How to start the dessert or bakery business from home

Home-based dessert businesses are gaining popularity and are supported by cottage food laws in the U.S. Many people are choosing to change their career paths for various reasons. As restaurants struggle to survive in the current economic climate, pastry chefs are increasingly moving to start their own businesses. Busy working moms are opting for the flexible work schedule of their own businesses to spend more time with their kids, which full-time jobs often don’t allow. Accomplished professionals are shifting their career trajectories to pursue their passion for baking and open their cake shops and home bakeries.

You don’t need formal culinary training or food service industry experience to open a home bakery in the U.S. This journey includes several key steps, from meeting legal requirements to implementing marketing strategies — each one manageable and well within reach. Operating under cottage food laws is a popular option for home bakers as it often simplifies many of the regulatory requirements associated with starting a food business.

Here’s a step-by-step guide for opening a home bakery under cottage food laws:

Testing the Waters

• Plan Ahead
  Assess your financial situation thoroughly. Don’t quit your current job if you need stable income and don’t have savings to support you while starting the business. It might take some time to gain customer traction and achieve profitability.
  
  
• Just Start
  Obtain some initial equipment and recipes and start experimenting. Offer your baked goods to friends, family, and coworkers. Gather feedback to build confidence and gather data on the popularity of your items and potential improvements. For example, you might find interest in vegan, gluten-free, egg-free, flourless, or sugar-free desserts. Refine your recipes based on feedback to master your craft.
  
  
• Start Getting Orders
  When you begin receiving orders from your network, it’s a good sign of early success. Use this opportunity to dive into market research and legal requirements.
  

Researching and Planning

• Market Research
  Identify your target market and competitors. Research local preferences and see what is already offered by other bakeries. Visit cake and cookie shops, and home bakeries to learn about their successes and challenges. Determine if there are too many similar businesses and identify potential niches where you could succeed, such as offering unique custom cakes if there are no similar options in your area.
  
  
• Distribution Channels
  Examine how competitors market their products and the audiences they target. If they mainly advertise online to a younger audience, consider exploring in-person events, community centers, farmers' markets, and local cafes.
  

Meeting Legal Requirements

• Allowed Foods
  Cottage food laws vary by state. Check your state’s specific regulations to understand what types of foods you can sell, any production limitations, and where you can sell your products (e.g., farmers' markets, online, or direct to consumers). Typically, these laws cover non-perishable items such as baked goods, jams, and candies. Some states have restrictions on high-risk items like dairy.
  
  
• Check Local Regulations
  Research state and local regulations, including zoning laws, health department regulations, and home-based business rules. Resources like Forrager and guides for specific areas (e.g., San Francisco) can help you navigate these requirements.
  
  
• Business Structure
  Choose a business structure (e.g., sole proprietorship, LLC). Each has different implications for liability and taxes. An LLC can separate your business entity and protect you from personal liability. Consult a financial advisor or accountant for tailored advice.
  
  
• Business Name
  Selecting the right name is crucial as it helps establish your brand identity and impacts your success. Align the name with your bakery’s focus, whether artisanal or specialty. Ensure the name resonates with your target audience. Once you have a shortlist, check the availability of domain names and social media handles.
  
  
• Business License
  Obtain necessary business licenses or permits once you finalize your business name.
  
  
• Business Bank Account
  Open a dedicated business bank account.
  
  
• Accounting System
  Implement an accounting system to track income, expenses, and profits. This will aid in tax reporting and financial planning.
  

Setting Up Your Bakery

• Kitchen Organization
  Arrange your home kitchen to be efficient and compliant with regulations. This includes proper storage, cleanliness, and ingredient separation.
  
  
• Equipment
  Invest in the necessary baking equipment and supplies. Ensure they are well-maintained and sanitized.
  
  
• Commercial Kitchen
  For some products, you might need to rent commercial kitchen space to stay compliant. For example, while your state might allow you to bake cookies at home, you may need to use a commercial kitchen for making custom wedding cakes with dairy-based cream.
  

Obtaining Insurance

• Liability Insurance
  Even if not always required, liability insurance is advisable to protect against potential claims related to your products.
  

Branding and Marketing

• Brand Creation
  Develop a brand identity, including your website and packaging. Ensure packaging is appealing and compliant with labeling requirements. Create a website and set up social media accounts on platforms like Instagram, Facebook, and a blog to showcase your products. Develop consistent messaging and a unique brand personality.
  
  
• Marketing Strategy
  Develop a marketing plan to attract and retain customers, including local advertising, special promotions, and partnerships with local businesses.
  
  
• Sales Channels
  Sales Channels: Decide where you will sell your products. Options include local farmers' markets, online platforms, or direct sales through social media.
  

Managing Ongoing Operations

• Customer Feedback
  Continuously seek and respond to customer feedback to improve your products and services.
  
  
• Compliance
  Stay updated on any changes in local regulations and ensure ongoing compliance.
  
  
• Automate Processes
  Streamline operations by establishing a single channel for orders. As your business grows, direct all communications to this primary channel to optimize efficiency.
  
  
• Keep Records
  Maintain accurate records of sales, expenses, and inventory.
  
  
• Inventory Management
  Implement a system to track ingredients, supplies, and finished products to avoid overstocking or shortages.
  
  
• Cost Calculation
  Accurately calculate the costs of ingredients, labor, packaging, and overheads for each product. Ensure pricing covers these costs and provides a reasonable profit margin. Regularly review and negotiate supplier prices to manage expenses effectively.
  
  
• Competitive Pricing
  Set competitive prices that reflect the quality and uniqueness of your products. Consider offering premium options for higher-end items.
  
  
• Product Quality and Consistency
  Maintain high standards for taste, appearance, and freshness. Standardize recipes and processes to ensure consistent quality and efficient production.
  

Staying Motivated and Informed

• Continuous Learning
  Stay updated on industry trends, new baking techniques, and business practices. Attend workshops or join professional organizations related to baking and small business.
  
  
• Self-Care
  Running a business can be demanding, so manage your time effectively and take care of your well-being to avoid burnout.
  

Pursuing Growth and Expansion

• Build Relationships
  Network with local businesses, farmers’ markets, and community events to grow your customer base.
  
  
• Monitor Performance
  Regularly review business performance and customer feedback to identify areas for improvement.
  
  
• Expand Offerings
  Consider expanding your product line based on customer demand or exploring additional sales channels.
  
  
• Evaluate Opportunities
  Look for opportunities to collaborate with local businesses or participate in community events to increase visibility.
  

Seeking Help and Delegating

• Hiring
  As your business grows, consider hiring help. Start with part-time or contract workers for tasks such as packaging, delivery, or administrative work. Look for individuals who share your passion for baking and have relevant skills.
  
  
• Delegating Tasks
  Delegate tasks to free up your time for more strategic aspects of your business. This might include handling orders, managing social media, or maintaining inventory.
  
  
• Outsourcing
  Explore outsourcing options for specialized tasks such as accounting, marketing, or website maintenance. Professional services can help you manage your business more effectively and allow you to focus on your core activities.
  

We are building a dedicated platform for home bakers to help them run their businesses efficiently, allowing them to focus more on the strategic and creative aspects. Join our waitlist, and we’ll reach out with onboarding instructions when the time comes and we’re ready to welcome you to our platform.

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Photo by Mae Mu on Unsplash