How do I work out costs?

Discussion in 'Pastries & Baking' started by chrislehrer, Jul 16, 2017.

  1. chrislehrer

    chrislehrer

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    An apparent opportunity has arisen, in which I’d bake bread to be sold at a local “artisan” sort of shop. My problem is, I can’t work out whether this is in any way a good opportunity financially.

    I can calculate what my bread will cost me per loaf, in terms of ingredients.

    I can calculate what my time is worth, and how much time actually goes into a given loaf.

    What I can’t figure out is how much it costs to run an oven. I have to have it on for about 1 hour before I begin baking anything, to get the stone fully heated. Then baking takes roughly 30 minutes, depending on the type of loaf. I figure that I can’t bake more than the equivalent of maybe 2 full hearth loaves in one go; with small baguettes (the kind you can do in something other than a proper deck oven), this means I can do maybe 4 per bake. This means that my oven runs:

    1 hour setup
    15 minutes per loaf (4 baguettes, bake 30-40 min, bring back to heat)

    So if I bake, say, 16 loaves a day, I have my oven running at about 425F for 5 hours a day.

    How do I work out what I’d be spending to do this?

    And are there additional costs I need to know or think about here? I know that local jurisdiction allows small-scale “artisanal” bakers and such to sell without expensive licensure and so forth, so long as they don’t have their own storefronts, but maybe I’m missing some other hidden costs?
     
  2. cheflayne

    cheflayne

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    gas or electric
     
  3. chrislehrer

    chrislehrer

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    Electric.
     
  4. cheflayne

    cheflayne

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    Silicon Valley Power in Santa Clara estimates $0.25 per hour.
     
  5. cheflayne

    cheflayne

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    transportation costs (obtaining supplies & delivery of product)
    packaging costs
     
  6. peachcreek

    peachcreek

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    Hi Chris.
    For your level of production it is going to be difficult for you to get more than basically a free learning process on commercial baking. I'm thinking much of your 'profit' will be eaten up by intangibles. Some people have already mentioned packaging and transportation. You'll find yourself spending money here and there to buy a tool or a replacement, or new storage bins or whatever. But, while you learn all this you're subsidizing yourself.
    The economics of baking really have to do with scale of production.The best place to be in that scale is with the most production with least costs. That is true whether you have a single person making bread or a huge giant factory.
    The main thing is to enjoy the challenges and experience! May the bread be amazing!
    Wishing you the best in your baking,
    peachcreek
     
  7. flipflopgirl

    flipflopgirl

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    Is the stone as large as it can be and still have the same results?
    If so can you arrange the racks to squeeze in another stone without detriment to your standards?

    mimi

    Another thought....do you have room for another oven if the first few orders fly off the shelves?
    My thinking...if you have a popular product that can at least break even (and can get a no compete contract) this could be the start of a new and exciting path!
    From home you could move to an incubator kitchen (and from there the world could be your oyster...or something like that lol) and make all the hard work and penny pinching pay off in the long run.
    It is the rare baker who starts off at the top..... slow and steady are key here.
    Good luck...I adore a good Cinderella story.
    :D
    m.
     
    Last edited: Jul 16, 2017
  8. chefbillyb

    chefbillyb

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    An apparent opportunity has arisen, in which I’d bake bread to be sold at a local “artisan” sort of shop. My problem is, I can’t work out whether this is in any way a good opportunity financially.

    This looks like it's more of a PITA. The only way something ever worked like this for me is when it was already part of my on going operation. Like if I was already baking hoagie rolls and someone wanted to buy 2 doz a day. It don't take that much labor or anything else to accomplish it.......
     
  9. azenjoys

    azenjoys

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    Ok, so I'm trying to imagine how much the store would have to charge for each of these, say, 16 baguettes in order to make them worth 5+ hours of your time every day... I think if you're in it for financial reasons then it's going to end up being way more of a hassle than it's worth.

    On the other hand, I am at the beginning of my own "Cinderella story" as flipflopgirl called it, so I do a lot of very small orders that aren't really good financial opportunities in and of themselves. For me they're absolutely worth it, because a) I planned time for learning and experimenting into my business plan with the idea that I would live off of my savings while taking these types of opportunities so I could transition from line cooking/savory side of fine dining to baking/pastry and business ownership b) I have a clear vision for where I want my business to go, so I can evaluate opportunities based on whether they will help me get to the next point in my plan and c) I'm in a slow recovery for a back injury, so it's not like I could take on huge production work anyway.

    So, when I evaluate a business opportunity or new client, I look at three things: 1) how much creative freedom/flexibility will this opportunity give me (aka, can I pursue my own learning goals while making an awesome product I feel good about) 2) will this opportunity provide marketing or logistical support for the next step in my business, and 3) are there a lot of not-exactly-quantifiable 'annoyances' involved in this opportunity (like, will I have to do a lot of driving during rush hour? etc.)

