Food is just one of those things - that type of product that, no matter who made it, or where, there will always be a market for it… provided that it actually tastes good.

You wouldn’t typically buy a smartphone from a company that isn’t Apple, Samsung, or Google.

 However, we all have our favorite hole-in-the-wall Korean joints, our favorite Mexican food trucks, and of course, our favorite small-time, or even home-based, bakeries.

Baked goods are the standout products in the food industry.

There is little-to-no cultural context to baked goods that would regularly keep an American from a spicy curry dish, or a Thai from cooking burgers at home. 

Baked goods are made to be sweet, savory - basically to satisfy the primitive brain that we all have.

Almost anyone can enjoy Mexican sweet bread, an Italian cannoli, or of course, an all-american Boston cream pie.

Of course, it follows that with baked goods, your market is huge - with the only true exception being health nuts (but of course, even they have cheat days).

But how can you take advantage of this market? 

How can you start your very own bakery and start serving devilishly delicious delectables to the world?

Well, it’s actually quite simple - and certainly a lot more straightforward than a lot of business.

I'm Ippei, and I'm a master of all things online business, passive income, and local lead generation...

And in this article, I will be going over the basics of a home bakery business: how to map it out, how to start, and how to grow.

How to Start a Home Bakery

4.2/5

Starting a Bakery out of Your Home is Super Practical

You'll need to decide on what to bake, plan out your baking time & space, obtain a permit, discuss taxes, layout pricing, and THEN start baking and selling your delicious baked goods. 

Start Up Costs

While this list is not a comprehensive compilation of every you need to start a home baking business, it provides a snapshot of what you need to add into your business plan.

  • Business License: $200
  • Convection Oven: $2,000
  • Dough Proofer & Warmer: $1,200 
  • Dough Mixer: $800
  • Large Refrigerator: $1,200
  • Misc. Small Kitchen Items: $1,000
  • Computer: $750
  • Payment Processor: $600
  • Misc. Office Supplies: $300
  • Marketing Materials: $500
Average Total Startup Costs: $8,550

Annual Revenue of Established Bakery

According to Chron, the average annual revenue of this kind of business is: $450,000

  • Average Annual Revenue: $450,000
  • Average Monthly Revenue: $37,500

Profit Margins of Established Bakery

According to Restaurant Accounting, the average Profit margin of this kind of business is: 6.5%

  • Average Profit Margin: 6.5%
  • Average Annual Profit: $29,250
  • Average Monthly Profit: $2,438

2 Pieces of Home Bakery Advice

A. Pick The Model That is Baste For You

Yes I’m going to put puns in the headers, and yes according to the internet, “basting bread” is a thing.

The first step in the formation of any and all businesses with as much variety as baking, is to:

  • Choose exactly what you want to offer
  • Choose exactly where you want to stand in terms of the quality you offer

Where you want to stand as in, how high-quality do you want your goods to be?

You can run a premier bakery offering whatever items you choose...

Cooked with incredible recipes and wrapped up in beautiful containers - sold at a high cost.

 Or not.

You can decide based on your previous experience, or just on how you want to be seen.

But the further you have to go to reach that skill level, the more time it will take to start up (duh).

What you want to offer is not as simple of a decision...

With so many options, and with a million times more variety in HOW you will prepare and deliver said options, you can specialize in baked goods in general, a certain type of baking like cookies or cakes, or even in a specific baked good.

Options for Home Bakery Goods:
  • Chocolate Croissants
  • Butter Croissants
  • Chocolate Chip Cookies
  • Jam Thumbprint Cookies
  • Chocolate Thumbprint Cookies
  • Ice Cream Cake
  • Normal Cake
  • Fruit Pies
  • Cobblers
  • Cream Pies
  • Sugar/Cinnamon Cookies
  • Brownies
  • Candy Bars
  • Bread
  • Jello Cakes
  • Sweet Bread

This list is far from comprehensive.

The options that other cultures offer, as well as variants on the items mentioned, plus whatever confection you yourself can invent, make the true list virtually endless!

For home bakers, though, you may be left with less options than the typical strip-mall bakery.

After all, you are likely starting out with just a few pots and pans and limited ingredients.

If you have a couple killer recipes, just stick to that couple - worry about expanding your offerings later.

Before you start ANYTHING, you need to first figure out the identity of your business.

Then, you will have yourself a plan of attack that you can shape the rest of your efforts around.

B. Pro et confection - The Pros and Cons of Baking

Yeah, the latin root is actually “pro et contra.” But I’m trying to be punny here, give me a break.

Starting out this article, I listed a huge pro of the bakery business: a large market. 

Everyone loves sweets.

But this is far from the only advantage - and certainly just one of many pros that exists among equally many cons. 

If you want to run a strong business, you first need to make sure that you are ready for the challenges that it will throw at you, so it is important to consider them along with the benefits.

