Running a bakery isn't just about baking fantastic bread and pastries; it's also about making sure that your business makes profits.
If you’ve not planned financially well about your bakery, then the costs can extensively increase, cash might run out of hand, and surprise expenses could create massive problems.
That’s why having a bakery financial plan is very helpful. It lets you keep track of costs, set the right prices, and ensure that your business stays profitable.
But, how do you create one?
This article will break it down into easy steps and guide you in running a strong, successful bakery. Let's get started!
How do you build bakery financial projections?
Creating realistic financial projections for your bakery involves thorough analysis and meticulous planning to comprehend its financial health and growth potential.
Here’s a step-by-step guide to help you build accurate and actionable projections while ensuring you factor in every detail:
1. Gather essential information
First, collect all the relevant key data that lays the groundwork for accurate financial projections.
This would include your bakery details like:
- Current operations
- Target demographics
- Historical financial performance
- And industry benchmarks.
Start with your bakery's sales data—analyze daily and weekly revenue trends, peak sales hours, and how demand shifts with seasonal changes. For new bakeries, analyze the latest market trends, industry benchmarks, and local competitors to make educated estimates.
Further, understand your customers inside out.
- Who are they?
- What do they like?
- What are their purchasing habits?
Then, track inventory data—monitor ingredient stock levels, shelf life, and supplier costs to ensure precise cost calculations.
Most importantly, don’t forget to analyze the past performance data of your bakery to understand what drives your business.
Consider analyzing previous revenues, costs, and profits to detect trends and highlight the areas for improvement. Analyze how some of the marketing campaigns, menu items, or seasonal changes impacted your sales and cost.
That’s how you'll have everything you need to create accurate and actionable financial projections.
2) Make rough pre-assumptions
Now, make some preliminary assumptions for your bakery’s financial projections based on gathered data. Such estimates will outline your business's revenues, expenses, and profitability levels.
Start by focusing on the basics: How much you’ll make in monthly sales, how much customers will spend on average, and what your operating costs might look like.
Use the understanding of past sales trends, industry benchmarks, and your own research. Even, take into account factors like seasonal changes or upcoming menu additions that could affect your numbers.
Here are a few key metrics to consider while making your assumptions:
- Revenue growth: Predict a percentage increase in sales, such as a 5% annual growth based on an expanding customer base or marketing efforts.
- Cost increases: Ingredient, labor, and utility costs may rise. Flour and dairy prices fluctuate, and summer refrigeration can hike utility bills by 10%.
- Seasonality: Sales peak during holidays like Christmas and Valentine’s but dip in January as customers cut back.
- Economic conditions: Account for inflation, rising wages, or other economic factors that may impact both costs and customer spending power.
Don’t aim for perfection—these are rough estimates to guide your planning that will evolve over time. So, revisit them periodically as actual data comes in.
3) Make revenue projections
Revenue projections are all about figuring out how much money your bakery might make.
To get started, consider a few key factors:
- Daily foot traffic: How many customers visit your bakery each day?
- Average transaction value: How much does a typical customer spend per visit?
- Sales volume: How many pastries, breads, or cakes do you sell daily?
Breaking down step by step makes it a lot easier to understand what one can earn.
If your bakery attracts 200 customers per day, who spend on average $8, then do the math.
200 customers × $8 × 30 days = $48,000/month
But you should also think about holidays, weekends, and special events—they can bring in more customers since more people may want pastries, helping you make more money. On the other hand, slower months or weekdays might mean fewer sales.
Additional streams of income will also come in handy, including custom cake orders, event catering, delivery services, wholesale with cafés or grocery stores, and baking classes. A high percentage will likely be comprised from these types of revenue.
By including these extra streams, you’ll get a more accurate picture of what your bakery can earn.
Revenue projections are more than just crunching numbers: they set reasonable expectations while preparing for the busier times as well as the quieter ones.
4) Calculate the Cost of Goods Sold (COGS)
The next step is to calculate your Cost of Goods Sold (COGS)—the direct costs of making the baked goods you sell. This includes ingredients like flour, sugar, eggs, and other materials used in your recipes.
Here's an easy way to do your COGS calculation:
List the ingredients: Write down everything used to make your baked goods, from flour and butter to toppings and fillings.
Find the costs: Check supplier invoices or receipts for ingredient prices.
Calculate per item: Determine the cost of making each product (e.g., if a loaf of bread costs $2 to produce and you sell 500 loaves, your COGS for that item is $1,000).
