Information on Starting an At-Home Bakery
Everyone has told you that you should try selling your cakes/cookies/bread/etc. At every potluck or party someone requests you bring your signature _______, and with your office job slowly sapping all the joy out of your life, maybe it’s time for a change.
For several years I ran a small bakery out of my home kitchen, primarily focused on providing specialty decorated cookies and some gluten free products. Before culinary school I was entirely self-taught, having learned how to cook and bake through some hilarious trial-and-error montages, as well as obsessive marathons of Alton Brown’s “Good Eats” television show. I can’t tell you whether a home bakery is the right move for you, but there are certainly insights that I’m happy to provide.
The Legal Stuff
Kitchen Certification: To (legally) sell products that you made in a home kitchen, you need to get your kitchen certified as a home processor business. The laws for this vary from state to state and county to county, do some Googling to figure out what your local restrictions and requirements may be.
Taxes: Before you sell your first cookie, you need to know about sales tax and how much to put aside for the tax man. Believe me, I know it sucks. You’re trying to get a business off the ground but you can’t enjoy a large percentage of your profits either from sales tax or income tax. The good news is that if you’re being diligent about paying those taxes (which will prevent trouble down the road), you can also deduct a lot of expenses. Car mileage and gas expenses from driving for business related reasons, a portion of your home utilities, possibly even a portion of your rent. Talk to an accountant to see what deductions are available.
Business License: The requirements for this will vary widely depending on where you are. The piece of advice that I received, from someone who probably wouldn’t want their name attached to this advice, was that “As long as you have your tax ID set up to pay sales tax, the rest of the legal stuff can wait until you’ve already started.”*
What are you selling? This might seem like an obvious question, and it is. It is extremely obvious. But seriously, what are you selling? Are you famous for your pecan fudge, but you have no idea how to bake a pie? You probably shouldn’t offer pies. There’s a tendency to want to diversify. You want to sell as much as possible so that more people come in to buy your products. But you’ll only end up alienating people if you’re selling a lot of ‘maybe okay’ products around your spectacular one. Have the confidence in the item that started your passion for the business. If you want to add variety, or if you have more than one thing that you’re really good at, by all means Sell Sell Sell! But don’t feel the need to add products just for the sake of adding products.
Where are you selling? Depending on the laws where you are it might be perfectly possible to have people come to your home and buy your products directly from you. Unless you’re comfortable having total strangers know where you live, and drop by at any time, I wouldn’t really recommend it. One of my favorite places to sell was at a farmer’s market, where I was able to chat with customers, give out samples to greedy, misbehaved children, and barter with other sellers for my groceries that week. It was actually a ton of fun. I also had a small but dedicated wholesale market, where I would provide my products to local shops. Finally: I sold online. And while I had a lot of online orders, that ended up being the most stressful and painful part of my business. This will depend a great deal on what you’re selling, but in my case I was trying to ship highly perishable items as cheaply as possible. Because who wants to pay $30 to ship an $8 product? I had products spoiling before they arrived, or not arriving at all, or arriving damaged.
How are you packaging your products? When someone is buying your artisan bread, it’s pretty easy to put it in a paper bag and hand it over. When someone is buying a beautifully decorated cake, you need a cake box. No matter what you’re selling, it needs an ingredient list and a notice whether it contains any potential allergens.
Making It: You’re probably selling products for money, and it’s very important to know how much you’re making. This isn’t always as easy as counting all the cash from the farmer’s market. How much have you spent on ingredients? How much of those ingredients or extra products got thrown away? That’s money you’ve spent and will not get back. Every business has a certain amount of waste, it’s inevitable, but make sure you know how much you’re losing and that you’re making more than that number.
Spending It: In order to be a professional business it’s necessary to spend some money. You need quality ingredients, decent packaging, mode of transportation to get your products to the customer, and potentially a lot more kitchen equipment to accommodate making a lot more products. Don’t let your business fail because you refused to put the necessary start-up funds into making it good.
NOT Spending It: But if you don’t desperately need something to make your business work, don’t get it unless you’re very comfortable spending that money. Something I learned after my first gig working at a commercial kitchen: They don’t buy anything they don’t need. And it’s a good mentality. There’s less junk filling up the space, and they’re making a lot more money because of it. When I started my at-home business I was so excited by everything I was going to make that I spent a lot of money I didn’t need to. I bought packaging in bulk because of all the future sales I’d have, I bought expensive equipment I didn’t need because I was a “Professional” now. But you know what professionals use? The cheap stuff that works and has always worked for them.
Something that I wish I had known when I started my business is that there are LOTS of people near you who want to help. Your local chamber of commerce for a start, other small business owners who have networking meetings in your area, and your friends and family. It's really hard to get started, and you're going to have a lot of doubts in yourself and your products. But a networking group and local support is invaluable assistance.
One book that I really wish I'd read first was "The E-Myth Revisited". (linked below) It's a fantastic book that goes into a lot of detail about the aspects of running a business you probably haven't considered.
If you’re about to start an at-home bakery I am very excited for you. It’s a fantastic process and something that will only grow your skills and passions. Feel free to comment below with any questions and I’ll do my best to answer them.
*I am not qualified to give tax or legal advice. If you encounter any problems and blame it on my advice I will laugh at you.
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