How to Start a Baking Business From Home and Cash In

Passive Income Starts Here!

How to Start a Baking Business From Home and Cash In

People rave over your Dutch apple pie. They always take a second slice of your Texas sheet cake. Those oatmeal raisin cookies disappear in minutes.

Fans tell you repeatedly you could sell your tasty treats. Maybe you should.

As a baker, you can add to your income doing something you love by starting a home baking business. What is needed? An initial investment in tools, packaging, and baking basics and a marketing strategy for your bakery business. It’s likely you already have some equipment but you may need more as your business scales up.

Estimates range from $5,000 to $10,000 to start a home baking business with monthly income from $1,000 to $2,000. Of course, those numbers depend on a lot of variables, including how extensive you want the business to be, where you live, how many hours you want to work a week, and more.

One thing that’s free is coming up with a name. That might be the most fun of all.

Check out The Penny Hoarder’s Guide to Starting a Business. Tip: Take manageable steps.

Start Your Mixers

There’s so much to think about that you might find yourself as mixed up as one of your cake batters. But if you take a methodical approach — you are a baker aren’t you? — you’ll be able to master each step.

Whether you want to launch a full-time business or just bake enough for a little cash on the side, we’re here to help.

In this post, we’ll cover:

First, Find a Support System
Decide on a Specialty
Do Your Market Research
Create a Business Plan
Home Baking Business Regulations
Devise a Marketing Plan
Equipment and Logistics Needed for Bakery Business

First, Find a Support System

Deciding to make your baking business dream come true is truly like a roller coaster ride. It is thrilling and terrifying at the same time. There are customers who sing your praises and ask you to cater their big office brunch. Yay! Then there are more complicated challenges. Like taxes. Or licensing questions.

Luckily there are lots of resources to help.

The Facebook group, We Are Home Business Bakers, has over 34,000 members. Joining a local business alliance is smart. They make workshops, gatherings, and peer-to-peer help available to members through networking. Almost everyone wants to be friends with a baker. These groups help you navigate at the beginning, and are a steady source of encouragement and support.

Back to top ↑

Decide on a Specialty

You will need a chunk of time, energy, space and money to get started. Think about your ideal baking business. The first thing you should do is see what baked goods are being offered locally.

Your dark chocolate raspberry ginger brownies have a fabulous reputation. But if you are going to be offering a brownie menu, you should look to see who else in town is making them. Then decide if yours are different enough to stand out, or if you should pivot to another treat.

This is the right time to ask people in your life which of your desserts they like best. You might think everyone loves the pecan snickerdoodles best, but it turns out the traditional ones are the favorite.

It is important to be flexible when you are starting out. Do a test run, and pay attention to how long it takes you to make the cookies, bake them, the amount of time for cooling off, and packaging them. This will help you plan your time, the amount of room you need, and your skills in uniform sizing.

If you were planning on using a professional kitchen, that is not allowed under most states’ cottage food laws. It might be something to grow into. You don’t have to spend much money to get started. Bigger dreams, and expenses, can happen after you have grown your home baking business.
Back to top ↑

Do Your Market Research

What items does a home bakery usually offer? These are most common:
Cakes

Cakes
Most pies (Check local regulations! Florida allows apple pies but not pumpkin)
Cookies including bar cookies like brownies
Bread
Dry mixes for cakes, cupcakes, breads, cookies, etc
Cupcakes
Granola

Search what is available locally online if you want to sell online. Visit different vendors at local farmers markets if that is your goal. Figure out a target market for your home bakery business.

Marketing is more than having business cards and a cute name. Ask yourself these questions before you come up with a marketing plan:

Can you describe your home bakery business in five words?
Which of your baked treats do family and friends like best?
What are the best ways to reach your target market?
Back to top ↑

Create a Business Plan

Writing a business plan might seem intimidating, but there are templates you can use. Different plans allow different levels of details. Here are 16 tools to help you launch and run a small business.

