Posts Tagged ‘doughnut business’
Should You Start a Donut Business in a Slow Economy Part One
February 26, 2010 | 
Author As you drive home from your current job do you ever wonder what it would be like if you would not have to do that anymore? You may think that you are lucky to even have a job when so many people do not have one. After all, these are bad times and having a job is a good thing and knowing you have a paycheck coming in is definitely a plus. You may even have the chance to move up in your company and make more money.
You may have often thought about starting your own business and all of the perks that come along with it. You could take advantage of the tax to deductions, Be your own boss, and all of the other things that you always hear about working from home or having your own business. It is true, when you work for yourself you do not give Uncle Sam an interest-free loan while you earn money, you pay the tax man after you have already earned it and take out your deductions. The doughnut business could afford you a lot of deductions and peace of mind knowing that doughnuts will always be in demand and people love them. But you question the timing of starting your own business. You have reason to be afraid, change is always a hard thing to do.
You have all of these things going through your head, But how could you live with yourself if your family lost their home and their life savings because of your business venture. That would be a very difficult pill to swallow, especially if you have a family. You feel trapped and go to work daily Thinking about the way life could be. It is much easier to be told what to do and how to do it than venture out on your own and try to make something of a business. You have probably heard all the horror stories of opening up a food related business. One of the good things about having a donut business, especially a small donut business, is you are selling one product and the overhead can be quite low. We will talk more about that in a bit. Stay tuned tomorrow and we will continue our discussion about starting a good business end is poor economy.
Posted in Starting a Donut Business | 
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To Sell or Not to Sell – Should You Sell Something Besides Donuts
As we have already discussed the donut business can be quite profitable. When you are selling mini cake doughnuts there is a high profit margin and low overhead. Depending on where you are selling your doughnuts, the overhead can be very low or very high. We are planning on starting small, Getting a machine that makes the doughnuts, and finding a place to sell them. We are focusing our attention on two places, a popular entertainment area that has movies, restaurants and some smaller shops. It is one of the open mall concepts where everything is outside, and people walk around the complex.
Another place we are thinking about selling our doughnuts, is the flea market in our local area. As you probably can imagine there is a lot of traffic that flows through the flea market. Anywhere there is traffic you can be assured that you will sell a lot of doughnuts. The problem is, or what we have found, is getting into these places to sell the doughnuts. Once we get into the place of our choice, we plan on purchasing the doughnut machine and setting up shop there. That is the only thing that has stopping us from continuing this project. There are other ways we can get the doughnuts out into the marketplace, but we would rather have somewhere to sell the doughnuts right from the start.
So now that that is out of the way, should we sell anything else but doughnuts? We have thought about this, and each one of us have varying opinions. We all do agree however, that the menu should be very limited. We will not sell 100 varities of doughnuts, we all agree on that. It is just not in our business model, the more choices you give the consumer, the more overhead that you have. We have studied other businesses that offer small doughnuts, and they have a very limited menus themselves. We will probably model Our donut business After what they are doing. We have noticed that the doughnut shops that are in business today have been around for quite some time now. None of them have changed much, and have not added things to their menu. They offer one or two varieties of small doughnuts, and perhaps a couple varieties of drinks to go along with the doughnuts.
We have facts about offering milk, juice or coffee to our menu but we have mixed feelings about this. We are leaning toward just producing the doughnuts and offering two different kinds of flavors. We will most likely have sugared and cinnamon flavored doughnuts. Depending on our location, we may offer milk or coffee but we are afraid of the overhead cost of adding these drinks to the menu. We may do it as a market test and see how it goes. But as mentioned the more items you have on the menu, the more overhead that you incur. If the doughnuts do not sell as well as we anticipate, we could potentially have a lot of waste as far as the drinks go. If the doughnuts sell well, then the drinks will complement the doughnuts and we can start selling drinks as well. Basically, selling drinks will depend on the net sales. Then we will go from there.
Getting Capital for your Donut Business
You have an excellent donut recipe, You have a location and an audience to sell your too... and you are certain that they will sell very well. Now you just need to get equipment licensing and other things rolling in order to get your business started. Yet found a great place to get equipment, but you have found that it can be very expensive. If you do not have any money saved but you are financially secure, i.e. you have enough money to make ends meet. Then he may want to get the capital to run your donut business from other sources.
Do you have good or decent credit? If so, then you may be able to get a small business loan from your local bank. Local banks are usually easier to deal with than big banks that just look at numbers. Credit unions are excellent places to get loans for $10,000 or less. If possible attempt to get a loan at a bank that you frequent often. You may be surprised how easy it is. They will want to know what the money is for of course and what you intend on doing with it. This will help you get the necessary capital that is required to get your business venture up and running.
