What costs come with buying a bakery besides the purchase price?
Expect to need cash beyond the purchase itself: opening ingredient inventory, working capital for slow weeks, a lease deposit, equipment repairs, smallwares and professional fees. Make a list early and ask your accountant and lender to test it.
The agreed purchase is only part of what a buyer pays. A bakery has to be stocked, staffed and kept running from the first morning, and the money for that is yours to find. Build the list before you make an offer, so that you know how much cash you need and not only how much you owe on closing day. This page lists the categories; it does not give amounts.
Stocking the shelves and the pantry
Flour, butter, sugar, eggs, packaging and labels have to be on hand when you open. Ask whether inventory comes with the sale and how it will be counted and paid for. Fresh product does not keep, so the pantry matters more than the display case. Ask your lawyer how inventory is handled in the agreement. Our page on running costs worth reviewing lists the lines to watch.
Working capital for slow weeks
Sales dip after holidays and in some seasons, while rent, wages and suppliers still need to be paid. Keep a cash cushion for the weakest weeks and for the first months while you learn the business. Lenders may ask to see this in your plan. Your accountant can help you build a monthly picture of cash coming in and going out.
Deposits, repairs and small items
A lease may ask for a deposit or a new guarantee. Equipment may need repairs soon after you take over, and smallwares such as trays, racks and tools wear out and go missing in a handover. Ask for the maintenance history and a list of what is included. Our page on checking ovens and equipment shows what to look for.
Professional fees and the first changes
Legal, accounting and lender fees come with the deal. After closing, you may pay for signage, new accounts, insurance, permits and software, depending on what you change. Ask each adviser what they expect to charge and when. Add a margin for things you did not see coming, and treat the whole list as a plan to confirm with your professionals.
- Inventory and packaging on opening day
- A cash cushion for slow weeks
- Lease deposits or guarantees
- Repairs and replacements for equipment
- Legal, accounting and lender fees
Related reading
13 pages on the same subject, grouped by topic.
Selling
Buying
- Expert answerWhat food licences and inspection rules should a buyer check before buying a bakery in Canada?
- Expert answerCan I run a bakery profitably if I’m not a baker myself?
- Expert answerFranchised or independent bakery: what should a buyer weigh?
- Expert answerWhich running costs should I review before buying an ice cream shop?
- Expert answerWhat should I do in the first month after buying a coffee shop?
- Expert answerWhat should I check about the equipment when buying a print shop?
- Expert answerWhat should I check before buying a gift shop?
- Expert answerWhat should I check before buying a home-based business?
- Expert answerWhat makes one bakery more profitable than another?
- Expert answerDo the bakery’s recipes and starter come with the sale?
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWorking capital loan
- 02Business Development Bank of CanadaGovernment4 key steps to plan your cash flow in the coming year
- 03Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 04Business Development Bank of CanadaGovernment13 terms you need to understand before signing your commercial real estate lease
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