How to Start a Cupcake Business
Cupcakes and cupcakes businesses are very hip now. Maybe its because the decorating possibilities for them are enough for keep an art student busy for months. Maybe its because these little cakes help people from overeating -- cupcakes are literally single serving cakes. Or maybe because many states, like Arkansas, Oregon and Florida, have passed Cottage Food Laws that allow people to make cupcakes and other baked goods at home in an unlicensed home kitchen.
Even if you don't live in one of these states, you can still make cupcakes at home after a visit from the Health Department, or if that becomes a problem, you can rent space (like two nights a week) in a licensed kitchen. Keeping your baking and your family kitchen separate is often a good idea.
There are no shortage of cupcake recipe books available, and there are at least six cupcake decorating books I know of. In terms of buying a book about starting a cupcake business, your only real option is Paula Spencer's Start a Cupcake Business Today
PRICING THE CUPCAKES
The best news about cupcakes is what you can sell them for. While someone may give you a look for asking $3 for a chocolate chip cookies, a fancy cupcake can easily go for that. What you need to do to price your cupcakes effectively is to figure out exactly how much it costs you to make each cupcake. This is like any other home bakery product, or retail bakery product for that matter. There are sophisticated software packages available for professional bakers, but hopefully you can work your costs out on a piece of paper or maybe an excel spreadsheet. Don't lose that piece of paper - file it with your other business documents. This whole process is called "costing" your recipes in bakery business terms, by the way, and the entire approach is referred to as "price-driven costing".
Do your calculation for each kind of cupcake you want to sell, and remember to pay yourself for the time it takes to make the cupcakes, package them, and sell them. Pay yourself at least minimum wage for your time spent doing all these tasks. The Federal Minimum wage is currently $7.25. Paying yourself is a best practice, but you should know that many small business people do not pay themselves for their time. You can get away with not paying your, but it is a sign of weak business or a weak business model... or just the sign of a business in the early start up phases, when you have to stretch every dollar.
Also remember to set aside money for state sales tax, (unless you are going to charge your customers for that, but messing with pennies can get to be a pain), and set aside both Federal business tax and payroll tax. Generally I set aside about 25% of each sale just for taxes. Putting aside 30% is not overkill. If you can add up all the ingredient and packaging costs, plus your time costs, plus your transportation costs, plus the taxes, and still come to a figure that is below what you are selling each cupcake for, you are making a profit. Congratulations.
WHERE TO SELL THE CUPCAKES
You can sell cupcakes at farmer's markets and other venues pretty easily. If you have an Iphone or a similar smartphone, and a business checking account, if you download the app "Square" you will be able to process debit and credit cards on the spot. Of course, you'll need a good enough cell phone signal for the credit card processing to work... I hope you don't have AT&T.
The best places to sell cupcakes are at established businesses, like restaurants and coffee shops. Bring each store 2-3 samples (with a business card attached to each one), and write the cost of producing and delivering those samples off to your advertising budget. Bookstores that also have coffee bars are great too, as are internet cafes, and even some vending machine arcades. If you can get a steady delivery schedule going with one of these places, you will have secured a beautiful thing: steady, reliable sales. Have a cupcake to celebrate.
LEGAL REQUIREMENTS & NAMING YOUR BUSINESS
There's another article on this site about naming a business, and all that will apply to cupcake businesses, too. Also, the legal requirements for cupcake businesses are the same for any home or retail bakery, so its best you read that article for the details in it, too.
WRITING A BUSINESS PLAN
Even a little home cupcake business deserves a business plan. You do not need to write a 100 page corporate plan; even ten pages is a great start. The nice people at SCORE or your local business development office can review your plan and give you some tips if you feel like you don't know what you are doing. And here's an excellent business plan outline.
MARKETING A CUPCAKE BUSINESS
For the basics, you will need business cards, a website, a Google business listing, a small phonebook listing, and some brochures. You can use your car for advertising if you get a car magnet. Buy the $30 or $40 car magnets, not the $15 ones (they blow off when you drive over 50 miles an hour). If you have the budget, see if you can't get a deal on a little 1/8 of a page ad to run for at least three months in your local newspaper or magazine. And, of course, Craig's List is free advertising.
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Start a Home Bakery
Buying a Bakery
How to Open a Bakery
How to Start a Cupcake Business
Start a Dog Bakery
Cottage Food Laws and Home Bakeries
Write a Bakery Business Plan
Choose a Name for Your Bakery
Bakery Equipment - What You Need to Start Your Bakery
Bakery Management Software: Spend a Little or a Lot
Starting a Catering Business
Startup Costs for a Home Bakery
Startup Costs for a Retail Bakery
Licenses and Permits Required to Start a Bakery
Create a Great Bakery Storefront
Developing a Bakery Brand Identity
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