How To Start Your Own Bakery Business From Home – The baker in you wants to spend her days creating chewy cookies and decadent cakes. The entrepreneur in you wants to be your own boss and make decisions. But the realist in you knows that you may not have the resources or time to open your own bakery.
This type of small business allows you to cook your own way, be your own boss, and work from home instead of renting expensive storefronts and hiring a team of employees.
How To Start Your Own Bakery Business From Home
If you are wondering how to start a bakery business from home, then you are in the right place. Here’s a step-by-step guide to turning your home kitchen into a small-batch production powerhouse.
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A home-based bakery is a business, which means it is still subject to state and local laws regarding food, business licensing, and taxes. In addition, there are complex laws regarding the sale of food from home.
Here are some general guidelines, but as laws vary from place to place, check with your local food and trade regulatory agencies before proceeding!
Home bakeries are usually covered by a section of the Act called Cottage Food. This classification separates home bakeries from commercial or retail operations with storefronts or industrial kitchens. Commercial bakeries must meet certain equipment and cleanliness requirements, while artisanal bakeries are exempt from most of these regulations.
Cottage foods are regulated on a state-by-state basis, but are often limited to shelf-stable products that don’t require refrigeration…perfect for baked goods!
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To ensure that these home food businesses do not grow too large (to prevent larger operations from circumventing retail baking regulations), cottage bakeries typically have sales restrictions. They also have rules about who they can sell to. A cottage bakery is usually designed to sell directly to the consumer, so you can’t sell to your local grocery store or bakery.
The first step in this process is to evaluate the regulations where you live. Your state and local health department should be able to provide more information about cottage food laws in your area.
When starting a home baking business, there are other legal considerations to consider before tying on the apron. Some states require a business license to operate a home bakery. Depending on your state, you may need a Food Manager license from the Department of Health.
It is necessary to create a business entity such as a limited liability company (LLC). As an individual or sole proprietor, setting up a company against running your business protects your personal assets from legal liability in the event of a lawsuit. You may also need an insurance policy. Make sure you consult with a cottage food expert and/or attorney for advice on the best way to proceed.
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One of the cardinal rules in business is always to keep business banking separate from personal banking. This means setting up your own business bank account, which you can do after you set up your company.
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You may also be charged sales tax and/or food tax on the items you sell. You should carefully track your sales and document their distribution to ensure that you pay the appropriate amount of local and state taxes.
Once you understand the rules and regulations and set up your company, the fun part can begin!
Most home bakeries make cookies, breads, muffins, cupcakes, or cakes. As your own boss, you can choose to build what you like (and choose not to build what you don’t). Auguste School of Culinary Arts Baking and Pastry student Katie Swalog bakes her famous cookies in her home bakery!
“Right now, when I’m in school, I still make cookies and cookies [at my home bakery] to focus on my school and maintain 4.0s and perfect attendance.” Cathy Swalog, Associate Professor of Baking and Pastry*
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Remember local laws when planning your menu! Remember, in most cases, the end product needs to be shelf-stable, so anything that requires refrigeration is usually not an option.
One of the best things about home bakeries is their flexibility. Let’s say you go to the farmer’s market over the weekend to sell pre-sliced banana bread. You will hear from some people that they love your banana bread and they would buy a whole loaf! Easy for you — you can offer both my languages next weekend
Wholegrain breads for those who crave them, as opposed to sticking to a pre-set menu. You can always switch things up, experiment with different ingredients, or scale back when things get a little busy.
Don’t know what to cook? Education in baking and pastry arts introduces students to a variety of bakery products. Also, with an online program, students can practice their techniques in the comfort of their own home kitchen, which is perfect for the home baker.
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Once you know what you’re getting into, you can get what you need to execute your recommendations. Whether it’s a variety of cake or candy tins, loaf tins, cupcake liners, piping bags and tips – make sure you have everything ready to go and a place to store it.
Some states’ cottage food laws require that bakery equipment be kept separate from personal kitchen equipment, so keep extra space needs in mind. Keep track of the cost of all your supplies to account for them when setting menu prices and paying taxes.
Pricing baked goods is about looking at what your competitors are charging and not just looking at what they’re doing. Your baked goods should cover the cost of your ingredients, labor, and additional expenses like business fees and farmers market fees, while still having some left over to make a profit. But how to determine these numbers?
Create a spreadsheet of each component you plan to use and the common denominator cost of each. For example, you can list the cost of:
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Maybe you plan to sell cupcakes. Based on your spreadsheet, you can add flour, sugar, baking soda, vanilla, eggs, etc. to your recipe per batch. you can calculate the cost. If a dozen eggs cost $3 and you use two eggs in your recipe, you know that those two eggs cost $.50.
Suppose a batch of cupcakes costs $5.00. Then divide the total cost of the batch by the number of cupcakes in the batch. For a $5.00 batch that yields 24 cupcakes, the cost per cupcake is $0.21 $5.00/24 cupcakes = $0.21 per cupcake. Remember, this is only the cost of the materials needed to make the item.
Next, calculate how long it will take to make a batch of those cupcakes. It will probably take you a total of two hours to mix the batter, bake, decorate and wrap two dozen cupcakes.
How much can you expect to earn per hour if you work in a bakery? Let’s say you are paid $15 an hour. So a total batch of cupcakes is worth about $30 of your time.
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, divide the total dollar value of your time by the number of cupcakes. $30/24 cupcakes = $1.25 labor per cupcake.
Consider what other costs there are for your business. This may include fixed costs such as farmers market fees and monthly website fees. Also included are variable fees that vary based on how much you sell (such as label and packaging costs) and your baking needs (think parchment paper and cupcake liners).
These values can be difficult to estimate until you have some experience and know how many items you sell per month, but do your best to calculate your total monthly overhead and divide it by the number of items sold. expects to sell per month. , When starting out, you may want to reduce your sales so you don’t fall into the hole from the start.
For easy math, let’s say your monthly cost is $100 and you sell 400 items per month at a markup of $0.25/item. $100 overhead / 400 items = $0.25 per item.
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Cost of goods sold (known in the industry as COGS) is the total cost of producing all the items you plan to sell. Add up each of these individual costs to determine the cost of ingredients per cupcake!
In our example: food cost $0.21 + labor $1.25 + overhead $0.25 = $1.71 per cupcake.
You have now
