Aisha's neighbourhood bakery | Introduction to Business

Aisha runs a small bakery. Here's a summary of one month.

Item	Amount	% of revenue
Revenue (bread, pastries and custom cakes)	$18,000	100%
Cost of goods sold (ingredients and packaging)	$6,300	35%
Gross profit	$11,700	65%
Rent	$3,200
Wages	$5,400
Utilities	$600
Marketing	$400
Other expenses	$500
Total operating expenses	$10,100	56%
Net profit before tax	$1,600	8.9%

The bakery is profitable, but the margin is thin. One slow month could wipe out the profit. Aisha looks at two options:

Raise prices by 5%. If customers keep buying the same amount, revenue rises by $900 to $18,900 while costs stay the same. Net profit rises to $2,500, a 13.2% margin.
Cut ingredient waste. Baking closer to demand trims the cost of goods sold by $300, so net profit rises to $1,900.

Small changes in price or cost can make a big difference to profit. You'll learn more in Pricing Your Product or Service.

Aisha's bakery on one page

Building block	Aisha's bakery
Customer segments	Local families, office workers and nearby cafés
Value proposition	Fresh bread and pastries baked daily, plus custom cakes
Channels	Storefront, Instagram and a local delivery app
Customer relationships	Friendly service and a loyalty card
Revenue streams	In-store sales, custom cake orders and wholesale to cafés
Key resources	Ovens, recipes and two skilled bakers
Key activities	Baking, ordering ingredients and marketing
Key partners	A flour supplier and the delivery app
Cost structure	Ingredients, rent, wages and equipment