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I ran a bread baking business for a year in suburban TX, and I can safely say that it doesn't matter how good you are: profit margins are really low in certain

I ran a bread baking business for a year in suburban TX, and I can safely say that it doesn't matter how good you are: profit margins are really low in certain areas. People were extremely cost sensitive. Also they often didn't even like "fancy" bread, and would complain about anything different from just regular sliced grocery store foam. I got pretty good, and was able to have some "subscriptions" back before that was a thing, delivering it to people at work, but in the end I was barely able to cover the costs once I'd factored in running the oven. I then moved to the northeast , where people care about bread a little more, but again are usually quite sensitive to convenience and price. The groceries here have average bakeries in store, and produce cheap reliable bread. As for cake baking, that's a whole different ballgame. I've had a friend who tried that and she had a very hard time. People typically were extremely price sensitive, and were very hard to please. It reminded me of the tattoo business: a few rockstars charging 10k for art that gets thousands of upvotes on social media, then a mass of people doing $100 specials for customers who are never quite happy. Kind of a bummer, so my friend gave up after a year and doubled down on programming as a career. She now keeps baking firmly in the "hobby" realm, since while she loves it, she knows it's extremely hard to make a living doing it.

tmm 5y ago
You’ve hit on something I’ve been thinking about a lot lately in price sensitive markets (which is basically anything in the consumer space). You’re better off being very expensive ($10k tattoo artist) than broadly appealing. I’ve seen it mentioned here a lot w.r.t. freelance web developers, but my friends in the trades are aware of it too. Be expensive. It filters out the terrible customers and gets you people who are willing to pay (and wait) for quality work. The difficult part, I think, is knowing your market well enough to know what that threshold is. There is a lot of hysteresis in pricing - you can easily be too expensive for the cheap customers, but not expensive enough to make up for the reduction in paying jobs. The hard part is you have to know your market really, really well. And you may not be able to apply that model to every job. No matter how rich your customer is, they’re probably not going to pay $1000 for you to change a lightbulb. On the other hand, there are plenty who will pay you $20k for work that your competition is quoting $5k for. And the closer your chosen field is to art, the greater that gap can be. If you want to be a baker, you can’t compete with grocery stores for the $30 birthday cake market, but you can make $6k wedding cakes and corporate event cakes. You might only make one cake a week, but isn’t that better than having to crank out 200 sheet cakes with terrible baby pictures printed on them?
- nautilius 5y ago
  I read an interview with a watchmaker once. He used to make watches in the $2000 range, before moving on to watches much more expense (I forgot the number, $50,000?). The reason was simple: someone buying a $2000 is often there for a once-in-a-lifetime purchase - graduation, marriage, etc. Someone able to spend $50,000 on a watch typically will have no issues to start collecting them and buying many more.
  - mooreds 5y ago
    Interesting! I have questions. * Did he have to start off in the 2k range before he had the skills/brand to make the 50k watches? * Did he take any steps to avoid getting trapped in the 2k market (too busy making 2k watches to make a 50k watch) * Were there any intermediate steps up to 50k or was it 2k->50k directly? * Are the inputs for a 50k watch significantly more expensive? I imagine you won't have the answers (unless you can dig up the interview), but what a fascinating story with lessons for software. I've read plenty about avoiding the $9/month SaaS customer in favor of the $500/month or $10k/month customer, but it is interesting to see it play out in a different, consumer focused space.
    - milesvp 5y ago
      If you’re interested in this topic of leveling up as a freelance creative, I recently came across Chris Do who has a lot of youtube content on this topic. There’s a lot of good stuff, and his delivery is much better than most other of the similar content youtube associates with him.
    - nautilius 5y ago
      Unfortunately, I don't remember the details, but from what I recall it was 'simply' a conscious decision on his part to switch his customer base, so it seemed that tooling/parts/skills/money were not the problem. I assume, as always, that luck has to be involved for someone to discover you and think you're worthy of their money. Then again, just the price tag alone may signify that you're worthy (remember that iPhone app 'I am rich', that did nothing but cost a couple thousand dollars?). Especially if your target audience really doesn't care about the price at all and can just afford to buy it as a novelty, to be the first to have watches from that new unknown brand, before it was cool. But the story had an immediate impact on how I thought about many products and marketing.
makeitdouble 5y ago
I’ve been only on the customer side but can concur. We were buying “fancy” bread and cakes a lot at a nearby bakeries, but clearly the bulk of the customers and sales where kids on their way from school to home, and people buying bread for the dinner and next morning. Of course quality mattered to a point, but I don’t think it made a difference wether it was 70% good instead of 99% good. At a point we were waiting the croissants at a store that was won the best award that year, and behind us the local residents were pretty bitchy about having to wait 5min for the next batch, and ended up going to another store farther from there.
- thorin 5y ago
  This is definitely a cultural thing, in France for instance, when I've visited. Every tiny village has a great bakery and possibly a patisserie as well. If you don't arrive at 8am or whenever, you won't get to choose what you want. People deal with it and the bakery still gets a lot of attention, in some cases the supermarket doesn't even sell bread and you have to go out to the bakery.
CommanderData 5y ago
Are Soft Pretzels in the bread or cake category? I.e the type from Auntie Anne's. Anyone know how are the margins with a Pretzel stand / your typical Auntie Anne's?
- dangerbird2 5y ago
  technically, it's a yeasted bread. The only thing that differentiates a pretzel from any other bread is that pretzel dough gets dipped in a basic solution before baking to create the brown crust
js2 5y ago
> Also they often didn't even like "fancy" bread, and would complain about anything different from just regular sliced grocery store foam. Great Harvest seems to do well enough. The one in my area is always busy. They have a FAQ for potential franchisees: https://www.greatharvest.com/franchise/open-a-bakery-franchise-faq https://www.greatharvest.com/franchise/open-a-bakery-franchi...