Add it up: Total the cost of all baked goods to get your monthly COGS.
For instance, if your bakery is spending $15,000 in a month on ingredients to produce $48,000 in revenue, then your COGS is $15,000.
Knowing your COGS will help you manage your expenses, optimize resources, and improve your profits.
5) Estimate operating costs
Next, describe the expected expenses incurred to operate your bakery.
When assessing the business operational costs, first list the fixed costs that would remain the same month in and out, including rent, insurance, and salaries for your staff.
Then, you have to identify variable costs that could change over time. It includes utilities, ingredient supplies, packaging, and marketing expenses.
Lastly, sum up the fixed and variable costs to come up with your total operating costs.
Overall, by calculating your operating costs, you can manage your budget and know whether your revenues can cover all the expenses to leave room for profit.
6) Prepare financial statements
After estimating your bakery's revenue, COGS, and operating expenses, it’s time to draft clear financial statements. These documents are essential for illustrating your bakery’s financial health and growth potential to prospective investors.
Here are the critical financial statements and reports that you should consider including in your plan:
- Income statement (profit and loss statement)
- Cash flow statement
- Balance sheet
- Break-even analysis
By adding these financial statements, you showcase your financial standing to potential investors so they can make well-informed decisions regarding investment.
We'll explore each of these financial components in greater detail in the upcoming sections, giving you insights needed to create a strong financial plan.
7) Prepare visual reports
Numbers alone aren't enough. Present your bakery’s financial data in a visually appealing and easily digestible format that readers can quickly understand and get valuable insights.
Using charts and graphs makes it easier to highlight your bakery’s key aspects, including revenue trends, expenses, profit margins, and cash flow.
Don’t worry; it’s easy. Use simple bar charts, pie charts, and line graphs to make the data clear. Also, highlight patterns like seasonal sales changes or rising costs to help with planning.
This will not only help analyze financial data but also enable you to communicate key metrics effectively to your team as well as investors.
8) Test assumptions, consider scenario analysis
Finally, take a step back and test the numbers to ensure your projections are more accurate. Try to run different scenarios (best- and worst-case) to see how changes impact your financial outcomes.
For instance, analyze what happens if ingredient costs increase by 15% or customer traffic drops during slower months.
Considering these “what-if” situations helps you identify potential problems in business operations and come up with solutions in advance. It even increases transparency and lets investors better understand your bakery's future with different scenarios.
Overall, these test assumptions and sensitivity analysis will help you make strategic decisions and necessary adjustments to keep your bakery running smoothly.
Key financial statements of a bakery financial plan
A detailed bakery financial plan typically includes important financial documents like the income statement, cash flow statement, balance sheet, and break-even analysis.
These reports clearly describe your bakery's current monetary position and the overall financial strategy to achieve future goals.
Let's explore each statement in detail.
1. Income statement
The income statement is also known as the profit and loss statement. It gives you a solid understanding of your bakery’s revenue, expenses, gross margin, and net profit for a specific time.
It helps you see whether your business is making enough money to cover its costs and turn a profit.
The gross profit is what you get after subtracting the COGS from the total revenue. This shows how efficiently your bakery uses its resources.
Further, divide the gross profit by revenue and convert it into a percentage to determine the gross margin.
Then, reduce operating costs like rent, salary, and utility to get the EBITDA. Finally, subtract interest, taxes, depreciation, and amortization from the EBITDA to arrive at the net profit of your bakery—the figure that investors care about the most.
Here’s an example of a mid-sized bakery’s income statement to demonstrate these calculations:
| Category | Monthly ($) |
|---|---|
| Revenue | |
| Retail Sales (In-store) | $35,000 |
| Online Sales | $10,000 |
| Wholesale Sales (Restaurants, Cafés) | $15,000 |
| Catering & Special Orders | $5,000 |
| Total Revenue | $65,000 |
| Cost of Goods Sold (COGS) | |
| Ingredients (Flour, Sugar, Dairy, etc.) | $10,000 |
| Packaging & Supplies | $2,500 |
| Direct Labor (Bakers, Kitchen Staff) | $8,000 |
| Utility Costs (Ovens, Gas, Water) | $1,500 |
| Total COGS | $22,000 |
| Gross Profit (Revenue – COGS) | $43,000 |
| Operating Expenses | |
| Rent & Lease | $5,000 |
| Marketing & Advertising | $2,000 |
| Salaries (Admin & Sales Staff) | $8,000 |
| Insurance (Property & Liability) | $1,000 |
| Office & Misc. Expenses | $800 |
| Depreciation (Equipment) | $1,500 |
| Loan Repayment (if applicable) | $2,000 |
| Total Operating Expenses | $21,300 |
| Operating Profit (Gross Profit – Expenses) | $21,700 |
| Other Income & Expenses | |
| Interest Income (if any) | $200 |
| Taxes (25% of Profit) | ($5,300) |
| Net Other Income/Expenses | ($5,100) |
| Net Profit (Final Earnings) | $16,400 |
The bakery generates a total revenue of $65,000 from multiple sources, including retail, online sales, wholesale, and catering.
