Cake shops can be highly profitable businesses in Nigeria when the operator has a huge competitive advantage and can minimize operating costs to the barest minimum. A few marketing and operational strategies can work a startup cakes shop to a highly lucrative position. Return on investment for an average cakes shop could vary from between 30% to over 100% while startup costs could be as little as 3 million naira.
This is a sample, miniature business plan for
setup of cakes shop in Nigeria. A cakes shop is a kind of confectionery shop
which stocks a variety of cakes and complementary pastries for various occasions
that serves various target market in Nigeria. Kindly note that this is a
summary and hence is a brief write-up highlighting key issues involved in
setting up and running a cakes shop in Nigeria. In this write-up, I will be
covering some issues such as the opportunities for cakes shop in Nigeria, the
likely challenges and a brief approach to gaining patronage, startup costs as
well as what a first year income and expenses statement could look like.
What is a Cakes
Shop?
As the name implies, it is a shop where cakes
can be ordered for (whether eat in or take away). The menu for typical cakes
shop varies from light treats like cupcakes, cookies, brownies and waffles, to
more exotic items like popsicles, smoothies, ice cream and party supplies. In
addition to menu items, cake shops also offer customized cakes such as; wedding
cakes, birthday cakes, anniversary cakes, souvenir cakes and similar cakes
which can be baked and delivered to clients on demand. Each of these cakes also
comes in different flavours.
What
is the potential market size for cakes in Nigeria?
Cakes are in very high demand in Nigeria.
There is a large number of people who order for cakes in Nigeria for various
reasons. We have the sweet tooth - people who love to eat cakes regardless of
occasion. There are also people who order cakes for different occasions such
as; workers buying their boss a cake on his birthday, a wife that buys her husband
a birthday cake, a boyfriend buying his girlfriend a cake, valentine’s cake,
wedding cakes etc. The wedding cakes market is especially a large one in
Nigeria. Think of a country where more than 24,000 weddings happen every week
and wedding receptions must have a cake as an item to be served to guests. If the
average wedding cake costs 20,000 naira we are looking at not less than 480
million naira every week from wedding cakes alone. Let us even talk about
birthday cakes. How many birthdays do we host daily? Parents buy birthday cakes
for their kids all the time, so too do spouses buy for their partners. If 4,000
Nigerian wives buy surprise birthday cakes everyday for their husbands at an
average cost of 7,000 naira we are talking at least talking of at least 28
million naira per day or over 1.5 billion naira per year. That is just for
wives buying for their husbands. What about friends hosting parties? I can go
on and on, my point is a lot of people in Nigeria are willing to spend money on
cakes (and good money at that).
Business
Opportunities for Cake Shops in Nigeria
|
There are
many opportunities to sell cakes in Nigeria and it is not limited to
locations as several major cities (Lagos, Abuja and Port Harcourt) have a
large population of people who are in need of cakes for various reasons and
occasions. People would order cakes and would offer them to other people or
even eat them on their own. Here are some reasons and each of these cases run
into hundreds of thousands of people who will spend hundreds of millions of
naira collectively. |
|
|
Parties |
Birthday
parties |
|
Birthday
parties |
For children, |
|
Romantics |
Lovers buy
each other cakes, romantics of dates |
|
Parents and
Guardians |
Millions of parents present cakes to their
children |
|
Hospitality |
Hotels serve
their guests as deserts before main course, |
|
Felicitations |
60th birthdays, 50th
birthdays etc |
|
Corporate gifts |
Presented to
guests at product launches, banks serving customers etc |
|
Social
Events |
House warming, child naming ceremonies,
reunions, community meetings, concerts, family outings |
|
Corporate Events |
Seminars, workshops, symposiums, conferences, |
|
Other events |
Community outreach,
church meetings etc |
Summary of potential opportunities for selling
cakes in Nigeria
I can go on indefinitely but the point
is a large number of people in Nigeria want cakes and are willing to pay good
money to buy and offer those cakes to their family, friends, loved ones,
colleagues and acquaintances.
Some
Notable Challenges for a Cakes Shop Business in Nigeria
While cakes are very popular lifestyle
products with huge market demand in Nigeria, I must sound a note of warning. The
business is a tough one to do and here are some reasons. But keep in mind that
it is possible to run a successful cakes shop even with many challenges.
- High
cost of running a cake shop. Cakes shops
typically serve a high end market and so they tend to be located in expensive
parts of the city where rent is high.
- Finding
and Keeping competent and loyal workers. Employing highly
skilled people with excellent cake baking skills doesn’t come cheap and what is
more, most times they will likely leave you either to join a competitor or after
a short time to setup their own cakes shop and end up coming after your own
customers. Employing lowly skilled workers is another nightmare - they will eventually
make mistakes that could cost you customers.
- Stiff competition. This is an easy business to learn and start and that means there are a lot of people who will get into the business. The entry requirement is so low that in as little as 6 months, a person who went to catering school can have what it takes to open a cakes shop. More competition means lower profit margin and reduced sales.
- Limited target market. While the market is sufficiently large, the competition is also fairly large but there is another take here. The people who can buy your product from you are relatively few in number compared to the total population. For every 1,000 Nigerians maybe less than 50 would be interested in buying cakes once in a while and that is because cakes are lifestyle products (not necessities). So during low periods, sales can be very discouraging.
- High Customer Expectations. The customers want to be served the best possible cake available for the price they are willing to pay. So if one of your customers has a friend who offered her a delicious cake that your cake shop cannot match in terms of quality or taste, you will lose that potential customer to your competitor because naturally, everyone wants to buy the best product they can afford. So you must constantly measure up or lose important customers – not an easy thing to do.
There are still several challenges
although I will not be talking further on this. Let us move on to the next item
on this article which is the startup expenses summary.
Startup
Expenses Summary for a Cake Shop Business in Nigeria
|
Item |
Cost |
|
Shop Rent (shop size: 20 by 15m for 1 year) |
900,000 |
|
Furniture (sitting tables and chairs, display shelves
etc) |
300,000 |
|
Entertainment devices, Electronics and gadgets |
180,000 |
|
Working capital |
300,000 |
|
Contingency |
300,000 |
|
6 months operating expenses |
600,000 |
|
Marketing budget |
120,000 |
|
Others |
348,000 |
|
Total |
3,048,000 |
The assumptions for this income and
expenses statement are that
|
Sample First Year Income and
Expenses Statement |
|
|
Gross income |
6,900,000 |
|
Cost of sales |
1,860,000 |
|
Gross profit |
4,040,000 |
|
Operational expenses |
2,490,000 |
|
Operating income before tax |
465,000 |
|
Taxation |
1,550,000 |
|
Profit after tax |
1,085,000 |
|
Payback period |
3 years |
|
ROI |
36% |
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Are you interested in writing a comprehensive
business plan for a cakes shop business in Nigeria and need an experienced,
professional business plan writer for it? Then give me a call: 0803 206 4106 or
email me: paulonwueme@gmail.com
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