How to Set Up a Home Baking Business

While you might be working from home, setting up a bakery business still needs careful planning, just like any other business. In this article, we’re going to give you a checklist walking you through everything you need to know on how to start a cake baking business from home, or any other type of bakery.

Step 1: Research

Before you start your bakery business, it’s essential to do some research.

Is a home baking business right for you?

The first thing to look at is will running a home bakery definitely suit you? You might love baking when you can pick and choose when you do it, but will you love it still when you’re baking several days a week? Baking can be hard work, involving early mornings with endless washing up and cleaning to go with it. It’s repetitive too. If you have a set menu, you’ll be making the same items over and over again, which may become boring after a while. And you’ll have to constantly deal with customers, which may or may not be something you enjoy.

Take an honest look at yourself and how you prefer to work before you open a home bakery. You don’t want it to become a miserable slog that you no longer enjoy, so be sure it’s for you before you start.

Having said that, it is your bakery, so you get to decide how many days you work, what times you work and what you make. You may also be able to take on staff to help with things that you don’t enjoy. So don’t give up. You can make this your own!

Competitor research

The next step is to look at your competitors.

How many local bakeries are there already, including bakeries with their own premises? What types of bakeries, what do they make and are there any gaps to be filled?

How can you stand out from all the other bakeries in your area? You might want to specialize and run a vegan bakery, make children’s birthday cakes, or focus on becoming the best donut maker in the county.

What do local bakeries do that’s good? Look at how they market themselves, how they present themselves, and their packaging. Do they deliver? Do they provide any extras, such as balloons, banners, and party goodie bags?

Now look at what you can do that’s better.

Competitor research can ensure you don’t get lost in the crowd of similar bakeries and you can learn from them to see how to market your own bakery.

What do you want to make?

Now you know where the gaps are, you can look at what you enjoy making and what you’re good at and choose the right focus for your home bakery.

You will need to consider what are the best baked goods to sell from home. You want profitable bakery items that people can’t wait to buy, not items that will sit on the shelf and get thrown away at the end of the day.

Again, do your research. See what your competitors sell a lot of and try doing a survey of local customers to ask what they’d like to buy.

You will develop your product range over time, with trial and error. Once you’re up and running, you can try limited edition items to test out recipes and see what sells.

Pricing

This is a complicated one and, again, you need to do your research and see what competitors are charging for similar items.

Here’s how to work out the minimum amount you need to make for each item:

Start with how much the ingredients cost and how much time it took to make the items. The latter is especially important if you make celebration cakes. If it took you two days to make a hundred hand-crafted sugar orchids from scratch, that needs to be covered in the price.

Then consider how long it takes to clean up during and after baking, how long it takes to package your items and deliver them, and how long you spend marketing your business. Not to mention, you need a profit so that you can get paid for all your hard work!

Naming your bakery

Now for the fun bit. What do you want to call your bakery? It’s good to reflect what you sell in the name, if possible. Clever is good, but clear is better. You don’t want people wondering what you do because the name is so obscure.

Think about your branding and how you want to come across. Your bakery name will be different if you make high-end cupcakes just for weddings and bridal showers than it will if you make cheeky, adult birthday cakes.

Try a bakery name generator to spark ideas. With this one, you can even check if the matching domain name is available: https://businessnamegenerator.com/bakery-business-name-generator-ideas-guide/

With your research done, it’s time to get to the next step in how to set up a home baking business - creating your business plan.

Step 2: Create Your Business Plan

With your home bakery business plan, you need to bring together all the research you’ve done, showing where you’re going to get your ingredients and packaging materials, what you’re going to charge, the startup cost of opening a bakery, and general running costs, including your energy bills and phone bill.

This lets you plot out a forecast showing how you’re going to make a profit and how much you’re going to pay yourself. This is especially important if you’re going to apply for a business loan.

Use your research to do a SWOT analysis, showing your bakery’s strengths and weaknesses and write down how to solve the weaknesses. If you know, for example, that you don’t know how to create sugar flowers, include details of a class you’re going to take.

