If you want to do a bakery business and want to purchase a running one, then here are 7 Essential Checks to Perform During a Bakery Purchase.
Buying a bakery is an outstanding endeavour. But before signing the deal, you must consider several factors to ensure a sound and safe investment. Look out for some key indicators of success, such as its financial statements, tax history, and lease.
Whether you’re a renowned entrepreneur or a novice, check these factors to decide wisely!
The first and foremost step in checking a bakery before buying is, to asses its financial condition. Conduct a thorough research on the financial statements of the previous few years, such as these:
However, if you haven’t yet shortlisted any bakery or have only a handful of options, look up the best bakery for sale on a renowned listing website. Choose one where you can find basic details, such as location, asking price, revenue, and net profit.
They’ll also have bakery contact information on the same platform. So you won’t have to search their contacts individually!
Conduct due diligence on the bakery. This includes checking if the establishment has any pending legal issues or tax obligations to resolve. If you take over the business before, they resolve it, you’ll inherit their troubles and have to pay them off.
So, investigate whether the bakery has unpaid loans, debts, or liens. Next, check whether all taxes, including sales tax income tax, and payroll tax, are paid and up-to-date.
This is only valid if the bakery space is on lease. Ask the bakery to share a copy of their lease agreement in person or via email. Here are a few things to focus on:
The rent must be reasonable according to the location and bakery’s income. If the rent is more than or almost equivalent to, the income, there won’t be much profit. Hence, you’re better off seeking another business.
Check how long the lease is for. A long-term lease is preferable. Otherwise, you’ll have to renew the lease and renegotiate. There is a chance that the new lease will cost more.
Ensure that the lease is transferable after buying the bakery. If there’s any restriction, a lease in the previous owner’s name can complicate the business operation and expansion.
Next, you will need to check, the bakery’s assets, i.e., the inventory and equipment. Assess which ingredients and packaging materials they use. Learn whether they have access to fresh, perishable items.
Ask questions about how they manage their equipment, how frequently they get them professionally maintained, and the maintenance cost. If, any specific equipment needs more frequent maintenance or is outdated, consider replacement costs.
The bakery’s workforce is of the greatest significance to its operations. So, ensure they have skilled and well-trained bakers who can maintain consistent baked goods quality and service.
Reassess employee contracts and their compensation package. For example: in Australia, a baker’s average weekly income is $1,196. Evaluate other potential liabilities, including severance pay.
Don’t forget to study the significance of the owner’s involvement in daily business. Ensure you’re prepared to invest your time & effort like the previous owner for similar profits.
Another non-negotiable is health and safety compliance while buying a bakery. Failing this can incur massive penalties.
Ensure it has necessary food handling certifications, health permits, and business licenses. These must be updated and transferable. Inspect the store in person and ensure the workstations are hygienic and sanitised.
They must also follow industry-standard food storage and preparation safety protocols.
Research the bakery’s online reviews on Google and other reliable websites. See what people like or dislike about it. Ensure there are more positives than negatives. Seek locals and know their perception of it.
It must also have a strong social media presence and following for a greater competitive edge.
Buying a bakery is a complicated process and demands careful consideration of several significant factors. With this guide, stay on top of your bakery research and make the best investment!
