So I belong to a great community of fellow cake decorators called Cake Central. If you’ve never heard of it, you should should definitely check out the site here: www.cakecentral.com
I posted about my bakery plans on the forum there, and received good feedback about not limiting my focus by geography, but instead focusing on demographics. And they were absolutely right! In my last post I mentioned my plans to focus on my own zip code, but cautioned that you may have to focus on a larger geography depending on your area. So I think it may be worth explaining further how I came to my conclusion and how you might do the same.
When looking at an area, you should find out how many people live there, what are the household incomes, are they married or single, do they have kids, etc. This will hopefully tell you whether there are enough people with extra money to buy your baked goods. And knowing the makeup of the households will tell you whether you can expect to sell cupcakes two at a time or by the dozen. If there are a lot of kids – this probably means more parties.
In my case, my zip code has about 11,000 households and 28,000 people. About 70% are married with kids. The average income is just over $90,000. Currently the only bakeries in the zip code are grocery stores, Costco, and Panera. There are some coffee shops selling baked goods as well. There is a custom bakery about 7 miles away, then 2 or 3 more about 10-12 miles away.
Because I live in a fairly affluent neighborhood, I think I’m ok focusing on the zip code, but I could still be wrong — and that is why the market research is still important. There seems to be enough people and enough money, but what if there is not enough demand? First, why are there no custom bakeries now? Maybe I’m lucky, or maybe others are smarter?? Also, it is a very health conscious community, so maybe my neighbors are not willing to buy enough sweets to support a bakery. What if they buy plenty of sweets, but only care about low costs and convenience — meaning they may be perfectly happy buying cheap baked goods in the local grocery store so I still wouldn’t get any business. These are some of the concerns I’m trying to address with market research. Having enough people with disposable money in your market area is a first step for sure, but you then need to understand their buying habits and motivations in order to determine your real market opportunity.
So where do you find neighborhood demographics? There are many great internet sites that can give you all sorts of data. Here are some I used:
Also check with your local Chamber of Commerce – they have these types of statistics available as well, usually on their website. You might get slightly different numbers from the various sources, but if you look at several, a basic picture will start to emerge.
A basic rule of thumb I’ve heard is to try and locate where there are no other bakeries serving your same niche within 5 miles for a city location or within 15 miles for a rural location. I’m sure there are plenty of exceptions to this, as there are to every rule, but it is something I did consider.
I know I promised a survey outline in this post, but I’m still working on it. In the meantime, hopefully this is also food for thought. I’ll post the survey outline within the next couple of days.
“Some people use research like a drunkard uses a lamppost: for support, not illumination.”
– David Ogilvy