- Cost of goods sold (COGS): $22,000
- Gross profit: $43,000 (Revenue - COGS)
After deducting operating expenses such as rent, salaries, marketing, and other costs totaling $21,300, the operating profit comes to $21,700 (Gross Profit - Operating Expenses).
Following taxes and minor deductions, the bakery’s net profit stands at $16,400 per month, resulting in a net profit margin of 25.2%.
In simple terms, the income statement tells you if your bakery is making money and staying financially healthy over time.
2. Cash flow statement
A cash flow statement shows how money is coming in and going out of your bakery over a certain period. It helps you figure out if you have enough cash to cover your daily expenses.
It’s also great for spotting potential cash shortages, especially during slower months, and demonstrates how much cash is coming from operations compared to things like investments or loans.
To create one, you’ll need to include cash from sales, ingredient costs and supplies, and other overhead expenses. It highlights how much money your bakery is making and spending during that period.
| Category | Monthly ($) |
|---|---|
| Operating Cash Inflows (Receipts) | |
| Cash Sales (Retail + Online) | $45,000 |
| Wholesale & Catering Receipts | $15,000 |
| Other Revenue (Deposits, Events) | $5,000 |
| Total Cash Inflows | $65,000 |
| Operating Cash Outflows (Expenses) | |
| Ingredients & Supplies | ($12,500) |
| Salaries & Wages | ($16,000) |
| Rent & Lease | ($5,000) |
| Marketing & Advertising | ($3,000) |
| Utilities (Electricity, Gas, Water) | ($1,500) |
| Insurance | ($800) |
| Miscellaneous & Office Expenses | ($1,000) |
| Loan Repayments | ($3,000) |
| Total Cash Outflows | ($41,800) |
| Net Cash from Operations (Inflows – Outflows) | $23,200 |
| Investing Cash Flows | |
| Purchase of Equipment (Ovens, Mixers, etc.) | ($5,000) |
| Furniture & Store Improvements | ($2,500) |
| Total Investing Cash Outflows | ($7,500) |
| Financing Cash Flows | |
| Business Loan Received (Initial Funding) | $20,000 |
| Owner’s Investment | $5,000 |
| Total Financing Inflows | $25,000 |
| Net Cash Flow (Total Inflows – Total Outflows) | $40,700 |
| Opening Cash Balance (Start of Year) | $20,000 |
| Closing Cash Balance (End of Year) | $60,700 |
That said, it’s a good illustration of how well your business is at generating cash. The precision of your projections in these aspects directly impacts the reliability of your cash flow.
So, be realistic with the assumptions you make in the cash flow statement. Use industry standards and consider market situations to ensure accuracy.
3. Balance sheet
A balance sheet gives a quick snapshot of your bakery’s financial position for a specific timeframe. It shows what the bakery owns, what it owes to others, and what’s left for you.
After all, it covers these key elements:
- Assets: Cash at hand, accounts receivable, and bakery equipment like ovens, mixers, and display cases.
- Liabilities: Financial obligations like short-term debts and long-term loans.
- Equity: The leftover earnings once liabilities are subtracted from assets.
Ideally, it’s presented as, Assets = Liabilities + Equity.
