A bakery is a food business where the product mix is the entire profit story. The same oven that bakes a 30-40% margin loaf also bakes a 60-75% margin custom cake. What you choose to produce — and how much you waste — sets whether you clear 4% or 15% net.
The bakery cost stack
| Line | Range (% of revenue) |
|---|---|
| COGS (ingredients) | 25-35% |
| Labor (often the largest cost) | 25-40% (keep 25-35%) |
| Rent / occupancy | 5-15% (warning above 10-12%) |
| Overhead (utilities, insurance, fees) | 10-20% |
| Net profit | 4-9% avg, top 15% |
Product margins — chase these
| Product | Gross margin |
|---|---|
| Custom / wedding cakes | 60-75% |
| Specialty pastries | 50-65% |
| Basic bread / staples | 30-40% |
Startup ranges and volume
| Scale | Total opening range |
|---|---|
| Cottage / home bakery | $5K-$15K |
| Small retail bakery | $50K-$100K |
| Full-service / urban | $150K-$400K |
Small independents do about $300-$1,200 in daily revenue; $30K-$50K/month is typical. Diversify early: wholesale to coffee shops, catering platters, evening baking classes, and a beverage program all lift the thin baseline.
Waste is COGS: food waste hits the 25-35% COGS line directly. Tight production scheduling and a standing wholesale order recover more margin than any price increase on walk-in bread.
Sources (retrieved 2026-08-13): bakery feasibility and owner-income studies (COGS 25-35%, labor 25-40%, net 4-9% avg / 15% top); startup-cost guides (cottage $5-15K, retail $50-100K, full-service $150K+); product-margin ranges (custom cakes 60-75%, pastries 50-65%, bread 30-40%); IBISWorld US bakery market sizing.