Making a profit - Page 3

Ugh! The lowest rent over here in the metro NJ, near NYC, is $4000. Oh I'm sorry, I mean to write $3950. Woo. That's much better and a heck of a lot less expensive!

I looked and there are a bunch of them! I assume you mean the revised version for small business?

I found alittle place for 1400 a month, plus electric and water. (they pay for trash) It is already a bakery, with the hood and the grease trap already in place. Its in a very high traffic area, in a part of town that is growing very quickly. We are still going through all the fun of trying to see if we can afford it, as I am barely making even now with the home business. Deb's list had no surprises for me! I want to do more production and I can't now because I don't have the space, I don't have the oven that can handle it. I have to pay a fortune every year (this year I paid 5000.00!) in advertising because yes, I have get a lot of word of mouth, but you still gotta let people know you exist. Does this inprove with a store front? I also get these calls like "oh, you are a home bakery!" and they think that means "I will save money". I am sorry, but I cannot charge less then a store front, because the cost of my flour, sugar and eggs is just as high! My electric bill is just as high (my average electric bill is over 500 a month, because not only do I have to run the oven almost for three days straight every week, but we have to keep the A/C down more because we don't have the refrigerator space to keep everything cool. Even a non perishable cake doesnt do well sitting out in a warm room.

Part of me just wants to just keep going with the home biz, because I have sunk so much into it, knowing it just isn't going to grow much more. (I do 4-5 weddings a week during heavy season and that is all my oven can stand...) but the emotional side of me looks at the American Dream. And the thought of actually being able to "go home" after working all day. When you have a home business, you work all the time, because its there in front of you all the time. And not have buttercream everywhere, and not giving up our guest room for storage of boxes and our dining room for fake cakes and well, your home becomes your business. So which is more important? (I am seriously asking) Deb, would you give it up if someone came in and said they would buy it all from you?

This one: http://www.amazon.com/E-Myth-Revisited-Small-Businesses-About/dp/0887307280/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1219756965&sr=8-1

Nope!

'Coz I just love what I do. And the luxury of being able to make a living doing what you absolutely love is so rare .... if you love this like I do (and why else do we put up with the headaches, right?)..... that I feel very very blessed to have found my calling in life.

When we moved all of my catering equipment out of the house (and you think just CAKE stuff takes up space!! ), my front formerly-formal living room stayed empty for about 6 months ... we were just enjoying the empty space!!

A soft-cost of working out of your home (and you're right ... it's too easy to procrastinate and do a little here and a little there, resulting in you working all the time) is that your family has to give up part of their house. Using simply numbers just for an example, if your house payment is $1000 a month for 5 rooms, you are paying $200 a room. But if you are taking up 1.5 of those rooms for cake stuff (storage, kitchen use, setting aside a room for consultations), then your soft cost is $300 a month .... $300 a month your business should be paying .... $300 a month your family budget is eating because they are paying $1000 a month in mortgage payments for 3.5 rooms instead of having full access to 5 rooms.

Advertising is a very real and required expense. There's a radio commercial running right now that says, "You think business is slow now .... wait and see how bad it gets if you pull your advertising."

Yes, if you build it, they will come ... but they have to know that you're there, first.

Loriemoms, I'm glad you are going at this with eyes wide open. As Debi pointed out there are so many things that we can overlook. On the hood if you look into this bakery have it contingent on the Fire Marshall passing it.

Mike

PS there is so much good info here I wonder if it could be a sticky?

There is a ton of really good info in here. I do have a question for you guys. I just started running my business out of my home in July and I'm definitely losing money right now so those losses are coming out of my own pocket. Once I start to make some money though I'm wondering how you guys handle this. Do you pay yourself a regular paycheck and deduct that from your expenses as payroll or do you just keep your profits? Also, does it matter as far as the government is concerned on how you do this? I am a sole proprieter right now so I can file my business taxes with my current taxes. I'm just wondering how other people handle that. Like I said, right now it doesn't matter because I'm losing money, but someday I won't be

I think it would make a GREAT sticky! A real eye opener...

We are asking not only the hood be inspected, but the grease trap cleaned, the entire place white washed white (it is all these hot colors right now sounds like it would be a nightmare to paint over) and some other things. My DH wants to just move forward and take all the risks. I figured I would have to bring in about 8-10K a month to break even!

You know Debi.. that's a great point.. So I guess my "rent" to myself is $500/month since I take up the entire office and some of the kitchen and basement with my crap.. .

Sorry if this sounds harsh. How are you losing money? Is everything going to advertising? Are you paying rent to yourself?

Mike

cupcake900 that's a good question. I'm struggling with the same issue right now. I don't know how much to pay myself. Right now, I just bankroll everything and pay for supplies out of my business account. But I just look at the money and wonder how much of it I can pay myself. I'd be interested to hear how others handle this. I was advised previously to establish a certain percentage as operating expenses and always keep that amount in the account and just take the rest as my profit/salary.

When you start making a profit, its time to visit your accountant. My accountant told me how much to take as "owners draw" to help manage my taxes...especailly to be prepared for a tax bill at the end of the year (or pay quaterly) Also, deductions are different if you make a profit and not make a profit. For instance,if you buy a new oven with profits, you can deduct much more of it that first year (sometimes all of it) instead of spreading over a 7 year period. Things like that..its very complicated, that is why depend on my accountant to help me out.

I lost 5K my first year working out of the home and my accountant told me that was very good..most people loose much more! (You have to buy equipment and such that first year!) Remember most businesses require you to get these huge loans, so if you are just paying out of pocket instead of a loan, you are doing pretty good!

THis past year was my 3rd year and its the first year I was able to take an owners draw! (it wasnt much, but it was at least something)

cupcake900 what is a profit? or that thing you called a paycheck?
don't expect one of those the first couple of years!!

Mike,
I am spending some money on advertising and I also had to buy more supplies and take on additional bills like a business phone line and internet service. I've also been making sample cupcakes and things to take around to businesses. It's not a huge loss, but I'm definitely not making anything right now. I know since I don't have a shop that it won't take me long before I'm not losing money anymore because I don't have the overhead costs associated with a bakery. I don't think your question was harsh at all.

While it was VERY nice for my house to be able to move all caking stuff out of my house and into the shop... I can tell you that I barely see my house! I just leased a new car - and I got a nice one cause I decided that the drive to/from home (only 15 min) was where I spend the bulk of my time thats not at work or sleeping! Its a ridiculous amount of hours that have to be put in here (at least in the beginning.... someone please tell me its just the beginning) so you may not have your house back as much as you think you will. MY DH do this together (kind of) so at least the whole fam is here... but my poor DS had a boring summer!