Include your marketing plan, as banks want to see how you’re going to attract customers and make your bakery a success.

Step 3: Cottage Food Laws and Registration

If only you could just bake and ignore all the boring bakery rules and regulations and the business legalities, but it’s really important that you start off on the right foot with your new bakery business.

Registering your business

You will need to register your home bakery business. You’ll need to check your chosen name with the US Trademark Office, decide on your business structure and register it. Check out The Balance Small Business’s great article on how to register a home business: https://www.thebalancesmb.com/how-to-register-a-home-business-1794143. This article also covers tax, zoning, and business licenses.

Do you need a license to sell baked goods from home?

Every state is different and even some counties have different requirements for licensing home bakery businesses. Check with your department of health to see what you need to do.

You can also find information at The Institute for Justice on Cottage Food Laws and Food Freedom Laws.

Check your license as this can dictate what you can sell, where you can sell, and how much you can earn. You may also have to make changes to your kitchen, such as adding a hand-washing sink and using a separate fridge.

Step 4: Marketing Your Bakery

You’ll need a home-based bakery website to direct customers to, and depending on your state food laws, you may be able to sell your goods online. The best bakery website is one that’s clear on what you sell, easy for customers to use, and has somewhere to sign up for your newsletter so that you can continue to market to people about the special of the day, discounts, reminders for Christmas, Mother’s Day and other big calendar events.

Building your newsletter is vital as you own your own website and newsletter and no-one can take those away from you. If your main social site goes out of business tomorrow or has an outage lasting for several days, you need to know that you can still reach your customers and market to them to keep your business going.

Learning how to promote a home baking business is one of the most vital parts of planning for your new business. You can’t run a business without customers. As part of your research, you should have looked at bakery promotion ideas from your competitors, so see what you can do that picks up on those ideas but doesn’t copy.

Focus your social media efforts on visual sites, such as Pinterest and Instagram. You can also try TikTok and Facebook to attract customers.

Step 5: Launch Your Business

It’s time to open the doors and sell your goodies to the general public! It’s a lot of work to get to this point and you’re not done yet, but don’t forget to take time to celebrate. You did it and you should be proud of yourself.

For the launch, think about special offers you can make, a special cake for the launch day that customers can enjoy as a free offer, and focus on marketing, marketing, marketing!

You want people coming back and telling their friends, so the quality of your goods and customer service are absolutely vital.

Step 6: Keep It Consistent

Now you’re up and running, keep marketing and attracting new customers. Talk to your customers and find out what they like and ask for feedback. You can learn if there are any new services or products they’d like, find out why they’ve chosen you over the competition and really build a bond with your customers that will keep them coming back.

Go to farmers’ markets, fairs, and more. Sell your goods, but also hand out leaflets with discounts and a way for people to sign up to your newsletter to attract a new audience.

Step 7: Add Other Income Streams

Once your business is running and you’re starting to get a good reputation, you can add different income streams to keep money coming in even when you aren’t selling your baked goods.

Start a food blog and recommend equipment and ingredients when you share recipes. You can earn affiliate income from doing this and some suppliers will pay to sponsor your blog if you mention them, once you have a good amount of traffic and engagement. You can also share your blog posts in your newsletter and on social media, ask for comments, and earn affiliate income from there too.

You could start a YouTube channel and allow ads so you get money from that and offer both online and in-person paid classes to teach people your skills.

You could also build up a collection of recipe books and sell them on Amazon and create a print version which you could stock in your home if you have customers picking up from your, and you could take your recipe books to fairs and farmers’ markets to sell.

It doesn’t just have to be about baking.

All the research and planning doesn’t stop once you’ve launched your bakery. It’s an ongoing process to talk to customers, learn what they want, and create a menu they’ll love. You also need to keep things fresh and come up with new ways to market your business. It’s not just about how to start a bakery business from home, it’s about how to keep it going long-term. But it can be done, and if you use this checklist, you can do it too!