Bakery business is one of the lucrative business in Nigeria though it require large amount of capital to start but once you are able to gather the capital, you will always smile to bank because product of bakery such has bread, doughnut are always in demand(in this article our focus is bread).
One of the principle of business is to solve the pain point of customer and one of the pain point of human is ‘time wasting’ if we can have more than 24 hours in day some people will be happy forever and what a good thing for bakery business because it solve that pain point, people do not have to go through the process of cooking to eat, with small money they can buy bread and save time which can be spend on money making venture.
I’m sure you are tired of all this epistle, I just want you to know that Bakery business is a business that cannot fade out as long as people continue to eat.
If you are reading this article that means you are planning to go into bakery business or want to expand your knowledge, whatever the case you are in the right place as this article will show you what you need to do to have a successful bakery business in Nigeria.
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Business opportunity in bakery business
Below are the businesses that surround bakery
Distribution business
Distribution involve buying from the bakers and selling to retailer.
Retailing
It involve selling bakery product to final consumer.
Nylon production
Nylon and other wrappers used in bakery business is produce by nylon manufacturers
Selling ingredients
This business focus on selling ingredient to bakery.
Steps to starting bakery business in Nigeria
1)Training
Bakery business requires some skill and knowledge which you need to get before starting it. You can get it by dedicating at least two month to work in a bakery business or hire a professional to teach you.
Please do not replace physical training with YouTube, while YouTube video is good, it won’t teach you all the necessary detail that will make your business a success in your geographical location.
Another way to go about it is to hire professional bakers as your early employee, you can rest on their back while you lean all the necessary detail.
2) Feasibility study
This should come first, but you can always utilize your baking skill if the baking business is not feasible. Feasibility study will help you to know if your bakery business will be profitable and how profitable it will be in your chosen location.
A business might be profitable in one location and fail in another location so don’t follow others like sheep, go out and interview your potential customers, suppliers and competitors, this will provide you with accounting information that will let you know if the business will be profitable, how profitable it will be and when will the business break even.
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3)Location
Bakery business is mostly location base for instance it is hard for bakers in Enugu to sell their product in Lagos. Let the following question guide you when choosing location for your bakery business.
Is there a good road network?
How far it is from source of raw material?
What is the purchasing power of the dwellers?
4)Business plan
If you want to operate a medium or large scale bakery business, you will need business plan that will show what your business will look like in the next 5 years and the steps you will take to achieve your proposed feat.
If you intend to use your plan to obtain loan or investment write the detailed business plan (the one that contain executive summary, organization chart and other detail), but if it is just for direction you don’t need to write the traditional one you can opt in for 1 page business plan, that will only show how to move from one step to another.
5)Source for capital
By now you should have secure capital or planning to. Capital requirement depend on the scale of operation nevertheless below are the source of capital you can look into
- Your savings
- Friends and family
- Trade credits
- Bank loan
- Investor
6)Registration
The next in line is registration. To avoid confrontation with the authority you need to register your business with CAC (Corporate Affairs Commission) and NAFDAC.
To reduce registration cost you can register only business name but make sure you have all the necessary document for NAFDAC registration it is very important, remember you are in food industry.
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7)Build your bakery
Here, you must be careful, if you have been a mister know it all since you need to calm down and look for professional.
Your factory must be planed and build according to the specification of NAFDAC, you will do well to leave building in the hand of professionals.
Acquire bakery equipment and ingredients
Below are the bakery equipment you need to acquire
Baking oven
Go for the industry baking oven if you want to operate large scale bakery business, if not you can use brick oven.
Slicing machine
It is use for slicing bread, a must have if you will be selling sliced bread.
Mixer
Mixer is an engine use for mixing flour. I will recommend you buy the electronic one it is fast and efficient.
Baking pans
If you purchase standard oven, it will come with pans, if not you can source locally.
Others are
Generator
Branded wrapper (nylon)
Supply truck
Disposable gloves
Big tables
Uniform for workers
Baking ingredients
Flour
Sugar
Eggs
Salt
Yeast
Baking soda
Butter
Preservatives
8)Staffing
Staffing is the least difficult of all the steps, since there are lot of unemployed youth in Nigeria, but make sure you hire competent employee, those that have passion for your business.
Your early staff will shape how your company culture will look like so start will your early employee whatever culture you want your business to be known for.
9)Marketing
Marketing strategy will depend on your business model, usually bakery business is a business to business model, you produce and sell to retailer, who then sell to consumer.
When choosing advertising medium make sure to choose what your target customer can relate with.
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Secrete of marketing is that
Good product + bad marketing = low sale
Bad product + bad marketing = no sale
Good product + good marketing = more sale
Below are the advertising medium you can use to reach your customer
Flyers
Signpost
Radio and TV
Social media
SEO (Build a website with content that will drive traffic. You can contact us for that)
Cost analysis and profitability of bakery business in Nigeria
Note: The following cost and profit is a rough estimate
Fixed cost
Standard oven (deck oven) == #1,000,000 — #1,500,000
Mixer = #1,200,000 — #1,500,000
Slicer = #400,000 — #600,000
Other equipment = #500,000 — #1,000,000
Land procurement = #300,000 — #1,000,000
Variable cost per week
Let assume a bakery produce 20,000 loaves of bread per week
Estimation from industry average =
Cost of production = # 400,000
Fueling (generator + supply vehicle)= #120,000
Wages/ salary per week = #80,000
Miscellaneous = #50,000
Total = #650,000
How profitable is bakery business
From industry average estimate a bakery make #50 on every loaves of bread produce.
Profit from 1 loaves = #50
Profit from 20, 000 loaves = #20,000 x #50
= #1,000,000
Challenges of bakery business in Nigeria
Spoilage
Bread can easily get spoiled by mold if left for a long time and also some supplier might return moldy bread.
Solution
Bake quantity that you know you can sell per day
For return bread, create a policy that will reduce it, but make sure it does not affect your customer.
Corruption
Whenever you are going to supply bread to your customers include bribe as part of your cost because police will surely get their own share.
Burnt bread
This is very common in the night, unfortunately customer hate burnt bread, they will surely return it if you sell it.
Solution
Install a smoke detective that will alert those on the night shift.
Theft
Your staff will surely steal your bread, but it should not be much, so create a system that will prevent them from stealing.
Other people that can steal your bread are tout and thug in your area, to prevent this give bread to guys in your area at least once a week.
Price of raw material
Have it in mind that what you buy raw material to day is not what you will buy it tomorrow; raw material prices is known to be unpredictable.
Solution
Buy in bulk and build a storage.
