Start a Home Bakery

If you are a whiz at baking, someone has probably said "you should go into business" over the years. Whether you are at the daydreaming stage or the planning stage, here are a few things to inform your musings.

Home Versus A Retail Location

Starting a home bakery instead of one at a retail location does have its benefits. The primary one is that you won't have to pay for expensive retail space. The secondary benefit is that you will be at home, which can be essential if you have small children. Running a bakery is no part-time job -- being able to put in your 40-50 hours a week while you talk to your eight year old while she does her homework is easier than talking to her for 15 minutes over the phone while you toil away in the back of a dark shop.

A disadvantage of having a bakery in your home is that, well, its in your home. There are a lot of distractions at home -- are you disciplined enough to stay focused and just leave things undone around your house? The other problem is your kitchen. Almost all home bakeries start in someone's kitchen, and while that makes great use of all the equipment you already have, it means making dinner may get complicated if you have a big order to fill. It also means that the primary room in your house is about to be taken over by your business. That may or may not be a big deal.

A related problem is storage. To get good prices on your materials you will need to buy in bulk. That means you will need, at the very least, a space as big as a small linen closet to store your bakery equipment and materials. A walk-in closet is much better and much more realistic. Also remember that whatever space you choose has to stay relatively cool. A garage that hits 80 degrees in the summer is going to do unpleasant things to stored dry goods.

Know Your Market

After scoping out your home to see if it can double as a bakery, the next issue is your market. Just because some friends told you that you should go into business does not mean you should go into business.

Where are you going to sell your baked goods? The farmer's market? Local restaurants and coffee shops? Other local bakeries? Have detailed talks with the owners at these places -- a casual remark across the counter where someone says "sure, I'll sell your cookies" is not a business deal. At the very least, sit down with these people and get them to look you in the eye and say they will give your baked goods a try. Be clear about what you will charge, and what they will make.

Find out if there are other home bakeries in your area. Do they specialize in anything? Finding a niche is the single best way for any home business to become successful. If there are no good bread sources in your town, you might want to put aside your prize-winning cookies for a few weeks and get really good at making bread. To be a success you'll need to learn how to be flexible like that.

Run the Numbers

The point of a business is usually to make money. Frankly, many people do get started for other reasons, like they need a new project to stay busy, or they see an opportunity to fund their favorite hobby. Either way, you need to know from the start whether this is going to be a money-making or money-losing venture. So fire up your computer and Excel, or break out a pad of paper and start listing every expense you can think of. Break out your expenses into two categories: Overhead, or ongoing costs (like having a listing in the phone book, or allocating $100 a month to cover the extra fuel all your cooking uses), and one-time costs. One-time costs are things like buying new equipment, or having a CPA or accountant setup a financial system to track your business expenses.

Figure out how much profit you can make on each batch of whatever you're making. Include packaging, and include paying yourself at least minimum wage for the time it takes to make and deliver the baked goods. Also include the time it takes to talk with owners, pick up empty trays and discuss new places to sell your wares.

Find Out What Licenses You'll Need

Get the specifics of what documents you'll need to start a home bakery. At the very least, you'll need to get an EIN number online, then a business certificate, then a checking account and business cards. And because you'll be making food, your county may require you to get an inspection done. All this may take a month or two to get in order.

Write a Business Plan

All the topics we've covered should be put down in writing. They're your business plan. Having a business plan in writing (NOT in your head) will make your business 50% more likely to succeed. It will also be a great way to show your family and friends and potential business partners and local retailers that you have thought through what you're doing. It makes you look good and trustworthy. It makes you look like a good business owner. And, actually, by spelling out all these things, you'll be well on your way to being a good business owner.

Start a Home Bakery

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