Some of the considerations:

Schedule. You will need time to shop, organize, bake, package, deliver, and promote your goodies. Decide how many hours a week you have available to work on your baking business.
Recordkeeping. You will also have to keep records for expenditures and income. Labels must be made for the food. There may be contracts and for sure licensing information that needs filing.
Business core. As you start, you may focus on a set menu or creating custom desserts. Maybe even a mixture. Your business and offerings can change as you get going to respond to the market, but it’s imperative to have an idea going in.

Think About Starting Lean

A business plan will help you understand all the factors that go into starting a small business. It will help you shape the business around your life, rather than the other way around.

Unless you are going to seek funding for your home baking business, a lean business plan, the briefer version, could work for your launch. A lean business plan helps you focus on the right questions when you are starting your business. In a way it is like a recipe. Figure out what you are making, what ingredients you will need, and the order that you have to do things for it to work out well.

You might decide that you have 20 hours a week to devote to starting a home bakery business, but not much cash. Everyone loves your vegan cookies, and you have all the equipment needed to make them. You need photographs, customers, packaging and a way to connect the customers with the cookies.

Using social media to promote your treats is free and effective. There are lots of online videos on how to take effective food photos.

You can accept cash, checks, or set up a payment service like Paypal or Venmo. Those are also free to set up, but there are fees for use. You can get started with your home baking business for practically nothing but the ingredients for your baked goods.
Back to top ↑

Home Baking Business Regulations

“Cottage Food” laws govern what home-based food entrepreneurs can legally make and how they can sell their products. State laws have expanded what foods can be made at home and sold to consumers.

This year, New Jersey created its own cottage food laws, meaning that finally all 50 states allow food entrepreneurs to start their businesses in their own homes.

There are wide variations in laws. According to the Institute of Justice, which follows what they call “food freedom laws,” 37 states allow home bakers to sell food online, and 21 states are allowed to sell food in grocery stores. States often ban selling home baked goods wholesale, which means restaurants and food trucks cannot use those products.

Many states waive licensing and inspection requirements. Earlier this year New Mexico changed laws requiring extensive kitchen upgrades, saving those who want to start a home bakery thousands of dollars

Your State’s Cottage Food Laws

There’s a good chance your state has updated its laws over the last few years. It’s important to make yourself familiar with them. This website is a database about cottage food laws.

However, it is smart to also check your state’s health department and departments of agriculture or economic development in case there are more recent developments. Most states ban making temperature controlled or potentially hazard foods at home.

Some states require food handling certificates, business licenses, and a sales tax permit. Florida does not require a license or certificates to start a business. California does. New Hampshire doesn’t initially but then does if your business grows successfully.

“Off-premises consumption packaged food” (that’s the technical tax language for home bakers’ products) is often considered tax exempt. Learn about local regulations as the home based bakery business owner. There are no national laws regarding cottage food production.

Licensing Needed

The first thing to do is know what your state’s laws require of your home baking business. Are there licenses or tax forms required by your state or municipality? It’s fun to shop for equipment and chocolate, but understanding what to do legally early on reduces stress later. Decide if the legal status of your business will be an S-corporation or LLC, and how you will handle taxes. More information about legal and taxes.
Back to top ↑

Devise Your Marketing Plan

You need a way to tell the world you are open, and that your organic gingerbread blueberry granola will blow their minds. You have a name for your new business. The next step is creating a logo, business cards or flyers, and a plan to get in front of your target market.

You can use a freelance designer through 99designs or Upwork. A logo design for cards, websites, and social media could cost $300-500. You can also use a free design program like Canva to create your own if you have the skills.

Digital Place for Your Baked Goods

Not everyone will have a website or social media at the beginning. Word of mouth can build a home bakery business. You can get potential patrons’ numbers and text them a weekly menu. But eventually you will need a public space, either in the real world or online, to sell your treats.

