Buying a bakery can be a rewarding decision, both personally and financially. But here’s the thing: not every shop that smells of fresh bread is going to bring in fresh profits. Before you jump in, you need to check if the numbers add up, not just the recipe for the muffins.
A profitability check is your way of asking, “Is this business worth the dough?” And trust me, you want the answer to be a clear “yes” before signing anything.
1. Understand the Current Revenue Streams
Before you consider purchasing a bakery for sale in Australia, you should first determine where the money is coming from. Is the money only coming from the sale of bakery items, or are there other streams of income as well, like catering, wholesale, or coffee sales? The broader the mix, the stronger the safety net if one product slows down.
Ask for monthly sales reports from the last 12–24 months. This will help you identify patterns, such as whether sales spike at Christmas but slow down in the summer. Consistency is great, but some seasonal dips are normal.
2. Check the Cost of Goods Sold (COGS)
The best croissants in town don’t matter if they cost too much to make. COGS covers all the ingredients, packaging, and other direct costs. In a profitable bakery, this should sit around 25–35% of total revenue.
If it’s creeping closer to 50%, that’s a warning sign; either the cost of ingredients is too high, waste is too big, or pricing is too low.
3. Assess Operating Expenses
Rent, electricity, staff wages, equipment maintenance: these all add up fast in the baking world. Look at:
- Rent as a percentage of sales
- The costs of staff
- The costs of using various electronic tools, such as ovens and refrigerators
If these fixed costs consume too much of the revenue, profitability becomes a struggle, even if sales are decent.
4. Investigate the Customer Base
This is one of those things numbers alone can’t tell you. Spend some time in the shop, see who’s coming in and when. Is it full of loyal regulars, or mostly occasional walk-ins? Are there corporate clients ordering in bulk?
Strong repeat business is a great sign because it means less money spent on marketing to bring in new faces.
5. Look at Location Advantages and Risks
A prime location near offices or schools can be a goldmine. However, remember that high foot traffic often comes with higher rent. Also, think about:
- Parking availability
- Competition in the area
- Look for the roads that may arise in the future that could affect customer flow
6. Review the Equipment and Fit-Out
Outdated ovens and mixers can mean unexpected costs down the line. Replacing one big commercial oven can set you back thousands. Ask for maintenance records and factor in how soon you might need to upgrade.
Additionally, verify that the layout facilitates efficient service; a poorly designed space can hinder production and sales.
7. Analyse the Seller’s Reason for Exiting
People sell businesses for all kinds of reasons, including retirement, relocation, health concerns, or simply a desire for a change. But if the bakery’s been losing money, you’ll want to know before you end up inheriting the problem.
It’s worth politely asking why they’re selling and then comparing their answer to the numbers.
8. Compare Asking Price to Market Value
Do some homework on similar businesses. For example, check listings like bakery for sale in Australia to get a sense of what’s out there and how pricing compares. A bakery with a strong profit history, modern equipment, and a prime location will usually command a higher price, but that premium only makes sense if the profits match.
9. Project Future Earnings
Once you’ve seen the current numbers, run some “what if” scenarios. What happens if ingredient prices rise by 10%? Or if you add a coffee machine and boost sales?
These projections help you see not just where the business is now, but where it could go under your ownership.
10. Get Professional Help
If you are able, you should consider seeking professional help, as they can offer better guidance on liabilities, unpaid taxes, and other related matters.
Final Words
In conclusion, owning a bakery business means you can enjoy both a rewarding lifestyle and a solid investment, but only if the numbers make sense.
Therefore, it is crucial to investigate the revenue, costs, and the future potential of the bakery shop that you are going to buy. The above step analysis will surely give you a sense of whether you’re buying into a golden opportunity or stepping into a financial trap.
