Learn how to start and grow your baking and sweets business the right way with this post about four common business mistakes to avoid. Don't let small issues slowly kill your business - find out what to look out for and how to succeed.
When you’re first starting a business, it’s easy to make mistakes that will have an impact in the future. In fact, some of the decisions you make today may slowly kill your business for months or even years without you even noticing.
These types of mistakes are not just restricted to new business owners. Even the most seniored businesses may look “successful” from the outside because they’ve been around for many years. However, they may often be dealing with small issues that keep them from running the business at its fullest potential. For example, they could be losing money or wasting resources because they don’t realize the inefficiencies within the business.
In this post, you’ll discover four very common business mistakes as you start and grow your baking and sweets business.
(1) Underestimating project time
I’ve said it before and will say it again! “Time is money.” Since you can never get more time, it is likely that the most expensive cost in your business will be related to time and labor. When it comes to labor intensive projects, if you have limited resources when it comes to labor, the longer it takes you to produce the deliverable the less money you will make on the project.
For example, let’s say you charge a client $200 for a cake. If it takes you 2 hours to make the cake and the ingredients and supplies cost $50, you just got paid $75/hour to make that cake. However, if you charge a client $200 for a cake and it takes you 4 hours to make it with the same ingredients and supplies cost $50, you’d only get paid $37.50/hour to make that same cake. Not to mention, if you only had 10 hours to work in the day, then longer projects would keep you from making more money on a per day basis because you would be limited on the amount of cakes you could produce. I think you get the point. Time is valuable and time is money!
Therefore, it is extremely important that you understand how long it takes you to execute certain tasks. Then, use that as a guide when estimating projects. That way you will be fairly compensated for your time which is super valuable. The best way to estimate the time required to do a job is to do it once yourself or watch your best employee perform the task, then determine the appropriate fees. If a project is the first of its kind, consider prior projects that may be comparable to the new project and use that as a basis for your pricing.
(2) Not knowing your numbers, bad pricing
I definitely used the word “your” on purpose. It is a very common mistake to use competitor’s pricing when folks are new in business. There is nothing wrong with being informed of a competitor’s prices because (after all) you want to be in line with the market. However, you should never set your pricing based solely on what your competitor is charging.
Consider for a minute…what if the competition has a bad pricing structure and is barely making money or even losing money? What if your costs are more than theirs? Things can go wrong very quickly if you start selling products without using your own cost as the foundation for your price.
Among other things, your pricing should be based on your supplies, ingredients and other overhead. Employees also carry different costs related to labor, insurance and other benefits. These all should be factored in when setting a price for your menu or special projects.
(3) Not charging for ALL of your time and costs
Delivery fees, admin and cleaning time, consultations, licenses etc all carry an expense that adds up to the cost of running a business. However, newbies and even seniored business owners fail to include these expenses into their overhead calculations. This money has to come from somewhere. Preferably, they will be covered by your sales. However, if you dont charge enough for your products or services, this cost will come out of your pocket. You may not even notice it at first. However, if you find yourself always working on the business and projects while also having little to no money in the bank to cover expenses, that’s when you know you’re not charging enough to cover your costs.
(4) Not getting paid fast enough
As I mentioned earlier, when working on a project always get paid upfront. Don’t use your own funds to cover the cost of a commissioned project or service. The whole point of running a business is to sell stuff so that you can make money. Therefore, you must place an emphasis on getting paid in a timely manner. Create a payment policy with deadlines that you adhere to. Then, use systems such as Square or Paypal to send invoices that can be paid electronically. Also, enable reminder notifications to stay on top of payment deadlines and remind customers of when payment is due. With all of the tools at your disposal, there is simply no reason not to get paid in a timely manner for projects. The only thing left is to make sure that you hold true to your own policies and cancel projects as needed when money is not received in time.
Conclusion
I’ve just outlined four very common sweet business mistakes and solutions to help you avoid them in your business. However, I feel like there is so much more that I could say. So stay tuned for a future post with additional tips. The main takeaway for this post is that you are responsible for the money side of your business. You need to understand your cost, focus on YOUR business, remember that time is valuable, and get paid up front. If you feel like your business is not living up to its fullest potential, then look at one of these four areas first. The issue may be right under your nose.
Cyd N. Mitchell
Business Blogger, Retail Bakers of America
Cydni N. Mitchell (aka Cyd) is a Bakery Consultant and the Sweet Business Coach behind Sweet Fest®. Based in Atlanta, GA, Sweet Fest® is an online company that supports the business needs of the Sweet Community in the areas of professional development, marketing, branding and web design.
By trade, Cyd is an accountant & financial analyst with a Masters from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. She is the Founder of the Sugar Coin Academy, an online business academy for business owners in the baking and sweets industry, and she is also the organizer of The Ultimate Sugar Show, Georgia’s Largest Annual Baking and Sweets Expo in Atlanta. She is also the Business Blogger for the Retail Bakers of America.
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