Do you want to use social media or a website? There are websites built for home baking businesses, such as Castiron, BlueCart, and Yummit. Spend some time online looking for which sites you find the most tempting, and try to figure out why you like them. Look at the ways people post their menus and photos. Pay close attention to how they handle sales.

Social media is a common way to sell baked goods. Instagram and Etsy are filled with drool worthy photos of cookies, cakes, pies, and more. Many businesses use Facebook for online presence. It’s best to pick one that you are already familiar with, and have a following. There will be time later to scale up.

Share pictures of your creations with your friends and followers! Who in the world wouldn’t want to daydream about your fresh lemon butter pound cake?

Where to Sell Your Goods

Your state laws govern where you can sell your goods outside of home. West Virginia, for example, allows you to sell at events, restaurants, and farmers markets, but you can’t cross state lines.

There usually is a fee for selling at a market or event. You will need additional equipment for a stall. Some markets and events provide the canopy ($98), tables ($50), and chairs ($19), but it is more likely you will have to bring them. You will need signage, including banners and possibly a standing display sign ($137)

Back to top ↑

Equipment and Logistics Needed for Bakery Business

Everyone who has had a restaurant knows that it takes a while to settle into the right purveyors. Companies and systems that look good on paper may not mesh with your schedule or taste. Buying in bulk usually saves money for shelf stable goods.

Do you want organic ingredients, or gluten free flour? Is there a specific chocolate brand you are loyal to? The cost of your ingredients will determine the prices you charge, so this is an important area to keep track of.

Restaurant supply stores like Gordon Food Service (which is free to shop at) and wholesale stores like Costco (annual membership is $60) can supply most of the basics for your home bakery. Local farmers markets and produce stands are great resources for fresh fruits, vegetables, and often eggs and other dairy.

Order packaging material and labels online. Most states have specific language that you have to use on labels, so pay attention to that when thinking about your packaging sizes and design.

For example, Florida law states that all cottage food products offered for sale to the general public must be labeled: “Made in a cottage food operation that is not subject to Florida’s food safety regulations.”

Space at Home

Make sure you have the correct equipment, including an oven that maintains stable temperatures accurately, and space in your house for supplies. You’ll need a place where you can easily package your tasty goods.

It will get old quickly if you have to move things out of the way every time you bake or pack. Check to see if your state requires separate equipment from personal use items, or even separate sinks or storage. This can have a big impact on your budget.

Transportation and Delivery

An important part of the plan is getting baked goods to the customer. Many home bakers offer multiple options. Picking food up at home could include contactless pick up. They might deliver the food themselves. Some states allow food delivery apps to transport your food (there may be fees for both the buyer and seller).

If you are planning on delivering the food, not only do you need a reliable vehicle, but you need to keep the baked goods stable as they travel. Stackable food crates ($45) can fit in even small cars. Or clean, solid produce boxes free from a vegetable stand work as well.

Setting Prices

A rule of thumb standard for pricing is to triple your expenses for the item, and adjust for market pricing.

An example:

To make four Chocolate Candy Bar Cakes you need a 5-pound bag of flour, half of a 5-pound bag of sugar, a pound of butter, a dozen eggs, baking soda, salt, a bag of mixed mini candy bars, milk, cocoa, powdered sugar, spices, and vanilla. Total cost for baking supplies is $26. Adding the packaging brings it up to $29. Triple that amount equals $87 so $22 a cake would be the starting price. If it is a custom cake; has elaborate icing; or everyone else is selling for significantly more, raise the price.

Your initial costs might be higher since you will be stocking up on supplies. Include in your calculations free samples or specials and coupons you might offer. Those costs are part of marketing.

Ready to Go!

Are you ready to start your home bakery business? With some smart planning and your inherent creativity, you can transform your life with this leap, a dozen cupcakes at a time.

The Penny Hoarder contributor JoEllen Schilke writes on lifestyle and culture topics. She is the former owner of a coffee shop in St.Petersburg, Florida, and has hosted an arts show on WMNF community radio for nearly 30 years.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.