tmm 5y ago

You’ve hit on something I’ve been thinking about a lot lately in price sensitive markets (which is basically anything in the consumer space). You’re better off being very expensive ($10k tattoo artist) than broadly appealing. I’ve seen it mentioned here a lot w.r.t. freelance web developers, but my friends in the trades are aware of it too. Be expensive. It filters out the terrible customers and gets you people who are willing to pay (and wait) for quality work. The difficult part, I think, is knowing your market well enough to know what that threshold is. There is a lot of hysteresis in pricing - you can easily be too expensive for the cheap customers, but not expensive enough to make up for the reduction in paying jobs. The hard part is you have to know your market really, really well. And you may not be able to apply that model to every job. No matter how rich your customer is, they’re probably not going to pay $1000 for you to change a lightbulb. On the other hand, there are plenty who will pay you $20k for work that your competition is quoting $5k for. And the closer your chosen field is to art, the greater that gap can be. If you want to be a baker, you can’t compete with grocery stores for the $30 birthday cake market, but you can make $6k wedding cakes and corporate event cakes. You might only make one cake a week, but isn’t that better than having to crank out 200 sheet cakes with terrible baby pictures printed on them?

nautilius 5y ago
I read an interview with a watchmaker once. He used to make watches in the $2000 range, before moving on to watches much more expense (I forgot the number, $50,000?). The reason was simple: someone buying a $2000 is often there for a once-in-a-lifetime purchase - graduation, marriage, etc. Someone able to spend $50,000 on a watch typically will have no issues to start collecting them and buying many more.
- mooreds 5y ago
  Interesting! I have questions. * Did he have to start off in the 2k range before he had the skills/brand to make the 50k watches? * Did he take any steps to avoid getting trapped in the 2k market (too busy making 2k watches to make a 50k watch) * Were there any intermediate steps up to 50k or was it 2k->50k directly? * Are the inputs for a 50k watch significantly more expensive? I imagine you won't have the answers (unless you can dig up the interview), but what a fascinating story with lessons for software. I've read plenty about avoiding the $9/month SaaS customer in favor of the $500/month or $10k/month customer, but it is interesting to see it play out in a different, consumer focused space.
  - milesvp 5y ago
    If you’re interested in this topic of leveling up as a freelance creative, I recently came across Chris Do who has a lot of youtube content on this topic. There’s a lot of good stuff, and his delivery is much better than most other of the similar content youtube associates with him.
  - nautilius 5y ago
    Unfortunately, I don't remember the details, but from what I recall it was 'simply' a conscious decision on his part to switch his customer base, so it seemed that tooling/parts/skills/money were not the problem. I assume, as always, that luck has to be involved for someone to discover you and think you're worthy of their money. Then again, just the price tag alone may signify that you're worthy (remember that iPhone app 'I am rich', that did nothing but cost a couple thousand dollars?). Especially if your target audience really doesn't care about the price at all and can just afford to buy it as a novelty, to be the first to have watches from that new unknown brand, before it was cool. But the story had an immediate impact on how I thought about many products and marketing.

makeitdouble 5y ago

I’ve been only on the customer side but can concur. We were buying “fancy” bread and cakes a lot at a nearby bakeries, but clearly the bulk of the customers and sales where kids on their way from school to home, and people buying bread for the dinner and next morning. Of course quality mattered to a point, but I don’t think it made a difference wether it was 70% good instead of 99% good. At a point we were waiting the croissants at a store that was won the best award that year, and behind us the local residents were pretty bitchy about having to wait 5min for the next batch, and ended up going to another store farther from there.

thorin 5y ago
This is definitely a cultural thing, in France for instance, when I've visited. Every tiny village has a great bakery and possibly a patisserie as well. If you don't arrive at 8am or whenever, you won't get to choose what you want. People deal with it and the bakery still gets a lot of attention, in some cases the supermarket doesn't even sell bread and you have to go out to the bakery.

CommanderData 5y ago

Are Soft Pretzels in the bread or cake category? I.e the type from Auntie Anne's. Anyone know how are the margins with a Pretzel stand / your typical Auntie Anne's?

dangerbird2 5y ago
technically, it's a yeasted bread. The only thing that differentiates a pretzel from any other bread is that pretzel dough gets dipped in a basic solution before baking to create the brown crust

js2 5y ago

> Also they often didn't even like "fancy" bread, and would complain about anything different from just regular sliced grocery store foam. Great Harvest seems to do well enough. The one in my area is always busy. They have a FAQ for potential franchisees: https://www.greatharvest.com/franchise/open-a-bakery-franchise-faq https://www.greatharvest.com/franchise/open-a-bakery-franchi...