer Baking for Business resources to help you start & grow a profitable Home Bakery business or small Bakery shop. Click here to find out the E-books we have on Starting up and Cake pricing.

Click here to get more information on our Baking for Profit Online Mentorship Program for Bakers.

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