bake - April 2018 - 9

A good rule of thumb to follow is projecting your bakery's firstyear sales at three times startup costs. Shoot for 10% profit, and
you may be able to pay off startup costs in three to five years.
Do the math on everything. "I do projected sales on a spread
sheet with average check and average number of customers for
each hour of the day we are open," Chang says. "You should be
able to pay your rent in one day's sales."
Eventually (some bakery owners wait a year or more), you as a
bakery owner will need to pay yourself a salary. Chang remem-


bers not caring about such money matters in the beginning,

Lack of consistency
Unclear vision
Inability to lead team

but "you will care if you work 10 years and you have nothing to
show for it."
Real estate location is vital, and it's important to think through
your plan, she adds. Scherber lived in Hell's Kitchen prior to


her first bakery opening and recognized the once-dodgy area

Go to work in a bakery first
Learn how to manage people
Everything takes twice the time at twice the cost
Keep personal risk as low as possible

was growing in popularity. "Real estate is a big issue. Today, it's
harder to find these little quirky places that are up and coming."
Chang recommends negotiating long leases - a minimum of
10 years with options. "You don't want the landlord saying after
five years that we're going to double your rent."
Doing your own thorough research on possible locations is
always a good idea, as is contacting a real estate broker to
look at 20 or more open spaces. "Get involved and know the
spaces," Scherber says. "Finally, you can find that perfect spot."
Look closely at potential hidden costs in each building space
you investigate. What's the ventilation like? The water lines?
Some spots can save you upwards of $50,000 in renovation
costs, Scherber says.

S corporations differ from the standard C corporation
because S corporations are pass-through tax entities,
according to They file an informational federal return, but no income tax is paid at the
corporate level. The profits/losses of the business are
"passed-through" the business and reported on the
owners' personal tax returns. Any tax due is paid
at the individual level by the owners. Both S and
C corporations offer limited liability protection, so
shareholders (owners) are typically not personally
responsible for business debts and liabilities.

Chang suggests negotiating with landlords on a tenant
improvement allowance to cover the costs of improvements.
Calculate your gross monthly rent per square foot, including
taxes, insurance and maintenance. Utilities in cities like Boston,


Chang says, are extra. Make sure an architect looks at your plan
to make sure you can pass the health department inspection.
"Pay a lawyer to look at your lease," Chang urges. Scherber
agrees: "Giving the landlord a lot of your money is never a

S corporations face more extensive internal formalities than LLCs, according to LLCs
are recommended, but not required, to follow internal
formalities. Owners of an LLC can choose to have
members (owners) or managers manage the LLC. S
corporations have directors and officers. The board of
directors oversees corporate affairs and handles major
decisions but not daily operations. Instead, directors
elect officers who manage daily business affairs.

good idea." | APR 2018 > 09

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