We are so excited that you have decided to join the community of bakers. For us, baking is a way to relieve stress. We love getting in the kitchen and creating delicious items. We love to experiment with flavors and techniques to try to create desserts that everyone loves.
We want to help you start your journey and by providing you with a checklist of items to complete when you decide to start your own bakery business. These are the different steps we took to establish our business. Some of the steps may apply to your situation, and some of the steps may not.
This is a guide to help you get started. Please be advised that we are not lawyers and cannot provide any legal advice. The only thing we can do is provide you with the common steps and processes for registering your baking business. This article is not a step-by-step guide but should be used for general guidance and direction for starting your business.
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Create A Business Plan
The first step is to create at least a simple business plan like this one here. Before you invest the money into registering and creating your business, you will need to decide what kind of business you want. When you are developing this business plan, ask yourself the following questions:
Who is my ideal customer?
How do I envision my business to work?
Where do I envision my business to work, i.e. online, storefront, events only, catering, personal, etc?
Who do I envision working for my business?
For a baking business, the biggest question you will face is to go commercial kitchen or bake from home. Like everything, there are benefits to both. Baking from home requires fewer start-up funds, but limits where and how you can sell your product. Commercial kitchens can be hard to acquire and are more expensive to start and maintain.
Research Food Laws
You need to research food laws in your state. Many states have what is referred to as Food Cottage Laws. These are laws to allow individuals to run food businesses from their homes. Each state is different. It is very important for you to check with your local health department to learn more about Food Cottage Laws in your state.
If you want to do a Food Cottage kitchen, then I would suggest you joining Facebook groups to find a support team to help you with the challenges that a Food Cottage kitchen faces. We have found this group here to be a helpful community when facing challenges with a Food Cottage kitchen, and we found this group here to have great resources for Food Cottage kitchens in the United States.
Determine The Business Type
After you have determined the type of kitchen, you will need for your business, you then need to decide which type of business you want to establish. To determine the benefits and drawbacks of each business type, we would suggest consulting with a lawyer. There are four different types of business classifications.
Limited Liability Corporation
Again, we are not legal professionals and cannot advise you on how to structure your business. However, we highly suggest you spend a good amount of time weighing the risks and benefits to each business structure to determine the right structure for your business.
Register Your Business
It is important to establish your business and to obtain all required permits to operate legally. Now, this process is going to look different for each business based on where you are located. I am a big believer in online resources and research. I hate calling people, but for many of these steps, it will require you to call your local regulatory agencies.
You will need to register with your state. Many states have online resources on how to register in the state, but most states require you to register with the Secretary of State. However, your registration process does not stop here. Once you register at the state level, you will then need to check local regulations. If your business model is not as simple as a storefront (such as online bakeries), then we highly suggest you contact the local business agency to determine the proper way to register your business.
File For An EIN
Not all states and local authorities will require you to have an EIN before you register your business. However, it is important that you file for an EIN as soon as you register your business. This step is where you register your business with the federal government.
DO NOT!! I repeat, DO NOT run your business without insurance. You need to protect your assets and your family. It is important that you buy insurance. You can get it relatively cheap. Probably cheaper than you actually think. We get our insurance currently through here. I have actually seen quite a few people with a Cottage Law business use and recommend this insurance company as well.
Once you get your business license, EIN, and your business registered, you then need to register for your taxes in your state. When we filed, it was separate from federal registration. We had to register for tax purposes in both states that we operated in. Do not skip this step. You need to know when you have to pay your taxes and how much sales tax to be collecting.
Now that you have gotten the most important steps to starting your business, its time to focus on actually building the business. There are some things that you will need to set up for your business.
Reserve Your Domain Name
There are many different sites to use to reserve your domain name. You will want to reserve your domain name through a service like GoDaddy or Google Domains.
If you choose to build your website through Wix (more on that next), please note some packages include a free domain. We made the mistake of purchasing our domain, and then we were offered a free domain with Wix.
Once you reserve your domain name, go to each social media site, and reserve your name. If you are wanting ideas on naming your bakery, then go here for a list of ways to name your bakery business.
Our world is a digital world. If you want to be successful, you must be both on and offline. This means that you need your own website. Now, not everyone is a pro at building and creating websites, but there are a few options for building a website. For our website, we started with a paid Wix site. Wix is great because there are templates that you can use to create your website. If you are looking for something simple, then Wix is what you will want to use. You can learn more here.
If you have the extra money, but you do not want to spend the time building a website, then I suggest outsourcing your website. You can search online for website companies. If you have extra funds, but still on a tight budget, then you could look into different freelancers. I suggest using Freelancer, but there are also other companies like Fivver.
You can also do like many other people and use WordPress to build your website. One of the advantages of a WordPress site is the fact that you host your own website. This means you own and control what happens to the site. For example, if you build a website through Wix, Wix actually hosts your site. If something happened to Wix, then you lose everything from your site and will have to start over. The disadvantage of WordPress is that it is not user-friendly like Wix. If you choose to use WordPress, then you can grab great deals at BlueHost here.
Once you receive your important registration numbers and licenses, then you need to set up your business financials. This starts with obtaining a business account with a bank. You need to keep your personal finances separate from your business finances.
Point-of-Sale (POS) is an important part of product management and your financials. Even as a small business or home baker, you need to have a POS system. You can sign up for a FREE version of Square POS here. We faithfully use our POS at every event. If you want to know the importance of a POS even for a home bakery, then go here to learn more.
Research and get a payment processing service. In today’s world, our lives revolve around technology. We are firm believers that all companies should offer an option for card processing. Customers are notorious for not having cash with them. In our experience, we get more sales when we offer card processing. We use Square for all our events, and for our online sales, we use PayPal and Square.
Next, you need to set up your profit and loss spreadsheets or set up your accounting software. We use this profit and loss workbook that we built here. Our pastry chef spent 20+ years in accounting before becoming a pastry chef. She has helped build all our accounting tools to help ensure we capture all our expenses and to make sure we are priced for a profit. If you would like to get our profit and loss worksheet, go here.
This worksheet is for entrepreneurs who are starting up their baking business. It allows you to organize all your financials at a fraction of the cost of accounting software. (Please advise we are not CPA's, and this advice should not replace seeking professional accounting advice.)
If your budget allows for a more sophisticated system, then we suggest either Quickbooks or Cakes by Sysco. Both systems will help with accounting, but Cakes helps with ingredient management.
Pricing is one of the most important steps of setting up your business, and yet it seems to be the hardest for people. It is so important to us that we created a blog post all about Pricing Your Cakes To Make Money here. We even created a FREE email course called “How to take control of your pricing in 3 days”. You can sign up for free here.
We developed this simple pricing calculator here. This tool captures our costs for all our ingredients and accounts for our overhead. Then the tool automatically marks our products up to ensure we make a profit. This standardized method saves us time and money by allowing anyone in our business the ability to price out any recipe for our customers quickly.
Now that you have the most basic structure of your company completed, it is time to move onto the action phase of starting your business. Now you get to print business cards, create menus, and get clients. It's so exciting that you have made it to this phase of your business. Honestly, you should stop for a moment and pat yourself on the back. You did it. You have taken the first major step and started your business. Congratulations. You are now the proud owner of a business.
If you are looking for more advice and help with setting up your baking business, then check out these articles.
Go here to find out why you need to be using precision baking.