CAKE BUSINESS - WHY RECORD KEEPING IS THE KEY TO YOUR SUCCESS
Running a business is all about numbers. How many cakes to make a week? How much to charge? How much spent on ingredients? How many sales made? You want to focus on the cakes and the fondant, but unfortunately, if you don’t set aside some time to look at your numbers you can lose track quickly and, if not lose money, certainly not be making as much as you could be.
Of course running your own business isn’t all about money. I’m sure you started your business for your love of cakes and make people happy with your delicious recipes, but the fact is you need money to live, and you deserve to be rewarded for your hard work.
This is a broad term that pretty much covers every outgoing and ingoing to your business. By keeping a note of everything you spend and earn, you will make your own life so much easier.
So what, and why, should you be recording numbers....
Whether you are doing your own tax return, or handing it over to an accountant, well organised and recorded accounting books will make a job that can become a nightmare, relatively easy.
For your ingoings, I recommend having a spreadsheet recording all of the money coming in each month, with the associated invoiced filed away for reference.
Outgoings, use a separate spreadsheet, and record everything you spend on your business. You can split this into different categories to help you keep everything straight, such as product related (ingredients, decoration, boxes, etc), marketing and overheads.
To do this, use a spreadsheet software, like Microsoft Excel or Google Sheets, it doesn’t have to look fancy, just be consistent at keeping everything on record. Here is an excerpt from my overheads spreadsheet done using Google Sheets. I like using Google Docs as it keeps everything backed up online, and on my laptop. I also use a Google mobile phone so it’s completely compatible with that and use Gmail to host my business email account (can you tell I’m a Google girl! No Apple around these parts!) This exact, editable spreadsheet comes in Cake Pricing Plus, so if you don’t want to spend time copying this then you can download it, and loads more goodies from the link below!
If you set a habit of doing this the same day and time every week, it will soon become part of your business routine and won’t seem like (much) of a chore!
Forecasting your profit and income
It’s tough to make plans if you aren’t sure when, or how much, you’re getting paid. Without tracking your income and your profit, you won’t be able to plan for you business future. By tracking your total income vs your total outgoings you will get a clear picture of how successful and profitable your business is. Without this knowledge, you will find your business floundering. It’s like trying to design a cake without getting a customer brief. There are certain things you just need to know.
If you followed step one you should have your monthly in and out totals. Create a new spreadsheet tracking these totals against each other and use this information to track growth and find holes in your business where you can increase income or reduce your costs.
This follows on nicely from my last point. You might find that you feel like you are always working at your business but don’t seem to have the income to match it. Your hourly rate has somehow ended up being pennies because you are working night and day. Well, that’s just not a healthy way to run a business. Of course there will be the odd late night, especially the days before a big wedding or market, but these should be planned and anticipated, not a regular occurance.
To get a handle on where you are spending time in your business, start tracking everything. From the time you spend interacting on Facebook, to sketching your designs, to meeting with clients, to actual baking. Look at these hours after a few weeks and decide if you need to be more efficient in certain areas. This is a screenshot of another spreadsheet included in Cake Pricing Plus, as before, feel free to copy it and make your own, or grab your own copy, plus lots more for just $29/£20.50.
You can’t grow if you don’t know where you are starting from. Armed with your monthly profit, you will be able to make a decision about how much you need to grow to make a living at this baking business thing.
Look at all of this information you are collating about your business. You are now in such a strong position to move forward, make changes and grow. Ignorance is not bliss when it comes to business and keeping well informed about your numbers will help you enormously.
Part of growing your business, by generating more income, may be looking at your pricing strategy again. Next week I will be running through the brand new Cake Pricing Calculator, which you can get here, breaking down all of the elements which go into pricing, and how to work them out. I’ll be covering hourly rate, time, material costs, overheads and profit margin.