How to Estimate Sales for a New Bakery Business
The U. S. retail bakery business is highly fragmented, with 6,000 locations selling $3.5 billion worth of baked goods at time of publication, according to First Report, a marketing research firm. Get a sweet slice of that market for your bakery business. Accurately forecasting sales in your business plan reduces product waste from overestimating volume and avoids lost sales by underestimating volume.
Know who your customers are, where they live and where they buy their baked goods now. For example, if you offer gluten-free cupcakes, and only one other business in town offers gluten-free cupcakes, you may have an ideal opportunity. On the other hand, the reason there is only one competitor may be because the demand is limited. Expanding your baked goods beyond gluten-free -- perhaps offering all organic cupcakes as well -- attracts health-conscious buyers and increases your sales potential.
Research what your competitors are selling by visiting them several times during the week to see how many customers are in the store and what the customers are buying. Recruit family and friends to visit the bakeries as well. Offering to pay for their bakery purchases may be all the motivation they need. If the bakery offers a menu at its website, that gives you the prices of its products. Bakeries out of your geographic location won't consider you a competitor and may be willing to tell you about their sales and what items are selling well.
Pricing is a critical factor in the profitability of a bakery like any other business. The price has to have enough margin to cover not only the cost of goods sold but all the other expenses and result in a profit. In the prepared food industry, which includes restaurants and catering operations as well as bakeries, the cost of goods sold should be between 28 to 35 percent, according to the Restaurant Report. For example, if your cupcakes cost 50 cents in ingredients, then the retail price should be around $1.50. An exception would be for highly decorated cakes for special occasions such as weddings. In that case, the artistic ability of the cake decorator raises the price substantially above the cost of the ingredients and normal markup.
In the beginning, estimate the volume of sales for each day for each product group. For example, you don't have to forecast how many chocolate cupcakes you'll sell as well as how many raspberry, vanilla, caramel and lemon cupcakes. Forecast the total amount of cupcakes you are likely to sell. Do keep track of the actual sales of each flavor -- that will help you know which are the most popular with your customers. Forecast each product type's -- cakes, pies, breads, cupcakes -- volume. Cross check the estimated volume of sales with what you can actually bake. It doesn't matter if you could sell 1,200 cupcakes each day if the facility and your staff can only bake 750. If that happens, work extra shifts to see if the volume demand is consistent before you invest in additional ovens and equipment.
The formula for sales is simply price times volume or units sold. Multiply the estimated daily number of cupcakes to be sold by the price of the cupcakes. Do the same for breads, cakes, pies and other baked goods. Add each product type's sales together to reach a daily estimated total. You can either multiply that daily total times the number of days the bakery is open for the month or add the total for each week and then multiply by 4.3 to reach a monthly estimate.