How do I check what a bakery for sale really earns?
Check a bakery’s earnings by matching the till to the bank deposits, reading daily waste and markdown records, tracing wholesale invoices to payments and adding a fair wage for the owner’s unpaid hours. Then ask your accountant to confirm the adjusted picture.
A bakery’s statements show what the seller reported. Your job is to find out whether the till, the bank and the invoices agree with them. This page is about verifying earnings, not about value. Ask for the records first, then check them against each other. Where two sources tell different stories, ask the seller to explain before you go further, and write down the answer.
Match sales to deposits
Retail bakeries take cash, cards and sometimes pre-orders. Ask for daily till reports, card processor statements and bank deposits for the same days, and see that they line up. Cash is the hard part. If the seller says some sales never reach the books, ask your accountant and lender how they would treat them. Ask your accountant how to treat anything that cannot be traced. The same habits matter if you run a bakery without baking yourself.
Read waste and markdowns
Bread and pastry do not keep, so a bakery loses product every day. Ask how the seller tracks what is thrown out, discounted at closing or given away. Sales that look strong can sit on top of heavy waste. A seller who records day-end leftovers usually knows the business better than one who does not, and the records tell you how well production matches demand.
Trace wholesale invoices
Wholesale sales are easier to verify than counter sales because they leave invoices. Pick several accounts, then match invoices to payments in the bank. Ask which accounts pay late and which have asked for credits. Wholesale that depends on one large customer is worth knowing about before you decide anything. Our page on wholesale accounts staying after a sale goes further.
Count the owner’s hours
Many owners work the ovens or the counter without a wage. If you plan to hire for that work, the cost belongs in your picture of what the bakery earns. Ask how many hours the owner works and which jobs they do. Your accountant can help you adjust the figures, and our page on what to review in running costs lists the lines to look at.
Related reading
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are financial statements?
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 03Business Development Bank of CanadaGovernmentWhat is Cash Flow
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