If getting a loan from a bank or credit union is not an option, Have you considered borrowing the money from a family member? Maybe you can borrow the money from a close friend who could possibly be a business partner? We explained the differences between a business partner and a venture capitalist and a previous post. But to summarize, when someone invests (capital) in your company they will have little control over the day-to-day operations of the business. It is simply your responsibility to pay the loan off when you start to make money, or whatever arrangement that you may have with the venture capitalists. Having a business partner can be a sticky situation if you are not careful. The business partner in your donut business could be difficult to work with or have different ideas on how things should be handled. As previously mentioned you can pay a higher rate on the loan than giving 50% of the company to someone who will not be actively involved in it. Be very careful about taking money from people and the contracts that you sign.
The business partner model has worked for us and our situation, but it may not for you. Assess your needs and what everyone brings to the table before you make a decision. This lone decision Could mean the success or failure of your venture. Not to mention the overall happiness that you will have our not have by going into the doughnut business.
Benefits of Having a Donut Business
There are many benefits to having a doughnut business. We are focusing on the small doughnut business, and not the franchise donut business model. The franchise donut business model Is not an effective way to sell small doughnuts, which typically are just one product. People who sell small doughnuts may sell milk, coffee or a different flavor donut but that is the extent of what they sell.
One good thing about the doughnut business are the low startup costs. You can typically buy the equipment anywhere from $5000-$20,000, depending on the route you want to go. If you just want a small fryer to set up shop at flea markets or even in your kitchen selling doughnuts, then you can get by with investing $5000 or less. If you want a concession type stand for your doughnut business then you will spend $20,000 or more on start up cost. Donut stands are good if you are selling your doughnuts at festivals, fairs, carnivals, sporting events or any other outdoor activity. Having a doughnut concession stand is a good way to generate a lot of revenue very quickly.
Doughnuts sell! As long as you have a crowd or an audience for your doughnuts, they will pretty much sell themselves. It is hard to avoid the smell of the doughnut, this is what gets them to your stand. Once they are there people can barely resist buying your doughnuts. The overhead is low for making doughnuts. You will have very little cost on the ingredients and equipment. The return on investment can be quite high.
If you can find a good place to sell your doughnuts, with a lot of traffic, you will make money. You will need to keep in mind the rent you are paying and how much you pay your employees for their time. As with all business endeavors, you will need to keep check of all expenses. Another thing that you will need to find, is a good donut recipe. You can try the recipes that can be found on the banner below this post, that website also will teach you how to start and operate your donut business. It is an excellent way to get the support and ideas from someone without having to purchase a franchise. It is well worth the money to invest in the system.
Getting Your Donut Business Legal
When starting your doughnut business, it is important that you comply with all state and federal regulations. There are legal issues and every business, and you want to prepare yourself for anything that arises. Anything from employee issues, problems with customers, and organizing with the state and federal governments, can pose a problem if not done correctly. Especially, when you are in the food business you need to be very careful on the laws that you may be breaking. It is a matter of public safety since you are serving food. The good thing is you will only be serving one item in your donut business. We are focusing on the small doughnuts on this blog and not the many variations and flavors of doughnuts that can be found in traditional donut shops.
Before starting any business endeavor you will want to find a competent attorney to help you along the way. Just as you do not want to put trust in any one person, you will not put all your trust in this one attorney. You will need to get a second opinion at times, it is just wise to do so.
The first thing you will need to do is organize your business with your state. Most businesses are better off being organized as either an LLC or Corporation. These structures will put a barrier between your business and your personal affairs. Never take someone's advice, whether they be professional or not, as gospel. Learn each business structure and their benefits, downfalls for each one. Depending on who you talk to, you'll get different answers as to what your business structure should be. Many accountants will tell you that a corporation is better and attorneys will lean toward a limited liability company. Find out which one is best for you and go from there.
The operating agreement for your donut business will outline how you will operate, regulate and rule the business. It is especially important to have your operating agreement if there are more than one person in your company, for example business partners. You do not want any misunderstanding about how your donu business is run. A lot of conflicts can be resolved when you have a carefully crafted operating agreement. There have been many failed businesses that were a good idea but failed because of misunderstandings with the business partners. What if your partner goes bankrupt, dies, or perhaps becomes a compulsive gambler? What will you do and how will your business handle this situation? What happens if he or she just quits? These are all legitimate questions that need to be discussed in the operating agreement. You need to pay a lot of attention to the operating agreement, it can save you a lot of trouble in the future.
Be familiar with any contracts that your company may be involved in. It is worth hiring an attorney to review and make any contracts that are necessary for you to run your business. Do not wait until your company is sued to deal with contracts, learn all about them from the get-go. Contracts can be very technical and when things go awry you can find yourself in serious trouble.
Employment law is one of the big things that gets small businesses in trouble. Employment law can be devastating to your business is not done correctly. Everything from employment taxes, terminations, recruiting and hiring employees can cause a lot of trouble if not done correctly.
This is not meant to scare you from opening your donut business, These are just facts that you need to be aware of before venturing into the world of business. Pay mind to the old cliché, don't quit your day job. Always have a backup plan, perhaps have some money saved before you start out on your own.