| Category | Amount ($) |
|---|---|
| Assets | |
| Current Assets | |
| Cash (Ending Balance) | $60,700 |
| Accounts Receivable (Unpaid Invoices) | $10,000 |
| Inventory (Ingredients, Packaging, Finished Goods) | $15,000 |
| Prepaid Expenses (Insurance, Rent, etc.) | $5,000 |
| Total Current Assets | $90,700 |
| Fixed Assets | |
| Equipment (Ovens, Mixers, etc.) | $80,000 |
| Furniture & Fixtures | $30,000 |
| Leasehold Improvements | $20,000 |
| Less: Accumulated Depreciation | ($18,000) |
| Total Fixed Assets | $112,000 |
| Total Assets | $202,700 |
| Liabilities | |
| Current Liabilities | |
| Accounts Payable (Suppliers, Vendors) | $12,000 |
| Short-term Loan Payments | $36,000 |
| Accrued Expenses (Wages, Taxes, etc.) | $8,000 |
| Total Current Liabilities | $56,000 |
| Long-term Liabilities | |
| Business Loan Balance | $150,000 |
| Total Long-term Liabilities | $150,000 |
| Total Liabilities | $206,000 |
| Equity | |
| Owner’s Investment | $60,000 |
| Retained Earnings (Net Profit) | $195,700 |
| Less: Owner’s Draws | ($60,000) |
| Total Equity | $196,700 |
| Total Liabilities + Equity | $402,700 |
Investors really pay close attention to the balance sheet because it shows them your bakery’s financial structure, return on investment (ROI), and overall stability.
It also provides an idea of the cash that is available to you, how the money is blocked, and what kind of solid business you are running.
4. Break-even analysis
We all know that profit is the all-time motive of all bakery owners. The real question is: When does the money actually start coming in?
A break-even analysis fits the bill at this stage. It shows exactly how much you’ll need to generate in revenue for all the costs to be recovered—no profit and no loss; just breaking even.
Let's take an example to see how it works.
For bakery,
- Fixed costs (Per month): $18,000
- Rent: $6,500 | Salaries: $8,000 | Marketing: $2,000 | Other: $1,500
- Variable cost per unit: $3.50
- Selling price per unit: $7.00
- Contribution margin: (7.00−3.50)÷7.00 = 0.50 which is 50%
- Break-even revenue: 18,000÷0.50 = $36,000
So, this bakery needs to bring in at least $36,000 a month to cover all its costs and break even.
This analysis shows exactly how much revenue is needed to reach the point where your total sales just cover your costs, causing no profit or loss.
In addition, this will give potential investors or lenders a fair idea of when your bakery would be profitable.
Download free bakery financial projections example
Creating a bakery financial plan from scratch seems overwhelming. After all, Excel sheets are tiring and endlessly long. But no worries! We’re here to help you with our free bakery financial plan sample.
It covers all the key components of a bakery’s financial projection, such as sales forecast, P&L or income statement, balance sheet, cash flows, and break-even analysis, simplifying the entire financial planning process to help you get started.
Build accurate financial projections using Forecastia
That’s it! We’ve discussed almost everything about creating bakery financial projections in this guide. Now, it should be much easier for you to put that knowledge into action and start planning.
But if it still feels like a lot to handle, don’t worry; Forecastia is the only AI-powered financial forecasting tool you need to make the process simple and stress-free.
It’s specifically designed for businesses looking to build accurate financial projections, anticipate future cash flows, and analyze overall financial performance—all without using spreadsheets!
Frequently Asked Questions
What are the key financial statements in a bakery financial plan?
A bakery financial plan includes three essential financial statements:
- Income statement
- Cash flow statement
- Balance sheet
- Break-even analysis
What are common operating expenses in a bakery financial plan?
Common operating expenses for a bakery include:
- Rent and utilities – Lease payments, electricity, water, and gas.
- Ingredients and packaging – Flour, sugar, dairy, and packaging materials.
- Labor costs – Salaries, wages, and benefits for bakers, cashiers, and staff.
- Equipment maintenance – Repairs and upkeep of ovens, mixers, and refrigeration units.
- Marketing and advertising – Costs for social media, promotions, and signage.
How do I create financial projections for my bakery?
Follow these steps to create financial projections for your bakery:
- Collect information on expected sales, ingredient costs, and operating expenses needed for financial planning.
- Predict monthly sales based on demand trends and calculate fixed and variable costs like rent, labor, and supplies.
- Create an income statement, cash flow report, balance sheet, and break-even analysis to track profitability.
- Use what-if scenarios to adjust projections and improve accuracy.
How often should I update my bakery’s financial projections?
It's recommended to review and update your bakery's financial plan at least once a year. This helps ensure that your initial goals and projections stay accurate and aligned with your bakery's growth and changing market conditions.
How to use the bakery financial projections template?
Enter your bakery’s details, such as projected sales, cost of goods sold (COGS), and ongoing expenses, into the bakery financial plan template.
These templates typically include built-in formulas to calculate key financial metrics like gross profit, cash flow, and break-even point, giving you a clear snapshot of your bakery’s financial health.
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