Are you passionate about providing comfort to people through the medium of freshly baked goods? Whether you're an artisan baker or simply a baking enthusiast, you may have long dreamed of owning a bakery, but your hopes have been dashed by your bank balance.
Well, we're here to tell you that, with some determination (okay, a lot of determination) and strategic thinking, it is possible to open your bakery with no money.
In the guide below, you’ll find everything you need to know about opening up a bakery without any start-up capital - including what sources of financing you can use and how a good business plan can make all the difference in convincing investors to fund your venture.
Is it possible to open a bakery with no money?
Opening a bakery with no money can raise a whole host of questions: how do I go about it and is it really feasible?
First of all, you should know that the feasibility of the business depends...on the business itself. Opening a 5300 sq ft bakery, with several bread ovens and specialised baking equipment in the centre of a busy city, with no money, seems unrealistic to say the least.
But if you downsize to a more modest business model, things start to look a lot more manageable. The smaller the bakery space, the smaller the initial investment will be and the less you will need to rely on the alternative funding solutions discussed later on in this guide.
Just because things are simpler, however, doesn't mean you won't still face challenges when opening your bakery with no money. Regardless of the bakery's size, you'll still have to invest in essential materials such as a security deposit for the bakery, baking ingredients, baking equipment such as dough mixers and baking ovens, and refrigerated display cabinets - which, as you can imagine, are pretty pricey.
Even with some effort to do things frugally by, say, buying second-hand dough mixers, your costs will still be relatively high. There's no doubt you'll need to apply for a bank loan, but you must bear in mind that banks will only provide one if you can prove you have enough equity to cover at least one-third of your financing needs. This is why building up equity via other financing solutions (which we'll come to later on) is vital.
This initial financing will not only launch your bakery but ensure it operates smoothly during the first few, critical months. Your bakery, like any other business, must have the means to develop and compete against other players on the market.
Love money and crowdfunding as alternatives to a bank loan
Setting up a bakery with no money simply can't be done without sourcing out alternative financing solutions. This will enable you to raise the funds to get your bakery off the ground, or at least fill your pockets with enough cash to convince a bank or investor to financially support your business.
First of all, consider love money. As you may have guessed, this is the money you can collect from your family and friends, in the form of donations, loans (interest-free or not), or investments.
Raising a bit of love money, in the form of capital investment, loan, or donation can be an effective way to get the funding you need to open your bakery with no money.
Your loved ones know you well and know what you are capable of, it is therefore often easier to convince them to invest in you and your business than to convince an investor you've never met before.
Another potential source of financing is crowdfunding. Here, two options are available to you:
- Crowdequity: this is where individuals or angel investors may provide funding in exchange for shares in your company.
- Donation-based crowdfunding: here, you set up a campaign on a crowdfunding platform, tell your story and collect donations from individuals who wish to financially support your venture. Being (most likely) baked goods enthusiasts, contributors may expect a small reward linked to your business in exchange for their generosity, such as a box of free croissants or cupcakes. It's up to you to quantify the size of the gesture according to the generosity of the donation.
Crowdfunding can be particularly effective as it enables you not only to raise funds for your project but also to introduce it to your wider community and create some hype around it.
Gathering contributions via crowdfunding is also an excellent way to demonstrate to a bank that future clients have a keen interest in your project, making for a more compelling argument that it’s worthy of a loan.
Many local businesses have been able to collect donations via crowdfunding that has helped them develop beyond their wildest dreams. Zuzu's bakery, in Yorkshire, for example, raised over £12,000 in 2018 - gathering enough funds to purchase a brand new bread oven and expand its operations.
State aid available to help you open up a bakery with no money
If you have your sights set on opening up a bakery with no money, you can also count on state assistance for entrepreneurs.
This can consist of government grants which are available in many kinds of forms - from cash awards to free equipment to help your restaurant flourish.
If you are in the UK, to find out more about the support available, you can visit the gov.uk Business Finance Support Finder. Another option is to apply for the Start-Up Loans Scheme. Supported by the government, this scheme offers personal loans of up to £25,000. The interest rate on such loans is just 6% and entrepreneurs also receive access to free mentoring and business support.
In the US, the SBA works with various organisations to provide small businesses with grants. Check out their website to see if you meet the criteria to apply.
Another option would be to find out about regional business start-up awards and competitions set up by your local government that reward and fund business start-up projects.
How a business plan assesses the feasibility of your bakery business
Writing a business plan is an absolutely essential step in opening a bakery with no money.
In fact, a business plan forces the entrepreneur to examine every aspect of his or her business, so they get a gauge of the exact means needed to bring it to life.
This means also accurately assessing your initial financing requirements. By balancing these with the amount of money you're able to raise, you can ultimately determine whether opening a bakery with no money is feasible or not.
This is done by estimating how much money you'll need to launch your business and then sustain it until you reach the break-even point. The financial tables will guide you by defining these aspects, as well as helping you calculate the break-even point and the time needed to reach it.
To make it simple, the business plan is made up of two main sections:
- A financial forecast that aims to highlight the expected profitability of the business and the initial financing requirement.
- A written part that presents, in detail, your project, the team, your business strategy, and your medium-term objectives.
A business plan works as a point of reference for the business owner and management team, so should be looked at from time to time to keep your business on track.
The stakes are high as you need to not only communicate your business’s concept and plan of action but also check its workability and make investors want to board on an entrepreneurial adventure with you.
It can be complicated and a little stressful to have a go at writing a business plan alone, especially if it's the first time you're doing it.
If you are not used to writing business plans, a good solution would be to use online business plan software.
There are several advantages to using specialized software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan.
- You can be inspired by already written business plan templates
- You can easily create your financial forecast by letting the software take care of the calculations and financial aspects for you.
- You get a professional document, formatted and ready to be sent to your bank.
If you are interested in this type of solution, you can try our software for free by signing up here.
As you can see, there's certainly no shortage of solutions when it comes to raising enough funds to open a bakery with no money.
We hope that this article has helped you to better understand how you can open a bakery with no money. If you still have questions, do not hesitate to contact us for any questions related to the creation of a bakery.
Also on The Business Plan Shop
- How to write the business plan for a bakery
- How to open a bakery
- Business plan template for a bakery
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