    If I were looking at the opportunity you presented, here are some things I might try to make it more worth my while..
    - Can you make an agreement to do something like "selected artisan bread" instead of just baguettes? That might put you in the driver's seat of deciding what types of loaves you want to make and you could rotate them based on what you're interested in making.
    - Could you just do Friday/Saturday deliveries to start and then see how you feel about it before committing to more?
    - Can you up-sell them on adding additional products that are easy/quick/low cost for you to make? I live in a major metropolitan area where there are lots of busy young professionals and meal "kits" are hugely popular - maybe you could make, like, 'olive oil infused with local organic herbs' or white bean spread or tapenade or something and have the store sell it near the bread as a "bruschetta kit"? (This also depends on your local cottage food laws - they may allow bread but not more potentially hazardous items)
    - Are there products that this shop sells that you use on a regular basis? Will they sell them to you at cost as part of your deal?
    - Can you use this local shop as an outlet for pop-ups/holiday sales/etc.? Maybe develop the relationship so that you can use them to take/distribute Thanksgiving pie orders or holiday cookies? That could help you see some real money.

    Anyway, just some rambling thoughts...

    And don't forget local/state business licensing (which was several hundred dollars by the end of it for me, plus some annual fees) and sales tax in your costs.
     
  10. flipflopgirl

    flipflopgirl

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    Took another look (if Bill says PITA then I take him at his word) and realized that you are only offering bread.
    Really no money in bread on a small scale....medium either.
    Good advice from azenjoys to upsell and/or flesh out your op but you will need real room to move around.
    Event cakes and hand decorated cookies are where the cottage baker can profit.... pies during the holidays if you can offer some unique flavors.
    If the ones (cottage cake ladies) already established in your area don't take you apart like rabid dogs first.
    Are you just wanting to bake or are you wanting to be a baker?

    mimi
     
  11. chefbillyb

    chefbillyb

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    On the other hand, I am at the beginning of my own "Cinderella story" as flipflopgirl called it, so I do a lot of very small orders that aren't really good financial opportunities in and of themselves. For me they're absolutely worth it, because a) I planned time for learning and experimenting into my business plan with the idea that I would live off of my savings while taking these types of opportunities so I could transition from line cooking/savory side of fine dining to baking/pastry and business ownership b) I have a clear vision for where I want my business to go, so I can evaluate opportunities based on whether they will help me get to the next point in my plan and c) I'm in a slow recovery for a back injury, so it's not like I could take on huge production work anyway.

    I would never stop or talk against someone following their heart and dream to do what they love. I started my business this way. I owned a Food service management company and Catering company. When I started my catering company I did some networking with local "big wigs" that attend or have a lot of catered functions. These were the wives of ,and or, local ladies in business in town. I would do "get to know me" free luncheons in their homes and sit with them and explain what I do. I also invited 200 local businesses to a Hors D' Oeuvres luncheon for a " Let me show you what we do" meet and greet. That being said, you get my drift.

    For you and what your trying to accomplish most of the time would start in a farmers market atmosphere. If this isn't an option, then make 50 loafs of bread. Then go to places that you think could be clients and give them a loaf showing them what you do. No one ever throws someone out when they're giving them something for free. This way you let them try your product and gives you a chance to start a conversation of what you can do and what their needs are. The cold sale is one of the hardest things you can do in sales. The "Bread in hand" helps settle the nerves.

    If your business gets to a point where you need more space. Look into restaurants, church kitchens to rent space to do your baking at night. As for the restaurant, it would need to be a place that only opens for breakfast and lunch and closes in the afternoon. The Restaurant doesn't do anything for 12 to 14 hours and could be in a position to rent to you. You may also get yourself a lower rent if you do all the baking for that restaurant. This will get you into a low cost Wholesale operation. when the restaurant opens in the morning you'll be on your way for your deliveries......Good luck.......ChefBillyB.......
     
  12. Chrisopotamus

    Chrisopotamus

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    If you check with your power company (or look at your electric bill), you can see the kilowatt per hour cost. Here's a calculator you can use to figure out the cost per day based on total hours: http://energyusecalculator.com/electricity_oven.htm

    You may also want to take into account the cost of your water heater heating the water used for cleaning.

    As others have mentioned, scale is everything when it comes to cost. For example, you'd be surprised how well bread does when it's pretty packed in an oven (Cakes not so much). Home oven racks are pretty standard sizes, would it be possible for you to find one or two used ones and squeeze them in so you can double the amount you bake at once? (This would require tweaking of course.)

    Also, formed bread dough usually freezes and bakes extremely well. Can you shape and form all the loaves, then freeze them and bake them as needed? If you're serious about it, it might be worth picking up an extra freezer at the Sears scratch and dent outlet. Most recipes recommend par baking, but I've always had fresher bread when doing the final proofing and then freezing. I just let it sit on the counter for 20 to 30 minutes before putting in oven and I had to tweak the oven time and temp a bit for my recipe.