My Cake Business, what am I doing wrong?

Discussion in 'Growing and Managing a Business' started by Hisham, Oct 21, 2012.

  1. Hisham

    Hisham
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    Hello All,

    I found this forum through google, while I was seeking answers, and I would much appreciate if you guys could help me out.

    About a year ago, I started up a cake shop, specialized in cheesecakes, our cake shop features also a cafe atmosphere, in which you can just enjoy a cup of coffee.

    Our cheesecake, is unmatched regarding taste, very high quality, unique and creative flavors, we never had an unsatisfied costumer! And recently, we added new products to our menu so we wont be only serving cheesecakes & Coffee, we added pies, English cakes, Tiramisu, Cookies, Muffins & Carrot Cake.

    Our pricing is within the average acceptable price rage with neighboring bakeries, our variable cost per cake is about 30% of it's price.

    Our location, we are located in the most active, upscale area which most successful restaurants, cafes & bakeries are located.

    Our atmosphere, our shop is very unique and never been done in this part of the world, and we granted the wow factor from everyone who came into the door of our small shop.

    Our customer service, many costumers have returned merely for the good service which many are not used to receive in other places, many of our regulars have become the marching band cheering restlessly for our shop.

    Marketing, we have been mentioned in many places with good feedback, like a radio show, in a magazine & a critic website. On the advertising part we made flyers, tons of facebook ads, magazines ads...etc

    - Sorry for the long question-

    After all that here I am a year after I opened, exhausted, drained both emotionally and financially, and don't know what to do, I have not made a single 1$ profit last year, and I can't located where did I go wrong, I dont want to close the shop cause theoretically there is nothing wrong with it, but we don't have enough costumers, our daily sales in 50% less than it should be if I want to make a little profit for myself or at least a salary, since I work in the shop everyday and I was totally dedicated to this place and don't have any other income source.

    I need help, can someone tell me please where did I went wrong, or any advice I can use to improve the sales?

    Thank you in advance.
     
  2. James Greg

    James Greg
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    I think you might have addressed the actual problem yourself. Customers are returning merely for good customer service while your specialty is cakes and other bakery items. You need customers to come back not merely for the service, but for the taste too. If they do not find the taste too appealing to make them come back but they still do because of the dreadful service they get at other places. Your customers wouldn't be spending much on the items but just enjoy their free time.

    You need to make sure they come back for the taste too. If they would love what they get to eat, they would be spending more money and you would get better sales.
     
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  3. Fergal

    Fergal
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    Hisham first of all welcome to Business Advice Forum. It sounds to me as if you are doing a lot more right than wrong, congratulations on bringing your business to the point where it is now and on having received such positive reviews from your customers. Unfortunately it is common for businesses to lose money in their first year and the first year is generally the most difficult period in the life of any business.

    How much financial analysis have you done on your business, e.g. do you know which products are profitable and which ones may be making a loss? Do you know how much you need to sell each week in order to break even? I realise that these are questions rather than answers, but I feel that if you want to know why your business is not making a profit you need to have some detailed information on your finances to identify where the specific issues are.

    You should also look through all your costs and try to find ways to reduce them. For example;
    • Can you reduce energy costs by changing supplier.
    • If you rent the premises can you negotiate a reduced rent with your landlord - if you explain your situation to your landlord, he / she might be happy to reduce the rent rather than lose a good tenant.
    • If you employ staff can you reduce wage costs? Perhaps you can reduce pay rates or reduce the number of hours that you hire staff on a weekly basis.
    • You say that your "variable cost per cake is about 30% of it's price" that seems quite high, given the type of business you are in. Would it be possible for you to reduce that? Maybe you could shop around for different suppliers, buy from a distributor / wholesaler or negotiate better terms with your current suppliers.
    In relation to your sales figures, are your sales increasing or decreasing from month to month?
     
  4. renegadeleader

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    Are you friendly enough to greet costumers whenever they come to your shop? Sounds like you don't have any problem with the system of your business, try to check if you are doing the right thing to get costumer loyalty.
     
  5. Hisham

    Hisham
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    Thank you all for your replies,

    James & renegaeleader, what I said about costumer service was my way of telling that we cover that area and we even took an extra mile, but as I said our desserts is unmatched in taste and quality.

    Fergal, we are 30% down from making the breakeven, and unfortunately cutting costs is hard cause, employees wise, we are 4, and two of those four are me and my brother and we are working for free, rental wise, they wont even consider such thing cause frankly there are many others who wish they had my spot, suppliers wise, we are taking from the sources and importers, which we wont be able to find a lesser price for the raw materials, and the one thing I don't want to compromise is the quality of my desserts. Sales figures are hard to analyse into a stable pattern cause numbers may rise two months in a row then drop, but I can say that our daily sales are higher than lets say 8 months ago.

    The thing that bugs me the most is that as a business/marketing graduate I've done everything -as they say- in the text book, and I saw during the past year, some business without any success factor (nor place, quality or value) create a huge buzz -even though it last for a couple of months then they end up with no costumers- but my shop never had that buzz or the chance for people to see how good what we offer is.

    I hate complaining and being a whiner, but I was hoping to get a professional advice or tip :)
     
  6. D_J

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    Have you thought about raising your prices? Your profit isn't just dependent just on the volume of your sales, but on your pricing too. Your description of your cakes, location, and clientele make it sound like your prices should not be on par with other bakeries but much higher.

    It sounds like your existing customers will pay, but even if you lose some...If you increase prices by 40% and lose 20% of your customers, you're still 12% up in sales and more than that in profit.
     
  7. TimB

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    Well you have done all that is required to create a good shop and if you have actually done all the above mentioned then its great. I only kept my self in your customers place and i think maybe its because of:

    Less items on the menu, as you claimed that many of your customers come back due to your services. That means they want to come to your shop and stay, but due to limited variety they are forced to go to another cafe. You also need to cater you customers with other items then sweet-dishes. Personally i would go to a cafe with a heavy menu. I know of a coffee cafe that gives 3 whole ranges of food and they also provide cigarets as a part of their menu.
     
  8. MarkTaylor

    MarkTaylor
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    Hi Hisham,

    This is an interesting problem and one that is hard to address without seeing the financials and knowing the business in more detail. A simplistic suggestion is to look for ways to: i) increase margin; and ii) increase volume of customers. With regard to point i - set up a spreadsheet showing overheads and average margin on a typical sale, then see what happens when you increase the price by a few % - if the product and experience are really good then you may well be able to charge a little more. With regard to point ii - I would suggest a range of simple marketing tools - advertising on Facebook, etc, handing out leaflets etc...

    I hope this gives you a few ideas and good luck with your business - it sounds fantastic!

    M.
     
  9. jackflaming

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    I can understand your problem. To get the profit, I will advice you to buy another side business which should be either relevant to your current business or you can buy a business that you can easily handle parallel. When you will run two businesses, you will get more profit.
     

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