While the pros and cons of your business will differ based on your location, you yourself, and the type of business you’re gonna run (refer to number 1), there are some general pros and general cons that typically apply across the board:

Pros
  • If baking is your passion, you can make your vocation your avocation 
  • You’ve got a relatively open market for your goods (if they’re actually good)
  • You have a ton of options to choose from
  • It is pretty easy to start a home bakery
  • Depending on perishability, your goods can be sold both locally and online
  • There is a creative aspect to baking that can be personally and financially rewarding
Cons
  • Perishability of goods is an innate con; your food will usually be less perishable than most local restaurants’, but it is still not a great quality to have in a product
  • You’ll face government safety regulations when baking food for sale
  • It is not a given that people will enjoy your baking as much as your loved ones “do”
  • You’ll face considerable competition if you don’t stand out
  • If demand grows, you’ll need to develop real infrastructure (acquiring a bakery with greater production power). Granted, this is not a bad problem to have.

To be honest, there isn’t much worry about that government regulations part if you are starting out small.

Although once you are making good money you will have to take them very seriously.

But when you begin your growth, you can just focus on making some goodies and finding people to buy them.

The 11 Ingredients a Good Home Bakery Kneads

1. Knowledge of baking (Basics & Advanced)

This can mean anything you want it to mean.

Don’t leave a gas burner on overnight? Sure.

Don’t put too much butter or flour into cookies? Sure. 

Whatever will keep you from making inedible food or hurting yourself or others (either with the food or the appliances) is something you’ll need to learn.

It’s advised that you learn some of the science behind baking, and cooking and ingredients in general, as well as how different recipes come out to be what they are.

The same ingredients, put together in a different order and in different amounts, cooked in different ways, can be the difference between a cake and a cookie, a croissant and a muffin, or a cake and a fudge.

In fact, all six of those different foods can be made using the same ingredients.

Although understanding the utensils and appliances, as well as the ingredients and the science behind them and the baking itself is important, you do not need formal education.

There are thousands of articles online, videos, and even courses that will explain the basics and the advances of baking for free.

Here are some free baking classes on Skillshare:

Surprisingly, there are courses on a wide variety of baking...

From making French Macaroons to decorating cookies... making texturized buttercream cakes, and easy sourdough breads, and everything in between.

You don't have to be a flavor scientist to start a home bakery.

And after all, people made delicious goods before ever even considering what tastes go together perfectly, or the ratio of flour to butter, or whatever.

It helps, but practice makes perfect.

2. Recipes (The Blueprint for Your Premium Cakes)

As a home bakery business, if you want to sell products, it needs to taste good.

You have a business model that can start out with some pretty high profit margins, all things considered. 

You could sell brownies from $1-5 depending on the quality, and produce them for only between 5 and 20 cents, depending on the batch size and the quality.

Of course, this requires that you have your recipes perfected - or perfected enough for people to enjoy.

Recipes may end up, for some, being the biggest challenge you face as a home baker. 

You’ll need to have friends and family who will be honest with your recipe.

You’ll need to go out there and test it, making sure that your future customers will come back and recommend their friends.

Overcoming a Lack of Recipes:
  • You can use your grandmother's old recipes
  • You can experiment and make your own
  • Find someone else's recipe online to start experimenting with
  • Ask relatives and close friends for their grandmother's recipes

Either way, and no matter if you’re selling danishes, bear claws, cakes, cookies, brownies, bars, or what have you, your stuff has to taste good.

Similarly to recipes, though, your food has to also look good.

This can be a part of the recipe, but it chiefly has to do little with the taste and mostly with the look that is specific to your business...

3. Get Creative (Your Edge in the Baking Marketplace)

Getting creative with your baked goods is important, no matter the item.

If your recipes are good, that is the most important aspect of the business out of the way.

Now to make the actual cookie, croissant, and cake look good.

On certain products this is easier.

On others, it may be unusual for it to have some sort of identity linked to your business.

A great example is a cake versus a chocolate chip cookie.

A cake can have differently-colored layers, and you can go crazy with the icing, spelling out whatever you want, adding whatever cookies, gumdrops, dots, or patterns you’d like.

A chocolate chip cookie, on the other hand, won’t have such options.

While you could add nuts, change the color of the cookie, or change up the ingredients slightly - is it still the chocolate chip cookie we all know and love? No. 

However, you can be the bakery that sells tiny little chocolate chip cookies in packs of 10, or giant, 6-inch wide cookies.

You can also do your best to make sure all of your cookies are evenly-shaped, with chocolate chips scattered evenly about the golden brown cookie.

Another option is getting nice wrapping - but we’ll get to that a bit later.

It ultimately is up to you how much decoration and style to implement into your products.

 Whichever path you go, and whichever baked goods you end up selling, the fact remains that having nicer-looking goods that stand out from the competition will benefit you.

