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 Owner Report revealed that entrepreneurs are regaining their economic confidence, with 60% of its respondents expecting to see revenue growth through to the end of the year.
As we head towards 2022, you may be looking for ways to optimize your bakery operations to boost your revenue or recoup losses. Working capital can be the key to affording things like additional manpower, increased inventory, or equipment upgrades. Whether your goal is to increase cookie production, open up a new brick-and-mortar bakeshop, or purchase delivery vehicles, having sufficient cash on-hand can go a long way towards meeting long-term growth.
If you’re unsure whether or not obtaining 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 meet customer demand
Receiving an overwhelming number of customer orders is usually a good problem, unless you can’t physically meet the demand. Funding can be put towards upgrading equipment – whether it’s repairing or replacing existing appliances or expanding upon what you have.
Furthermore, today’s ever-evolving technology offers tremendous ways to alleviate time-consuming managerial functions like bookkeeping and accounting. For example, equipping the business with a secure point-of-sale system will definitely elevate the way orders are taken, recorded and managed.
Better equipment and technology always comes with a price tag, but the rewards are worth it. You’ll no longer have to spend hours manually doing administrative work, and can instead put that time towards things like baking, creating new recipes, and marketing.
2. You’re understaffed
As a bakeshop owner, you know the holiday season sees a surge in orders. You may be well-equipped with the best tools and equipment, but you lack the manpower needed to meet the increase in high-season demand.
If your staff is really feeling the burden of a growing demand without the necessary support, they may start looking for work elsewhere. Funding can be put towards hiring more people, either permanently or for the busier seasons.
Take the time to evaluate your staff’s roles and responsibilities. If you have one person baking, taking orders, and managing logistics, it may be time to hire someone who can focus solely on the logistical end and take that load off the baker’s shoulders.
With more funds under your belt, you can grow your payroll. This money can be used to pay for temporary or full-time employees, as well as outsourced talent who can deal with your taxes, advertising, or insurance coverages.
3. You have a growing customer demand in a new market
If your first physical bakeshop is gaining momentum and you’re receiving inquiries from different cities outside your own, it may be time to expand your operations. Business expansion will mean different things to different owners. It could mean renovating an existing space, acquiring more parking spaces, or opening up another brick-and-mortar bakery.
If you have an opportunity to expand your reach and open a new commercial space in a different location, funds are going to be required – but they don’t need to be a hindrance. Obtaining the right small business loan can enable you to provide your products to a new market.
If you are thinking about 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 bakeshops are already within your 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 funds would be needed to set it up?
Knowing the answers to these questions will help guide you as to whether or not this is the right time, or place, to open a new location.
4. You have too much debt
Carrying debt is a huge financial burden to business owners, whether you run a small bakery or a huge company. It’s difficult to make growth decisions when money is tight. Plus, having an almost negative cash flow can hurt your credit score, which may be detrimental if and when you need to apply for loans in the future.
That said, taking out a loan to pay for your existing debts can really come in handy. This is also known as debt consolidation – when you obtain additional funds to pay for outstanding balances. Doing so allows you to pay lower fees and reduce extra charges.
Refinancing debts is a great way to pay-off all your loans with terms and conditions that work in your favor. This also keeps you from further damaging your credit rating as you’re only paying one loan instead of managing multiple accounts. For those who want to approach 2022 with a cleaner slate, taking out a loan to repay debts is one 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 hard it was to navigate the evolving effects of the pandemic and maintain operations in such an unprecedented time. While some owners were able to use government funds to support their operations, many were forced to permanently shut down.
A wise owner of a growing business knows the value of keeping an emergency fund. Emergencies, by their very nature, are unforeseen. We can’t predict when they will occur, but we can be prepared 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 capital in an emergency fund so 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 take out money from their account anytime, and you only need 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 cent.
A business 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 for contractual professionals who you hire for projects like marketing or interior design.
6. You see the need for a delivery vehicle
Offering delivery services can expand your customer reach, especially in this post-pandemic world where many people are working from home. If you haven’t been able to afford a vehicle to fulfill deliveries yourself, funding can be put towards making this purchase.
Many small businesses rely on outside services like Uber Eats to make their deliveries, but you lose quality control when utilizing 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 line of business as your products – which are often purchased for special occasions – require a certain level of care in their transportation. Furthermore , you will have control of your delivery schedule to assure that items arrive, not only 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 deep into the Age of the Consumer for some time, but the pandemic accelerated their takeover, putting them firmly in charge of 2022 and beyond.”
You need to identify what it is your target customers want (i.e., customized baked goods, quicker delivery times, etc.) and where they are. This could mean physically – seeking opportunities to collaborate with aspirational brands or have a presence at cool events – but it also means digitally. Younger 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 to do so. You can use funding to hire a marketing or social media consultant to help you strategize ways in which you can effectively reach your target market and execute your plans properly.
8. You’re lagging behind the competition in terms of expertise
A key to progress in business, and in life, is learning new skills. However, signing up for continued education can be expensive, especially if you just opened your first bakeshop recently.
Not to worry, you can use outside funds to upgrade your skills or learn new baking techniques. Upskilling ensures that you’re keeping abreast with the industry trends that customers are looking for – be it innovative recipes, popular seasonal flavors, dessert mash ups, or cool new decorating techniques.
Aesthetics aside, there may be new baking techniques that will make the job easier, or certain ingredients that you can use to minimize costs. If you have sufficient funds to pay for further education and training, you’ll be more equipped to deliver better customer service.
Having more funds is a game-changer
As a new business owner, there are opportunities for growth all around you, but you’ll need capital to take advantage of them. Setting business goals lays the groundwork for your future growth, but funding is what allows you to reach those goals and propel your business forward. With small business loans, you’ll be in a much better position to expand your bakeshop and thrive in 2022.
About the Author
Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.