Smart Cookie Newsletter - Issue #11

Why Net Margin Is Your Bakery’s True Health Score

Author

Jimmy MacMillan
September 29th, 2025

Why Net Margin Is Your Bakery’s True Health Score

If there’s one thing I’ve learned after helping dozens of bakery owners break through plateaus, it’s this: Most metrics don’t really tell you if your business is healthy—they make you feel productive. Traditional numbers, such as labor %, food cost %, and overhead rates, are the business world’s favorite false proxies. They hint at what’s going on inside your operation, but rarely show the bottom-line reality.

In the bakery industry, it's easy to get lost in the weeds of granular targets. However, focusing on isolated percentages can mask inefficiencies and hinder real profit growth. That’s why, whether I’m working with a bustling retail bakery in Chicago or a high-volume wholesale producer in BC, Canada, my focus is on one metric that tells the truth: Net Margin.

Net margin—the percentage of your sales that turns into actual profit after covering all costs—cuts through the noise. It’s the ultimate efficiency metric. Once you understand and track it, you’ll stop chasing disconnected benchmarks and start running a business built for thriving, not just surviving.

What’s a False Proxy? And Why Should You Care?

A false proxy is a metric that looks important but doesn’t actually reflect what you want to achieve. In bakeries, labor % or food cost % might look great on paper, but they often hide deeper problems:

  • You could hit a “perfect” 18% labor cost while losing money on pricing or overhead.

  • You might keep food costs below 25%, but if your sales mix is off, your profit vanishes.

Net margin, however, doesn’t lie. It’s the metric that ties every part of your operation together—staffing, ingredients, pricing, overhead, and sales strategy. If this number goes up, you know you’re truly becoming more efficient and more profitable.

Net Margin in Action: The $500,000 Sales Models

Let’s make it real. Here are two bakery business models—both hitting $500,000 in annual sales, but with very different net margins:

Standard Model

$500,000

15%

$75,000

Efficient Model

$500,000

22%

$110,000

If you focus solely on labor %, you might be satisfied with a slim profit. But optimize for net margin—streamlining menus, boosting process efficiency, managing waste, and refining pricing—and you unlock $35,000 more real profit, without increasing sales.

Why We’re Focused on Net Margin

My work at Successful Bakery is about more than chasing industry benchmarks. It’s about making sure bakery owners build businesses that pay them what they're worth—without running harder on the hamster wheel. By shifting the conversation from proxies to net margin, we bring clarity, simplicity, and real opportunity for growth.

When your net margin improves, it shows that every aspect of your operation is getting sharper—from team productivity to ingredient management to pricing strategy. It changes the entire trajectory of your business.

Keep Rising,

Jimmy MacMillan

Principal Chef, Consultant, Successful Bakery

P.S. If you found this helpful, forward it to another bakery owner who could benefit from it. Growing together makes us all stronger.