This post is written by Michelle Green from the Business of Baking Blog. If you are not following and reading her new blog posts every week, you are seriously missing out! It’s filled with lots of information, funny stories and witty views on all things business and baking. Check it out, you won’t be disappointed and I promise you will learn something new 🙂 – Sharon
In the course of writing The Business of Baking, I’ve come across some common mistakes made by new business owners. Making mistakes is part of what makes life interesting – and it’s only by learning from those mistakes that we become better people and better business owners. So much about small business ownership is about figuring things out as you go along, but knowing the common mistakes new baking business owners make is a good way to avoid some heartache!
Here are the ones I’ve heard crop up the most often:
1. Not realising you are in business – you know how it is, you make a cake for your child’s birthday or a friend and suddenly everyone is telling you to go into business because your creation was brilliant. Then a friend calls and asks you to make a cake for her child, gives you some money for the trouble…and BOOM, you’re in business.
You didn’t plan it, you didn’t do anything special to make it happen – but make no mistake, as soon as money changed hands, you conducted a business transaction. It’s easy to still think it’s just a hobby, you’re just messing around, you’re a beginner…but the minute you got money for your creation (even if it didn’t cover costs), you were acting as a business.
Basically -conducting business is when goods and services are exchanged for one another or for money. Even if you sold that cake to your Mum, that puts you in business and that’s just not the same as having a hobby. The rules are entirely different, and you need to think about things in a different way from then on – even if your cake was wobbly and even if the money was only a few dollars.
2. Not keeping track of expenses – When you’re still in the hobby stage, you don’t really think of all those cool cake toys as being ‘expenses’ and you definitely don’t think of your ingredients as expenses either. As soon as you start accepting money for your creations you should start keeping track of what you’re spending.
It’s just a good habit to get into, even if it’s a long time before you’ll ever make that money back. Some of those expenses might even be tax deductible, so it’s well worth keeping track of the items you’re buying. You might be a long way off feeling like it’s a “real” business or even acting like it’s one, but noting down expenses (even with an old school pen and paper tucked into your bag) is a good thing to start doing as it develops your business mindset.
3. Worrying too much about the competition – Without a doubt, you need to know who your competition is, what they charge and what their products are like. Knowing what you’re up against is vital information because it helps you decide on the parameters of your own business, and helps you make decisions. However, if you’re spending the time you’ve got obsessively stalking the competition online, posting cakes in forums waiting for your peers approval, complaining about other companies having more orders than you, or talking negatively about other companies, that’s a complete waste of your time. Spend that time marketing your business, developing new products, and talking to your customers or future customers. We don’t like to say it, but you’re in this to make money from selling cake, so selling is what you should be spending your time doing.
4. Waiting for customers to just magically appear – You’ve got the business cards, the shiny new baking pans, the website and the logo, but the orders aren’t coming in,. The tumbleweeds blow past your door because there are no customers there to stop them. New business owners forget that it’s not enough just to be great at what you do, you’ve got to go out there and bring people to you. Word of mouth is fabulous and will absolutely help bring in customers, but there is a point at which you can no longer rely on it to be your only marketing plan.
5. Discounting: When you first hang out your shingle of business, pricing can be a hard skill to master. You don’t know all the financial ins-and-outs of your business yet, you don’t feel you are ‘professional’ yet, you still lack the confidence to charge what you should be charging. That’s okay – we all go through that – but what’s not okay is immediately offering discounts to potential customers because they either question your pricing or do not immediately order.
In those early days we so desperately want the sale we discount, offer extras, and do all sorts of crazy things just to get the order. The problem with starting out as a “discounter” is that word gets around – fast – that you’ll discount. Sure, the customer will tell all their friends about your amazing cakes, but they will also say that you’ll discount when pushed, and that your cakes are cheap, neither of which are things you want your business to be known for!
The cake business – or small business – can be an immensely fun and exciting but immensely challenging place to be. The trick is not to get into business in the first place, that’s the easy part (just get your Mum to buy a cake off you…) The tricky part comes once you are actually IN business. Staying in business, and being successful at it, is more challenging then most people realise. The take home message is this: your baking business can’t just be about the baking – it’s got to be about the business side of it too!
UPDATE: Michelle has now filmed an online business class with Craftsy which is perfect for beginners. Check the preview below and follow the link if you like it!
Michelle Green: How to start your cake business - Learn more and get a discount!
Or for more advanced students, she has produced her own topic-specific online courses on Pricing and Marketing. For more information follow the links below.