Costs, coaching key to success

All of us are being challenged by a rapidly changing economic landscape
as commodity and energy prices have gone through the roof over the past
few years and have not yet worked themselves through to retail prices,
especially in Ontario. Food industry insiders report that Ontarians
spend only 6.9 per cent of household income on food – lower than
anywhere else in North America and at least one per cent less than the
Canada-wide average of around eight per cent.

All of us are being challenged by a rapidly changing economic landscape as commodity and energy prices have gone through the roof over the past few years and have not yet worked themselves through to retail prices, especially in Ontario. Food industry insiders report that Ontarians spend only 6.9 per cent of household income on food – lower than anywhere else in North America and at least one per cent less than the Canada-wide average of around eight per cent.

But bakers are an especially conser-vative breed when it comes to pricing – and we tend to resist change. I often hear comments from colleagues such as: “I can’t raise my prices; my customers won’t accept it” or “The cost of ingredients can’t stay up that high; it will come down again.” What they forget is that prices usually never come down to the level where they were before so we are automatically behind the 8-ball.

The other contributing factor is that many bakery owners do not know their real cost because they are too busy doing what they are passionate about and love most, namely baking the products that help them make a living. By the end of the day they are too tired to check invoices, labour costs, energy costs and overhead – and to figure out how much it actually costs them to produce a loaf of bread or piece of pastry.

So the setting of retail prices becomes in most cases a guessing game, and at best it is to the advantage of the con-sumer and the detriment of the bakery owner. In rare cases the opposite is true: prices are set too high and so the business might suffer because the consumer is not willing to pay for an overpriced product. Thus, not knowing your cost is one of the greatest handicaps in running a profitable business.

In my experience, bakery owners who live by the motto, “Make the best quality product you know how and charge a fair price (not gouging and not giving it away),” are usually very successful. One of the prerequisites, naturally, is being aware of your true costs. Your accountant can help you with this or you can help yourself with software and technology solutions that make the task of costing and cost control much easier. You will also find experts that work as consultants/coaches and are specialized in these areas in our industry.

Often I hear bakery owners saying, “You must be kidding me. I don’t make enough money as it is and now you tell me to pay for a consultant or coach?”
What they don’t realize is that a good consultant or coach with specialized experienced in the baking and pastry industry will always pay for him or herself and make money for the business through implementation of changes resulting in waste reduction and higher profitability.

For example, let’s say I’m consulting for a company whose prices, I believe, totally undervalue their product. And let’s say their annual revenue is $1 million. By raising prices 10 per cent and saving 10 per cent of costs through waste reduction, that’s a 20 per cent increase in revenue – or $200,000 – and that more than pays for the consultant, whose typical fee would be 25 per cent of the revenue gain – or $50,000 in this case. The owner bags the rest as profit.

In the baking industry people are working too hard for too little profit. I am passionate about this because my colleagues are getting too little return for what they’re putting into it – and it’s a downward spiral in that our return is too small and that means we can’t pay our people well or invest in quality ingredients and technology. We can’t even pay ourselves. This is why the retail bakeries are on such a decline, with only around 1,500 retail bakeries left in Canada. The industry is being taken over by grocery store chains and big corporations. To overcome this, we need better education of bakers and pastry chefs at the retail level. We are relying on Europeans who came to Canada as immigrants and that knowledge pool is declining instead of expanding.

I don’t know how many of you took time out of your busy schedule to watch some of the events in the Beijing Olympics, but one thing that was consistent with every athlete is that they all have a coach. You might ask, “Why do they need a coach? They are already on top of their game?”

A coach is not necessarily a better athlete, but he or she has special knowledge that can bring out the best in an athlete. And the competitive world of business isn’t any different.

A wise man once said, “I don’t have enough time to make all mistakes in life, so I’d better learn from others who have made them already before me!”
“A good coach is not only someone who has made and learned from mistakes, but is able to use this knowledge
to help others.”

Wolf von Brisinski is a master pastry chef and baker originally from Germany. He has many years of international experience helping companies increase their profits through better business, retail and production management, as well as improvements in research and development. Von Brisinski is involved with several Canadian baking and pastry trade groups and associations and can be reached at 905-338-9740 or stelleur@sympatico.ca.