This post is for people who want to start a bakery business in Pakistan. We will see how much money is required and what the requirements are. We will take the bakery business as a project and determine its full feasibility.
Breif Description and Assumptions
The planned bakery and confectionery shop is a small-scale project that includes a production space as well as a sales outlet. It will be outfitted with the necessary machinery and fittings. The production area will require 5,000 square feet of covered space, while the outlet will require 750 square feet. Throughout the year, the sales outlet will be open for 16 hours every day.
Cakes, snacks, candies, nimko, biscuits, bread, and basic confectionery goods will be included in the product mix. This item will be prepared and purchased in direct proportion to predicted sales, based on local client demand.
Maximum sales are projected during Eid and winter seasons. The project’s first-year revenue is expected to be Rs 18.35 million. Production is predicted to expand at a 5% annual rate, with a 10% annual increase in sales price. The installed capacity of a bakery is determined by the variety of items produced. Starting capacity utilization is 70%, with a 5% annual growth rate.
The following are the crucial success factors for this business venture:
- The entrepreneur’s background knowledge and expertise in the baking business. You should know how bakery works or how bakery items are produced. otherwise other people will cheat you
- Induction of skilled labor for the manufacturing of required commodities.
- Quality and hygine requirements must be maintained.
- Pricing strategy and understanding of target clients’ needs.
- Presentation of the decor and layout of the shop and merchandise.
- Location considerations for easy access
Geographical Location Importance
Smaller cities with an emerging middle class, such as Sargodha, Sheikhupura, Gujarat, Sukkur, Hyderabad, Noshehra, Charsada, Quetta, Khuzdar, and Gilgit, are potential locations for this operation. Areas of Lahore with a higher percentage of the middle class are also advantageous for this project. while selecting the location, Consider below points
- Accessability -Your bakery’s location should be convenient for your suppliers and customers.
- Cost – This is balance between customer density and your budget. Higher cost with low sales will take you longer to breakeven your investment. Before committing to a location for your bakery, you must be aware of the overall operational costs such as rent, water, power, taxes, security deposits, labor costs, and other hidden fees.
- Crime Rate – The higher the crime rate, the higher the price to secure the bakery against them
- Competetion – Starting your business in an area with low competition is beneficial, as long as you are confident in its demand potential. If this is the case, there will be no client division, and nearly all of them may end up buying from you. The disadvantage is that you’ll have no competitors to learn from, and your business may become stagnant in terms of new marketing concepts or product categories after a while.
- Growth Potential – You should make sure that the site of your bakery setup has a high likelihood of growing. For example, an area having commercial businesses and entertainment hubs is likely to see more foot traffic over time. In comparison to an industrial zone, they may also have a high demand for a variety of bakery products. As a result, you must assess the location’s growth potential over the next 10 to 20 years.
- Parking Space – Having enough parking space outside your bakery is critical since it allows customers, suppliers, and vendors to park their vehicles while visiting.
Potential Target Customers / Markets
Areas with a high concentration of middle-income people in the mentioned cities will be appropriate for establishing a sales outlet for the company. The workshop’s production facility should ideally be positioned alongside the sales outlet; however, if rental prices are a problem, the production facility can be created at a distant cost effective site. Higher transportation costs may be required in this scenario.
To assess the commercial viability of the Bakery and Confectionery business, a complete financial model has been constructed. This section outlines various cost and income assumptions, as well as the analysis’s findings.
All of the calculations in this financial model are based on expected revenues of Rs. 18.35 million in the first year. The capacity utilization for the first year is calculated to be 70%, with a 5% rise in consecutive years up to a maximum capacity utilization of 95%.
The following table displays the planned venture’s internal rate of return, payback period, and net present value:
|Internal Rate of Return (IRR)||53%|
|Payback Period (years)||2.61|
|Net Present Value (NPV)||Rs. 8,313,285|
The profits of the products sold determine project returns. The profitability of the firm is greatly dependent on the cost of raw materials. Furthermore, wasting is more likely in bakery or food item businesses, therefore reducing wastage through demand and supply research will be critical to profit maximization. This venture will benefit from effective supply chain management in this regard.
