Do it myself or start buying it in

[Olzki]

Hey folks... got a bit of a puzzle that I'm trying to figure out, but I'm not 100% sure where to start.

I've got a little coffeeshop, and at the moment, I do 100% of the baking of the sweet stuff, in my council approved home kitchen. This means I generally need two full days and maybe an extra afternoon a week, at home, getting the cakes and the cookies made. This means I have to employ staff to cover those times, as well as 1 day "off" a week (generally spent doing admin, trip to wholesalers etc.).

We've done pretty well over the last 6 years, but times are getting harder; I've had a large local roaster coffeeshop chain open up their new flagship store in the building one door down, as well as new food based cafe open up a little further down the road, and along with all the talk of "cost of living", our sales are decidedly down.

Looking at my outgoings, my biggest cost is currently staff. So, to lower my costs I could let a part time staff member of two go, reluctantly, and do their shifts myself, but then I've no time for baking. This could easily be solved by ordering in stuff from local bakery companies, but that wouldn't be as profitable as me doing the baking myself. But then I would be saving myself money on staff costs. And that's the puzzle I'm trying to figure out.

The good news is that I'm armed with lots of data from the last 6 years as well as price lists from a few local bakeries, and obv I know what my staff costs are. I'm also pretty handy with a spreadsheet. I know there's a way to figure it out, but I'm not sure where to start.

There are other pros and cons to buying stuff in as a way of lowering my wages bill, such as my getting a bit more of a life back, but it also means we take one step closer to being just another generic coffeeshop, rather than somewhere that has baked goods you don't often find in other shops.

So... any ideas on how to work this out, or on my predicament in general? Any help at all will be much appreciated.

 

[Newchodge]

Start with your costs. Spreadsheet the actual costs of each member of staff over the past 3 years, month by month (go back pre-covid)

Then spreadsheet, for the same period, all the costs of the home baking, ingredients, packaging, cooking fuel, delivery fuel, licence admin, etc. Same period, month by month. Exclude your time.

Then estimate what you would have bought in to achieve the same sales, over the same period - total cost, goods, delivery, etc.

Would you have saved anything by buying in as opposed to baking the same or similar goods?

 

[kulture]

Survey your customers and find out what makes you different in their eyes. Is your coffee better? Is it your home bakes? Is it your friendly staff? Is it your prices?

It is likely to be a combination but there may be a clear favourite.

I suspect that you will loose customers if you go generic. What options do you have regarding reducing the opening hours?

 

[Olzki]

Survey your customers and find out what makes you different in their eyes. Is your coffee better? Is it your home bakes? Is it your friendly staff? Is it your prices?

It is likely to be a combination but there may be a clear favourite.

I suspect that you will loose customers if you go generic. What options do you have regarding reducing the opening hours?

Great idea to survey the customers - I will get something put together in Forms this evening.

It's worth pointing out that the sweet baked goods are only a portion of the business; we also have a range of sandwiches, which are made fresh on site, and we already buy in pastries and savouries. And obv. there's all the coffees, smoothies, milkshakes etc.

I considered closing an hour early (we go 7am to 5pm thru the week, and 8am to 5pm on Sat, and 9am to 4pm on Sun) as 4pm to 5pm can feel kind of slow. But I did a spreadsheet, looked at the average takings for that hour (excluding Sunday) vs. the cost of staying open, and it beats it nearly twice, so scrapped the idea. We def are busy enough to be open between 7am to 8am.

I have a full time manager who suggests advertising, as we don't do any at the moment, other than sporadic posts on social media; maybe that could be an area for development?

 

[Olzki]

Start with your costs. Spreadsheet the actual costs of each member of staff over the past 3 years, month by month (go back pre-covid)

Then spreadsheet, for the same period, all the costs of the home baking, ingredients, packaging, cooking fuel, delivery fuel, licence admin, etc. Same period, month by month. Exclude your time.

Then estimate what you would have bought in to achieve the same sales, over the same period - total cost, goods, delivery, etc.

Would you have saved anything by buying in as opposed to baking the same or similar goods?

Superb response! Thank you!

I've made a good start looking at how much it would cost to buy in similar versions of what I make, and what the difference in profit will be. Then maybe trying to extrapolate that over a period of time?

Looking at costs of staff is relatively easy as most of mine are part timers who rarely do enough hours to generate any tax or NI contributions, so it's mostly just their hourly rate I'm looking at.

I do have a full timer, who is my manager, gets a salary rather than an hourly rate, and has a load of extra responsibilities, which he mostly fulfils *eye roll*. Should I be trying to factor in his costs, even though his position and role will mostly be unchanged?

 

[IanSuth]

How about asking current customers not only why they use you but how they heard of you/first came to use you. That might give you an insight into what advertising would work best, if they "saw you wandering past" then spend more time & energy on a-board and the front window, if they say "word of mouth" consider a promotion on getting existing customers to introduce someone

etc etc

 

[Chris Ashdown]

What percentage of the total turnover is the home baked products

Can you reduce the amount of time spent baking to just the most profitable items Maybe the cookies are more profitable than the cakes and have longer shelf life

Would a oven and kitchen at work make better use of your time maybe doing away with the manager

 

[kulture]

How many days a week are you open? Is it worth closing on one? Can you afford to keep the full time manager? Could you not manage and have extra part time staff to pick up any slack?

 

[MBE2017]

You might find reducing your range and concentrating on fewer core products increases sales and profitability.

Once you have done the exercise suggested by Newchodge, then consider if you had fewer staff and products, work out the main profitable items and see what results you get. You might find keeping the part timers and reducing your range keeps your profit but reduces your overheads. Only you can decide.

 

[MOIC]

Keep to your USP, home baked goods, if that’s the draw to your customers.

Diversify into another style drink, for example Bubble Tea.

Prepare your baked goods at home and just finish baking on the premises, if allowed. There’s nothing better than the smell of freshly baked food.

In order to survive against the new competition, you need to offer something different. It won’t be easy.

A simple trade off between staff costs v outsourcing baked goods may not be the solution in order to survive and have a profitable business.

 

[Olzki]

Thanks to everyone for their responses - I've got a customer survey up and running, a spreadsheet that tells me losing one staff member and continuing to bake myself, but maybe more in the evenings, is the way to go, as well as lots of great advice and ideas about how to proceed - thank you!!!

 

[MBE2017]

Congrats Olzki for at least listening to suggestions, hope you prosper.

 

[Pembroke99]

Could you move the sweet stuff baking to the premises and have the part time staff do it instead of you? Also wold staying open later so you catch the evening commute crowd help? You could maybe shut for a short time, morning or afternoon to make up for it and do the baking then?