Here's How to Sell Bakery Business to Lessen Pandemic’s Effect

Plight of migrant workers, dearth of raw materials and disruption of logistics were fewer obstacles that ceased operations in the bakeries
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Sep 02,2020
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  • 21 Mins Read

A set of devouring eyes mesmerized with the sweet essence of pastries is rarity in bakeries now. Small bakeries that were once receiving enormous orders for birthdays, anniversaries are left abandoned. While the large ones have witnessed a massive decrease in the demand of the bakery products. Like other businesses, the pandemic has taken a toll on the bakery industry also. 

As the business conditions are rapidly changing, the bakeries, especially small units are adversely impacted. Plight of migrant workers, dearth of raw materials and disruption of logistics were fewer obstacles that ceased operations in the bakeries. Consequently, mills were affected as they received less demand for flour and wheat flour that are primary ingredients in various bakery products. This gave rise to tensions in the bakery industry as no one was certain when the pandemic end or its impact lessened on the market. Owing to this, small bakeries were up for sale as they were unable to make two ends meet. 

According to IMARC Group's report, bakery products are rapidly gaining popularity owing to their pleasant taste and health-benefits as they are made from a variety of grains such as rye, maize, wheat, and oats among others. As bakery products provide both convenience and affordability to the consumers, their consumption level has witnessed a rise in the past few years. The Indian bakery market reached a value of around $8 billion in 2019.

The report states that the growth in the fast-food chains further stimulates the demand for breads as they are used in sandwiches, burgers, soups, snacks, etc. Moreover, the introduction of value-added bakery products is giving an impetus to the market growth. Apart from this, busy lifestyles, changing eating habits and western influence has reflected in a strong demand for bakery products in India. It is expected that the Indian bakery market will exhibit moderate growth during 2020-2025.

Despite the pandemic plaguing the bakery industry, it is anticipated that the industry will rise up in the offing. On the other hand, bakeries that are available for sale have to start from the scratch. Considering the present scenario, small bakeries that are striving should look for an immediate exit. Here are some of the important things that entrepreneurs should know while selling a bakery. 

1. Valuing the Bakery 

Before selling a business, it is important to know its true worth in the business ecosystem. If the business does not value much, then it will lower the entrepreneur's spirit and anticipation. Hence, it is integral to perform business valuation beforehand.

While doing the valuation, an entrepreneur has to include various elements that affect the overall price of the bakery business. The primary factor affecting the pricing is property where a bakery is situated. If the baker owns the property, then the bakery's valuation increases tremendously. Thus, he can gain substantially if a deal strucks down. 

Another thing that impacts the bakery is location. If the bakery is at a busy corner of the street, then there will be more footfall while in the deserted place, there would not be much business. Hence, it is always preferable to establish a bakery business in proximity with commercial spaces and commuter centres. By doing so, the baker would not have to establish a brick and mortar store.

In today's time, a pro bakery consists of high-tech kitchen appliances. However, if a baker does not own expensive gadgets then he can carefully maintain appliances and kitchen which, in turn, help fetch a high price. Earnings and constant customer flow will demonstrate profitability of the business and its goodwill in the market. To showcase profitability, the baker should have access to auditing books as they will give a clear picture of the business. 

2. Prepping Up 

Before putting the business on auction, a baker has to take a slew of important actions. He has to keep all documents ready so that they can be easily transferred at the arrival of the new owner. Besides this, the entrepreneur has to inform staff and other people such as the landlord, clientele and vendors about selling his business. 

By informing people in advance, selling the business becomes a seamless experience. Also, staff and customers embrace the new transition easily and would not be surprised during the transfer of ownership. However, it is still uncertain if staff and customers took this information negatively, thereby, deciding to leave the business and go elsewhere.

Apart from preparing others for a big surprise, the entrepreneur himself needs to wipe off emotions developed for the business and emerge as a headstrong individual. Similarly, it is important to tell family and closed ones about selling the bakery. 

3. Ascertain the Right Buyer  

In the present time, bakers are available in a diversified cohort. As a result, the baking profession does not demand necessary education; although, experience and expertise are indeed to excel in the business. While selling the business, a baker should look for a buyer who is as passionate and innovative as he is. In this way, the business would be in the right hands.  

Moreover, the seller should not hesitate while asking business-related questions. By questioning the buyers, the seller gets an idea if the business should be sold or not. Understanding the perspective of a buyer is important as it helps the seller know if the other party is interested in the deal. Following this, he can quote a higher price and thus, get a good price. Moreover, it is integral to maintain the business’ goodwill and personal conscience.  

4. An Intricate Work 

Selling the bakery business is a daunting task. It is not as easy as it seems. Once the baker has made up his mind, it becomes easier to carry out remaining tasks. He has to decide the business’ worth and accordingly, be paid for years’ hard work. The bakery is like a seed that needs sowing and watering from time to time. To thrive the business, the baker has to keep investing into it, upskill himself and buy more assets for the business. Thus, like a gardener, the baker has nurtured the business and blossomed it into a beautiful tree.

The above-cited information should be used by the bakeries while selling the business. Every business has a different business model and therefore, has different selling techniques as well. Even when a bakery is not running properly and customer flow is less, the entrepreneur should not sell business at a loss. He has to compensate for losses and try selling the bakery at a profit. After assessing the bakery's valuation, it becomes easy to decide whether selling the bakery is a good move or not. Besides valuation, it would be impossible to take a sound decision regarding the bakery business.

As the economic slump reverses, bakeries along with various other businesses will regain their sheen. Until then, entrepreneurs have to survive and try to gain buoyancy in the market. To stand the business upright, various schemes have been initiated by the government like Emergency Credit Line Guarantee Scheme and Mudra loans. 

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