Despite the ongoing impact of the COVID-19 pandemic, 2021 has been a year of hope for many small business owners. A recent Bank of America Small Business Owners Report found that entrepreneurs are regaining their economic confidence, with 60% of its respondents expecting revenue growth through the end of the year.
As we head into 2022, you may be looking for ways to optimize your bakery operations to increase revenue or recoup losses. Working capital can be key to affording things like extra labor, increased inventory, or equipment upgrades. Whether your goal is to increase cookie production, open a new bakery, or buy delivery vehicles, having enough cash can go a long way toward long-term growth.
If you’re unsure if getting capital is the right move for your bakery business, we’ve gone ahead and outlined some of the most common signs that you’re ready to fund growth.
8 Common Signs Your Growing Business Needs More Funds
1. Your equipment can no longer keep up with customer demand
Receiving an overwhelming number of customer orders is usually a good deal, unless you can’t physically meet the demand. Funding can be earmarked for equipment upgrades, whether that means repairing or replacing existing devices or expanding what you have.
Plus, today’s ever-changing technology offers tremendous ways to alleviate time-consuming management functions like bookkeeping and accounting. For example, equipping the company with a secure point of sale system will definitely improve the way orders are taken, recorded and managed.
Better gear and better technology always come at a price, but the rewards are worth it. You won’t have to spend hours manually doing administrative tasks anymore and you can spend that time on things like baking, creating new recipes, and marketing.
2. You are understaffed
As a bakery owner, you know that the holiday season sees an increase in orders. You may be well equipped with the best tools and equipment, but lack the manpower to meet the increased demand during peak season.
If your staff are really feeling the brunt of growing demand without the necessary support, they may start looking for work elsewhere. Funding can be spent on hiring more people, either permanently or for the busiest seasons.
Take the time to assess the roles and responsibilities of your staff. If you have someone who cooks, takes orders, and handle the logistics, maybe it’s time to hire someone who can just focus on the logistics and take that load off the baker.
With more funds under your belt, you can increase your payroll. This money can be used to pay temporary or full-time employees, as well as outsourced talent that can take care of your taxes, advertising, or insurance.
3. You have growing customer demand in a new market
If your first brick-and-mortar bakery is growing and you’re getting requests from different cities outside of your own, it might be time to expand your operations. Business expansion will mean different things to different owners. This could mean renovating an existing space, acquiring more parking spaces, or opening another brick-and-mortar bakery.
If you have the opportunity to expand your reach and open a new business space in a different location, funds will be needed – but they shouldn’t be a hindrance. Getting the right small business loan can allow you to take your products to a new market.
If you are thinking of opening a new bakery, ask yourself the following questions:
- Is there a big enough market for your business and the products you offer?
- How many existing bakeries are already in the desired location?
- Can the new market afford the price of goods?
- What would be the operational expenses involved in maintaining the new branch?
- How much funding would it take to set it up?
Knowing the answers to these questions will help you know if now is the right time or place to open a new location.
4. You have too much debt
Debt is a huge financial burden for business owners, whether you run a small bakery or a large corporation. It’s hard to make growth decisions when money is tight. Additionally, having near-negative cash flow can hurt your credit score, which can be detrimental if and when you need to apply for loans in the future.
That said, taking out a loan to pay off your existing debts can be very helpful. This is also known as debt consolidation – when you get extra funds to pay off outstanding balances. This allows you to pay lower fees and reduce additional charges.
Debt refinancing is a great way to pay off all your loans with terms and conditions that work in your favor. It also saves you from further damaging your credit rating because you only pay one loan instead of managing multiple accounts. For those who want to approach 2022 with a cleaner slate, taking out a loan to pay off debt is a proven way to maintain a healthy cash flow.
5. You don’t have enough money for emergencies.
As a small business owner, you know firsthand how difficult it has been to manage the evolving effects of the pandemic and maintain operations in such unprecedented times. While some owners have been able to use government funds to support their operations, many have been forced to close permanently.
A savvy owner of a growing business knows the importance of keeping an emergency fund. Emergencies, by their very nature, are unforeseen. We cannot predict when they will happen, but we can prepare for them when they do. Maybe your business isn’t ready for growth right now. You may want to obtain funds for the sole purpose of saving the principal in an emergency fund so that you have it as a cushion when you need it.
A business line of credit is a good resource for this purpose. It allows the borrower to withdraw money from their account at any time, and you only have to pay interest on the money you withdraw. If you don’t need the money, you can keep the revolving funds in your account and you won’t be charged a penny.
A commercial line of credit is perfect for unforeseen circumstances such as immediate equipment repairs or when there is a sudden need to increase inventory. The money can also be used to pay contract professionals you hire for projects such as marketing or interior design.
6. You see the need for a delivery vehicle
Offering delivery services can expand your customer base, especially in this post-pandemic world where many people are working from home. If you cannot afford a vehicle to make the deliveries yourself, you can finance this purchase.
Many small businesses rely on outside services like Uber Eats to make their deliveries, but you lose control of quality when you hire a third party. Items may not be properly secured or temperatures in the vehicle may not be optimal for transport. If a cake arrives upside down or cupcakes arrive with runny frosting, you could lose the customer for good.
Having your own company delivery vehicle is beneficial for your industry because your products – which are often purchased for special occasions – require a certain level of care when transporting them. Plus, you’ll have control of your delivery schedule to ensure items arrive, not just looking their best, but on time.
7. You don’t have enough customers
An integral part of growing your business is reaching more customers. According to Business Insider, “We’ve been steeped in the age of the consumer for some time, but the pandemic has accelerated their takeover, putting them firmly in charge of 2022 and beyond.”
You must identify What it’s what your target customers want (eg, personalized baked goods, faster delivery times, etc.) and or they are. This can mean physically – looking for opportunities to collaborate with ambitious brands or being present at cool events – but it also means digitally. Young consumers rely on social media for seemingly everything, making it the perfect place to advertise and market your business and products.
If you’ve never set a budget for marketing and advertising, now is the time. You can use the funding to hire a marketing or social media consultant to help you strategize to effectively reach your target market and execute your plans properly.
8. You are behind the competition in terms of expertise
One of the keys to progress in business and in life is to learn new skills. However, enrolling in continuing education can be expensive, especially if you just opened your first bakery recently.
Don’t worry, you can use outside funds to improve your skills or learn new cooking techniques. Upgrading skills ensures you stay up-to-date with industry trends that customers are looking for – whether it’s innovative recipes, popular seasonal flavors, dessert mixes, or exciting new decorating techniques.
Aesthetics aside, there may be new cooking techniques that will make the job easier, or certain ingredients you can use to keep the cost down. If you have sufficient funds to pay for additional education and training, you will be better equipped to provide better customer service.
Having more funds is a game changer
As a new business owner, there are growth opportunities all around you, but you will need capital to take advantage of them. Setting business goals lays the foundation for your future growth, but funding is what allows you to achieve those goals and propel your business forward. With small business loans, you’ll be in a much better position to expand your bakery and thrive in 2022.
About the Author
Matthew Gillman is a business finance expert with over a decade of commercial lending experience. He is the founder and CEO of SME Compassa specialty finance company providing training and financing options to business owners.