Not every baker sets out with the goal of growing their bakery. Some are perfectly content to maintain a cozy mom-and-pop shop that serves their neighborhood. Others have their sights set on growth, either through adding locations or through a franchising model.
But for many, the path forward isn’t so clear. When business picks up, bakers face a tough question: Should I scale my operation to serve a wider customer base and potentially make more money than I’m earning now? What if that means big changes to my business and daily life?
There’s more to scaling a bakery than just “growth,” and the first thing you need to determine is whether or not it’s right for you.
What Does It Mean to Scale Your Bakery?
“Scale” and “grow” are often used interchangeably, but they’re not quite the same thing.
To grow your business means to increase revenue while also increasing the expenses and resources needed to maintain that growth. For example, let’s say you start selling your bread to local restaurants, bringing in an extra $3,000 per month in revenue. But you have to hire someone to make the extra bread ($2,000/month), and of course you have to buy more ingredients ($1,000/month). So your expenses also grow by $3,000. In that case, you’ve grown, but you haven’t increased your profitability.
To scale your business means to increase your revenue faster than you increase your costs. It’s about making each unit that you create more profitable. Returning to the above example, let’s say you add new efficiencies to your bakery that let you fulfill the $3,000 restaurant orders without hiring someone new or buying more equipment. You’re only paying $1,000/month for your ingredients, and $500 for a modest amount of extra labor, leaving you with $1,500 profit. In this case, you’ve scaled, because your growth has outpaced your expenses.
What Is Scalability?
A business or system’s ability to operate under an increasing workload with an equal or increased level of efficiency and profitability.
“There are more dollars created from little coffee shops and restaurants than any government agency, any non-governmental organization, any institution. It’s the small businesses that are putting their necks on the line and they are the economic engine for our country.”
Andy Clark, Owner of Moxie Bread Co. and Founder of The Mill Site
To Scale or Not to Scale?
There’s an unspoken assumption that every business owner’s goal should be to get bigger and make more money. But if your bakery is profitable and you’re enjoying your daily workflow, then you’re certainly under no obligation to do so.
That said, there could be missed opportunities in your current operations. Lines out the door every weekend and frequently running out of inventory might ultimately be a sign that your operation can’t keep up with demand.
How can you tell if it’s time to scale?
When You Should Not Scale
When your bakery is not growing. Scaling is not a remedy for poor sales. It should work in conjunction with growth.
When you’re not profitable. If what you’re doing isn’t working, your business practices or methods need to be fixed before you move on to the next step. Focus on ways you can lower your costs without changing output.
When you haven’t considered everything involved. Your revenue should outpace your expenses, but there will still be some expenses to meet. These may include larger mixers, bigger rack ovens and other equipment upgrades, more staff, a bigger location, etc. You have to work these costs into your calculation to know if scaling is a good business move.
When you can’t let go or delegate. You’re only one person, and you can’t be everywhere at once. As you increase your production, you’ll have to delegate and trust your team.
When You Should Scale
When demand exceeds supply. If you’re regularly running out of product, maybe it’s time to figure out how to service more of your customers.
When you are in a comfortable financial position. If you’re debt-free or can comfortably cover your existing debt obligations, you may be able to afford the initial expenses required to scale up production.
When you’re ready to take your hands off the wheel. To scale, each department has to be able to run without you, because you can’t always be there. That means you’ll need to commit to systematizing your bakery operations and hire a team to do things just the way you like them—and then let the team manage the day-to-day (with regular checks from you.)
“The knowledge from Escoffier has given me the skills and confidence not only in my baking, but to take my baking and creations to the next level.”
Trista Besecker, Escoffier Online Pastry Arts Graduate
The Two-Pronged Approach to Scaling
So what is the trick to increasing profits without incurring large expenses? It requires a two-pronged approach. First, you serve more customers. And second, you reduce your cost per unit.
Serving More Customers
If you think your current operations are maxed out, you may look to adding new locations as the most logical way to reach more customers. This is possible, but finding a new lease and getting the space renovated will be expensive. And we’re trying to avoid major expenses, remember?
Instead, let’s think about how we can serve more customers from your existing space. How about online sales? Online marketplaces like Goldbelly allow artisanal bakers to sell their breads and pastries online, rather than in-store.
You can also explore wholesale opportunities that will get your product into local grocers, cafes, or restaurants. The challenge with a wholesale operation can be space. Where will you make the product if you’re already using your kitchen space to bake for your in-house customers?
Look for efficiencies in your current production that will let you make more breads or pastries in a batch. If that can’t be done, consider adding a late-night or overnight shift that will let your bakery run retail during the day, and wholesale at night. You’ll have to pay for the added labor and utilities, but there will be no additional equipment or lease to pay for. Or as a third option, consider renting a lower cost commercial kitchen space that can be used strictly for wholesale.
Reducing Per-Unit Costs
As you increase your output, you’ll have to buy more supplies and ingredients. And very often, the more you buy, the less you pay per ounce or pound. Reassess what you’re paying vendors for flour, sugar, chocolate, yeast, and other bulk ingredients to make sure you’re getting the best possible price.
You can also look outside the traditional “big box” food suppliers to nonprofits and local farmers. You might be surprised at the pricing. Bakery owner Andy Clark created a nonprofit grain mill called The Mill Site that supplies flour to local bakers at affordable prices.
“The nonprofit mill has allowed us to keep the pricing down, since we don’t need to make money on it. It’s just our food costs plus our labor costs plus our overhead and a little wiggle room.”
Andy Clark, Owner of Moxie Bread Co. and Founder of The Mill Site
The same concept applies to packaging, to-go cups, receipt paper, napkins, and all the other supplies you need to serve your customers.
After addressing ingredient and supply costs, look into labor. These days, software can do everything from streamlining the ordering and checkout processes to helping you keep better track of your inventory. Less time fiddling with numbers is less money spent on labor!
Finally, are there any parts of your process that you can automate? Some automation tools include dough dividers, rack loaders and unloaders, and fillers for icings and jams. These can cut back on manual labor and reduce labor costs.
An Exciting New Challenge
Scaling a bakery is a delicate dance. You want to increase efficiency and profitability, but not at the expense of your product quality.
This is why some bakery owners choose to keep things simple. But if you’re looking for a new challenge, this can be an exciting way to branch out and see what else you’re capable of.
And if you’re unsure where to start with your dreams of owning (and then scaling) a bakery, let’s chat. A degree or diploma in Baking & Pastry from Auguste Escoffier School of Culinary Arts can teach more than just baking. It could also impart lessons in profitability, entrepreneurship, and management—all key to a successful baking business.
To learn more about working in baking and pastry, read these articles next:
- 4 Tips for Opening Your Own Bakery
- 8 Skills that Every Baker Should Have
- How to Start Your Own Food Truck
This article was originally published on October 18th, 2019, and has since been updated.