4. Utensils & Utilities (Have the Right Tools?)

To bake things, you of course need to have...

  • Spoons
  • Knives
  • Whisks
  • Sieves
  • Bowls
  • Plates
  • Pans
  • Pots
  • Refrigerator
  • An oven (convection if possible)
  • A range/stove top
  • Foil / Seran Wrap
  • Storage space for all of this stuff

In other words, you need a kitchen. Obviously.

Depending on the products you want to make, you may need certain types of pans and pots - dark-colored or light-colored?

You may need a certain capacity in your fridge - does it have enough room to store a batch of fudge? (This ties in with knowledge of baking.)

It is also important to get high-quality utilities that are made for the baking and storage requirements that you’ll be subject to.

You don’t want your cookie dough stored in the freezer to be in a bowl that will crack open when you decide to take it out to finish up the batch.

While you don’t need some $2,000 KitchenAid, you definitely need hardware able to handle high quantities of high-quality goods.

5. Ingredients (Supply line is Essential to Success)

Obviously, you can’t make this stuff out of thin air. Need I explain? No.

But I’m going to anyway.

It’s not just about having the raw materials needed to bake a cake or a brownie.

Your recipes may differ from traditional recipes, and it is always good to explore other options...

Even if those options include some super rare nut that isn’t common at grocery stores (remember, you have to stand out from the competition).

It is also wise to consider the difference that high-quality ingredients will make to the finished product, depending on what that said product is.

Chances are, the best cookie, cake, and brownie you’ve ever had from a restaurant was made there from scratch - and definitely not with some frozen cookie dough or some prefabricated pillsbury brownie mix.

This is no coincidence.

However, you don’t need high-quality ingredients.

You simply just need ingredients that you will be able to put together in such a way that people will buy them.

But of course, the best possible recipes call for the best possible ingredients - but also fetch the best possible price.

6. Cottage Food Laws (and Other Regulations)

While this isn’t too important if you’re selling to your friends and family, you can still be taken down easily if you don’t operate under the gov’t’s food safety regulations.

Handling food comes with risks - food poisoning, allergen contamination, and a bunch of other disgusting conditions that I would rather not remind you all about.

So some might argue that the government is doing a good thing by ensuring that food providers like home bakeries follow procedures to keep customers from risk.

These laws are known specifically as Cottage Food Laws...

Like the image above states, "cottage food laws are basically laws that allow small-time producers to use appliances in their homes to bake, cook, can, pickle, dry, or candy certain low-risk foods for sale."

"By contrast, state laws require all other food producers to process foods in licensed kitchens."

But let's be honest.

This is the government.

If it were as simple as “don’t keep raw meat with cooked meat,” “wash your hands,” or the other basics, this would be no problem. 

Unfortunately, and especially with baked goods, the government overextends their authority and decides to place strict, specific measures on what constitutes food safety.

And while these MUST be followed - fines can range into the tens of thousands and restaurants are fully liable for health damage - they shouldn’t be a huge consideration if you’re just starting out and working out your recipe.

Don’t take this as formal or legal advice - I am not responsible for your kitchen mishaps that get your customers sick.

All I’m saying is deal with the problem when it arrives.

If you are not yet selling to a lot of random people or if you haven’t even sold outside your social circle at all, the problem of figuring out the regulations is a non-problem.

But when you get to that point, you should be diligent.

Speak to other bakeries, consult online resources (fda.gov, usda.gov), and contact your state & local officials for information. 

It is not worth the fines, and it is certainly not worth losing business when a health inspector scores your business low.

7. Acquire Necessary Licenses & Permits (More Red Tape? Ugh!)

Again, you can look up this information or call your local or state officials.

There are some general permits that you’ll need, amongst a few that may be required locally or state-wide.

Technically, even if you start a home bakery, you’ll need a business license.

You’ll usually get this from your county or state.

Of course, you’ll also want to register for an actual business (I’d recommend an LLC), and if necessary, a DBA for that business.

You’ll also, technically, need permission from the health department and possibly even the fire department for the safety of your building - whether or not customers are allowed in.

There is a lot of paperwork involved in business.

But luckily, when you’re starting a home bakery, the paperwork needed is immensely low, relative to other business models. 

However, if you want a squeaky-clean business, it is worth it to spend the few weeks/months and the couple hundred dollars to research and acquire all the necessary permits and licenses.

Some services, however, like ZenBusiness.com, will provide everything for you. 

They will ask you some questions, charge you a fee, and send the paperwork to your state to be registered.

Services like this also act as your own registered agent, which can be very helpful to a small-time sole-proprietor.

You may also need a sales permit, but only if you are required to charge sales tax.

Read more about that below.

8. Find Out If You Need To Charge For Sales Tax (Get Your Numbers Right and You'll Succeed)

This is a big one - that’s why I separated it from the previous items.