Cost of Bakery Project
|Machinery & Equipment||2,588,800|
|Furniture & Fixtures||880,000|
|Total Capital Costs||5,853,800|
|Raw Material Inventory||658,950|
|Upfront Building Rent||450,000|
|Total Working Capital||2,108,950|
Bakery Space Requirements
The proposed Bakery and Confectionary Unit’s space requirements primarily include a production hall, a storeroom, and a retail outlet. It is advised that a leasing space of at least 5,750 sq.ft. (5,000 sq.ft. for production space and 750 sq.ft. for outlet) be obtained for this purpose. The production area and bakery store could be purchased separately. However, it should be guaranteed that both facilities are close to each other for simple supply of manufactured goods to the outlet.
|No.||Description||No. of Item||Cost per Item||Original Value|
|2||Mixer Cakes and Cream Type||1||500,000||500,000|
|3||Oven (8×8 ft)||1||800,000||800,000|
|6||Frier and Burner||4||12,000||48,000|
|9||UPS and Batteries||5||60,000||300,000|
|11||Misce Tools & Equipments|
(Pans, Knieves and others)
The necessary machinery is readily available in local marketplaces. Used and new machinery can be obtained from many wholesale marketplaces such as Lahore, Karachi, Peshawar, and Gujranwala.
In addition to the plant machinery and equipment listed above, the following items will be required for the proposed venture:
|Sr.||Description||No. of||Cost per Item||Total|
|1||Tables for Production||2||10,000||20,000|
|2||Chairs & Other Furniture||1||40,000||40,000|
|3||Cost of Renovation and Interior Designing||1||400,000||400,000|
|6||Weighing Scales (For Cash Counter & Production)||2||10,000||20,000|
|7||Micro Wave Oven||2||30,000||60,000|
Human Resourse Requirement
The following are the details of the human resources required to run the proposed business’s operations:
|Description||No of Employees||Monthly Salary per Person|
The above HR composition will be hired to manage the project’s operational affairs under the direction of the Owner Manager. Chefs and salespeople would need to have relevant experience.
Utilities and Other Costs
The cost of energy and gas is an important expense that the company must bear. Electricity costs are expected to be roughly Rs. 80,000 per month (for both the factory and the outlet), while gas costs are estimated to be Rs. 550,000 per year (for both natural gas and LPG at 70% capacity utilization). Given the lack of availability or low pressure of natural gas, alternative fuels such as LPG, wood, or kerosene oil may be required. Advance procurement of raw materials and packing material for at least 10 days, as well as a finished goods stock level of 05 days, shall be maintained at the production and outlet facility to ensure ongoing sales of goods.
Below is the estimated Revenue Generation of Year 1
|Product Mix||1st Year Sales Revenue(Rs.)|
|Bakery Sales (70%)||25,113,575|
|General Item Sales (30%)||07,234,072|
|Cost of goods sold growth rate||10%|
|Days operational per year – Factory||355|
|Days operational per year – Outlet||340|
|Operating costs growth rate||10%|
|Administration benefits expense||10% of administration expense|
|Travelling expense||0.5% of administration expense|
|Communication Expense||2% of Sales|
|Office expenses (stationary, entertainment, janitorial services, etc.)||1% of administration expense|
|Promotional expense||1% of Revenuew|
|Sale price growth rate||10%|
|Production capacity utilization||70%|
|Production capacity utilization growth rate||5%|
|Maximum capacity utilization||95%|
|Days operational / year for Shop||340|
|Hours operational / day||16|
|Shift length (hours)||8|
Raw material assumed for this project are as below
Q1: How to start bakery business from home?
You can start making bakery products and register at foodpanda as home chef. foodpanda will do marketing for you and your products.
Q2: How much cost for bakery business?
In Pakistan, and 2023, you can start a very good bakery business in 8 Million Rupees. and you can get return in 3 years time. However if you go for cheaper option, you can start bakrery in 2 Million. for this option hire minimum staff and use used equipment.
Q3: How to grow bakery business?
You should use digital marketing to your benifit and do the marketing. Good website, good social media marketing will help you grow your business from your shop.