Problem:

A start-up bakery/cafe had been in business for about a year. It’s a spin-off of a successful fine dining restaurant and something the owner has always dreamed about doing.

Business is good, they have a steady stream of customers, but they’re not making money.

Actually, they’re losing money, but they’re not sure why and/or how much. The restaurant, which is profitable, is keeping the bakery afloat.

Challenge:

Make the bakery break-even by the end of year two.

Issues:

  • Come in and look at their financials and total operations.
  • Closing the bakery was not an option for the owner.
  • They never had much of a business plan and the one they had was left in a drawer somewhere
  • Their payroll costs were more than their sales.
  • The staff was huge and the manager inexperienced.
  • No one in the operation knew how to cost items, so they didn’t know what items were profitable and which ones were losing money.
  • In the costing, breakage, spoilage, overhead, personnel, etc. were not factored in
  • All the buying for the bakery was done by the bakery and the same for the restaurant. There was no combining of orders for efficiency of scale.
  • All of the bread and bakery items for the restaurant were coming from the bakery, but there was no accounting for that (on either side).

Solutions:

  • Reviewed financials and created a budget showing their current situation.
  • From the budget created scenarios that gave them options to reach the goal of break-even in year two.
  • Created different scenarios where reducing staff, hours of operation, increasing sales and marketing efforts, understanding food costs, finding efficiencies of scale with the fine dining restaurant and reducing expenses in different combinations could get them to their goal of break-even.
  • With the different scenarios, she could also see how to retain the quality and charm the bakery is known for, while reducing costs and reaching the break-even goal in year three or later, depending on her preference.
  • Create budgets allowing for the owner to increase her compensation after the break-even point and in subsequent years.
  • Begin to repay investors.

Results:

  • Worked with the owner, and gave her recommendations about the feasibility of keeping the bakery
  • Spoke to her about lowering head count and looking for a new manager with experience in the bakery business, none of which she was open to.
  • Suggested installing security cameras to increase safety, reduce slippage and employee theft in what (unlike the restaurant) is a largely cash business, which she was resistant to.
  • Armed with projections and budgets, whether followed or not, the bakery remains open for business.

If you’d like more information on this project, or to talk (confidentially) about a growth strategy for your business contact me.