If you know one thing about the government, you know it also loves its money - and it does not play around with unpaid taxes.

This is why it is extremely important to know if you are required, by any governing body you are ruled by, to charge sales tax for your items.

Some states don’t charge sales tax at all, some states don’t charge sales tax on groceries, etc.

If you must charge sales tax, you have two options:

Option One for Sales Tax:
  • Put the sales tax on top of your products as an added cost for customers
  • Consumers in states with sales tax know this process and we are used to it
Option Two for Sales Tax:
  • You can pay for your customers’ sales tax
  • You just can’t advertise that or even mention it anywhere

Funny enough, when you look through all the legal jargon, usually businesses can pay their own sales tax, only being a crime when they actually say they do it. (Welcome to the government.)

But don’t take my word for it.

I’m just some guy on the internet.

Find out if you need to charge sales tax and if you do, make your customers pay for it.

And again, you can find out this information from your government officials.

9. Wrapping & Branding (How Your Baked Items Arrive)

Pro Tip:

People don't care about your wrappers and boxes if they hold disgusting food. Customers want baked GOODS, not baked BADS!

Make sure your stuff is appreciated, then go bonkers with the customized wrapping if it fits.

Are you selling $8 brownies en masse?

Are you selling jars of cookies by the truckload?

Then maybe it’s time to invest in nice-looking containers.

But otherwise, just focus on the basics of wrapping and boxes with small, CHEAP touches that make them your own.

You can add stamps, ribbons, bows, and cheap color schemes to basic cardboard or plastic wrap containers and make them beautiful enough to attract customers.

After all, Godiva chocolate is my personal favorite brand.

They’ve got some nice golden wrappers, some of their products have metal containers - and it’s fairly high-quality chocolate - but how much do you think they invest in their containers?

Not much.

There pricing more than covers it. 

And the truth is, “not much” in the realm of wrapping baked goods is oftentimes too much.

10. Bake your stuff (Do what You do Best)

Time for the rubber to hit the road. This item is gonna be a short one.

Take your ingredients, your recipes, your knowledge of baking, and your utensils and appliances. Now take your hands and your brain and get to work.

Make some baked goods.

Make enough so that you will be able to lower the cost, but not so many that you won’t be able to sell them out before they spoil.

And for the love of Betty Crocker, test out your goods with people before you sell it.

And it goes without saying that you don’t want to be like Crazy Amy from Kitchen Nightmares.

Take criticism well.

They’re trying to help.

11. Sell Your Baked Items (to Stay in Business)

Now it’s time to get rich.

There are so many methods for acquiring customers in this industry that it would take a whole other article to spell it out. 

But of course, acquiring customers and keeping them is probably the most difficult aspect of running a business, perhaps second to hiring good employees (depending on the business you’re running). 

So considering this, I’ll just shoot through a few different methods that can see success:

  • Free samples

  • Door-to-door

  • dorm-to-dorm

  • eCommerce

  • trade Shows

  • Local Partners

  • Groups & Organizations 

Free Samples

Whether you set yourself up in a mall, outside of a grocery store, or even go door-to-door, free samples are a great way to not just test your product, but to get your name out there. You can also bring large platters to community get togethers and increase your influence - if your stuff is really that good, people will recommend it and remember your name.

Again, there are plenty more ways to find customers. This list barely scratches the surface.

Get creative in your efforts to find customers and you will be greatly rewarded.

And remember - combining creative efforts just mentioned with creative designs and tasty recipes is all you need to succeed in your home bakery business.

But a strong marketing strategy requires more than just trade shows and free samples.

Ultimately, you will have to be prepared with a lead generation strategy that will attract new customers to your business on a consistent basis.

Fortunately we can teach how to do exactly that through our local lead generation coaching program and online course.

So with all this being said, does it still sound like a good idea?

Well it should - this business model is much more straightforward than at least 90% of the other entrepreneurial ventures available to hustlers in 2021.

And if baking is your passion, it is hard to find a more rewarding job than running a home bakery.

And who knows… Maybe you’ll open a storefront and a franchise, and maybe you’ll be the McDonalds of sweets.

Good luck with your home bakery business, and remember: you owe me for this advice. I’ll take your best brownie.

Successful Bakeries Have This One Thing in Common...

Customers.

It seems kinda obvious though, and even straight forward.

But, there are some nuances that some companies are able to quickly grasp as they are building their brand...

While others completely flop.

The idea is simple enough: have a predictable way to generate more customers.

But how?

Just starting out, you don't have brand/name recognition, or even a foothold in the market.

This isn't exactly a problem for new bakeries either...

It's a problem that every single new business owner faces.

If you're interested in finding out how to solve that problem, I can show you.

Click here and I will explain the whole process on another one of my blog posts.

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