Do you have a knack for cooking and delighting people with tasty meals? Starting a bakery business can help you make money doing something you enjoy. Customers may come back frequently for your baking and tell their friends about your bakery. If you’ve thought of starting a bakery but feel like it would be too complicated, this guide will simplify the process. You will walk away from this tutorial with a clear idea of how to launch a successful bakery business.
Why Should You Start a Bakery Business?
Starting a bakery business can help you earn extra income that can turn into a full-time income. When you start a business, you have a higher income ceiling since you can scale operations. If you enjoy baking, you will be working in an industry that gives you a deeper sense of fulfillment than other occupations.
13 Steps to Starting a Bakery Business
If you want to start a bakery business, you need the right plan. These 13 steps will help you turn your bakery business idea into a successful company.
1. Choose a Bakery Format
Baking is a vast industry that gives business owners several options. It is important to decide which baked goods you will serve your customers. These are some of the verticals you can consider:
- Cakes for special occasions
- Gluten-free and soy-free baking
2. Write a Bakery Business Plan
Once you decide on a bakery format, the next step is to write a bakery business plan. This plan acts as your roadmap and can help you navigate business challenges and opportunities. Here are some points to consider when creating your business plan:
- Branding: Your brand affects how customers see your company. Your branding reflects your company’s values and can appeal to people of a specific demographic, income level, interests, or any other characteristics.
- Budgeting: Business owners should identify the expenses for their bakeries and create a budget. Aspiring bakery owners can anticipate startup costs and start raising the necessary funds.
- Marketing: How will your business get noticed by customers? The marketing component of your business plan allows you to list ideas and strategies that you can incorporate.
- Pricing: The way you price your products impacts demand and profit margins. You will also have to look at competitors’ prices to gauge a reasonable price for your goods.
3. Decide Your Business Entity
After you create a business plan, it’s time to decide on your business entity. All businesses start as sole proprietorships by default, but changing your business entity has pros and cons. You can choose from one of these business entities:
- Sole proprietorship: This business model works for a solo business owner. You get to use tax write-offs to minimize your personal taxes. However, your business assets and personal assets are not separate. A lawsuit against your business can affect your personal assets.
- Partnership: Working with a partner makes it easier to raise funds and get work done. However, it also comes with increased liability and splitting of profits. Disagreements between partners can slow down the company and possibly result in going out of business. Choose your partners carefully if you pursue this route.
- Corporation: This business entity separates your personal assets from your business assets. Corporations provide legal protection and extra tax write-offs, but you will get taxed twice. Corporations also have an easier time getting business loans, business lines of credit, and business credit cards.
- S Corporation: These corporations are similar to regular corporations. However, they do not get double taxed and cannot issue stock as easily as regular corporations.
- Limited Liability Company (LLC): This business entity provides a good mix of other entities. Business assets and personal assets are legally separated, you get tax advantages, and they are less complicated to set up than corporations. Sole proprietorships and partnerships are still easier to set up, but LLCs act as a good middle ground.
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4. Secure Business Funding
You can approach friends, colleagues, and financial institutions for the capital you need. A business plan helps you determine how much capital you need to launch your startup. You can approach lenders with this amount and see if they approve. You don’t need a business loan to get started. Some business owners use personal loans and home equity credit lines to get the funding they need.
5. Find the Right Place
You will have to find a busy area that attracts your desired type of customer. Business owners should research their areas and determine the best neighborhoods to open a bakery. After this research, business owners should look for available commercial properties to buy or rent. If you are just starting your bakery, it may make more sense to rent at first and then decide if you want to buy a commercial property once your bakery performs well.
6. Obtain the Appropriate Bakery Licenses and Permits
A bakery requires several licenses and permits to legally open and stay in business. These are some of the licenses and permits you may need to get started:
- Business License
- Certificate of Opportunity
- Seller’s Permit
- Catering Business License
- Food Service License
7. Open a Business Bank Account
A business bank account helps you separate your personal finances from your business finances. Bakery owners should open business checking and savings accounts. These business accounts can make tax prep easier.
8. Plan Your Bakery’s Menu
If you enjoy baking, you will love this part. You get to decide what goods your bakery will offer. You should look at the costs of goods as part of your decision and also consider what you enjoy baking.
9. Price Your Baked Goods
The price points you assign to your baked goods impact sales and profit margins. You may get more sales by lowering your prices, but that can also result in lost revenue and narrow profit margins. Achieving higher profit margins with higher prices makes a bakery more sustainable. However, if you set your prices too high, you may have difficulty getting return customers. You can look at competing bakeries in your area to assess how to price your goods.
10. Prepare and Finalize Your Baking Place
You can secure a property by purchasing or renting a commercial property. It can be more time-consuming and costly to take out a commercial mortgage, but that may be the best option for some bakers. Starting with monthly rent payments and signing a contract reduces your initial overhead.
11. Buy Baking Equipment and Supplies
You will have to invest in baking equipment and supplies that keep your store running. You will have to buy flour, ingredients, ovens, and other resources. Bakery business owners should create a list of what they need and establish price points. Grouping costs based on fixed and variable can help you assess which costs will keep coming around and which ones are mostly “one and done.”
12. Hire and Train Your Bakery’s Staff
It’s difficult to run a bakery by yourself, especially during busy hours. Hiring and training staff will help you serve more customers as well as allow you to work on the business components of the bakery. If you work alone, you miss the chance to spot opportunities in your industry and ways to gain market share.
13. Market and Advertise Your Bakery
Once you have your bakery set up and ready to welcome customers, it’s time to market your business. Bakery owners can implement several strategies to reach customers. Here are some marketing tactics to consider:
- Create a website
- Create a Google Business Profile
- Optimize your website for SEO
- Create online content for your bakery
- Establish social media profiles
- Get featured in local media
- Enter marketing collaborations with other local businesses
- Sponsor events in your community
Launch Your Bakery Business
Starting a bakery business can be exciting. You get to bake the food you want to make and serve customers. You can watch as people enjoy your goods and come back for more. A bakery shop can become a critical component of a community and bring people together. Every business starts as an idea, and using these 13 steps can bring your business idea to life.
Do you need any specific qualifications or experience to start a bakery?
You do not need specific qualifications to start a bakery. However, it helps to have business experience or know someone who has the experience. You or someone else must also know how to bake various foods.
How much does it cost to start a bakery?
It can cost $10,000 to $50,000 to start a bakery, but costs depend on several factors.
Is it necessary to have a storefront, or can you start a bakery from home?
You can start a bakery from home. An at-home bakery is more affordable, but a storefront bakery separates your business location from your home address.
How can you find suppliers for ingredients and other bakery supplies?
You can look for companies that offer bulk ingredients and baking supplies, such as Bakers Authority and Amazon Business.