Do you want to start a baking business from home? If YES, here is a complete guide to starting a baking business online with NO money and no experience.
Okay, so we have provided you an in-depth sample baking business plan template. We also took it further by analyzing and drafting a sample baking business marketing plan backed up by actionable guerrilla marketing ideas for baking businesses. In this article, we will be considering all the requirements for starting a baking business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Baking Business from Home?
If you are one of those that enjoy baking and equally have that entrepreneurial spirit, then the baked goods business is definitely one which you should consider starting. This is due to the fact that there are a number of people who prefer to buy baked goods than making it themselves.
In starting your baking business, you will need to have sufficient skills and the knowledge necessary to safely prepare food and also know about potential dietary issues. Dietary issues are important as they will help you know how to label your baked goods appropriately so that those that have allergies to certain ingredients can be aware of what they are purchasing.
Starting a Baking Business from Home – A Complete Guide
- Industry Overview
The baking business industry is very vital to the economy of the United States of America as its total GDP for the economy amounts to nearly 2.1 percent. Those that own baking businesses, product wholesalers as well as other businesses directly or indirectly under this industry have employed close to 1.76 million Americans as at 2010. Those employed earned more than $90 billion in wages and benefits.
According to statistics, the market for baked goods globally is expected to exceed $485 billion by the year 2020. The increase in demand is caused by demand for organic, healthy and natural baked goods. The largest market worldwide comes from Europe, where demand for fresh baked products in stores are very high.
Another fast growing market is that of the Asia-Pacific with a CAGR of over 6 percent and this is due to the rising population as well as a change in the consumption trends. Also, the middle class in Asia is gaining affluence and as such has lost its appetite for rice and have started taking wheat based foods such as bread in place of rice.
In the United States of America, there are about 2,800 commercial bakeries that bring in an annual revenue of $36 billion. There are also close to 6,000 retail bakeries that bring in an annual revenue of $3.8 billion. The commercial side of the industry is heavily concentrated as the 50 largest companies generate about 75 percent of the industry revenue. The retail aspect is however not as heavily concentrated as the commercial aspect and therefore the 50 largest companies generate only about 15 percent of revenue with many companies in this bracket owning just one facility.
According to IBISWorld, the profitability of the industry will improve over the next five years especially as the prices of the primary ingredients used in baking will stabilize. This will allow bakers over this period to easily anticipate fluctuations in prices and also be able to adjust the prices of their own baked products even as the ingredients costs continue to rise. Therefore revenue for this five year period is expected to grow annually at an average rate of 0.6 percent which will amount to $40 billion over this time period.
According to analysis, most customers prefer their products to be freshly baked and this reason is what caused an increase in the purchase of bakery products. 11 percent of customers claim that they buy at least one baked product every week, while 22 percent bought at least once a month. Most people who consume baked products are very particular about the taste of the products and to them it is important that the product have a good taste than for it to be healthy.
In the bakery industry, cake sales are the most significant as they represent nearly 29 percent of the whole industry. Out of this percentage, 51 percent are mostly decorated cakes and dessert cakes with about 10 percent for cupcakes. Therefore households are usually the best customers for cakes. Hispanics for instance spend close to 17 percent on cakes more than the average household.
The recovering economy will see an increase in disposable income and with customers’ new health conscious trend, there will be demand for baked products that are organic, gluten free and other products such as fortified products. Competition externally has increased over the past five years, with imports projected to grow annually at 7.1 percent and exports expected to increase by 9.8 percent over this time period.
Starting a Baking Business from Home – Market Research and Feasibility Studies
- Demographics and Psychographics
The demography and psychographic composition of those who take baked goods is quite huge as it cannot be restricted to a certain class of people, age group or race but cuts across all these factors. This is because baked goods, except for a few set of people, are consumed by nearly everyone.
Therefore, if you are thinking of defining the demographics for your baking business, you should be ready to make it all-encompassing.
List of Niche ideas Within the Baking Industry That You Can Specialize in
The baked goods business is one that covers a whole lot of baked goods and so to start this business, you will need to understand what you are best at, so you will focus on that before expanding your business to accommodate other baked goods.
Due to the fact that there are several niche ideas in the baking business, small businesses usually start off with handling just one or two niches, while larger companies are usually able to handle more niche areas thereby getting more customers.
Some of the major niche areas for a baking business are;
- Sit down bakery
- Video tutorials
- Online bakery
- Specialty bakery
- Counter service bakery
The Level of Competition in Baking Industry
The level of competition in the baking business industry has a lot to do with the location of the business. As a bakery, you cannot operate from any part of the country, as you must be physically located close to your customers, especially as people prefer to consume freshly baked goods.
This trend has made it very favorable for large scale baking companies who have physical facilities in locations where there is likely to be a huge demand for their baked products. This equally has made it very hard for smaller bakery companies to compete, especially those who have just one facility and therefore cannot meet up with demands in other areas. Asides from location, equipment needed in order to meet up with large demands also favour the larger bakeries than the smaller bakeries.
In terms of ensuring that customers get personalized services, the smaller bakeries have an upper hand over the larger bakeries as they have been able to meet up with the desires of the customers by offering specialized handcrafted products. The larger bakeries are not able to replicate this due to the fact that they produce their baked products en mass in order to meet up with the basic growing demands of their customers.
List of Well-Known Baking Business Brands in the Industry
Every industry has brands which are well known and the baking business industry is no different. Most of these brands that are well known have deployed certain strategies that have enabled them to stand the test of time. Some of these strategies could include; publicity and advertising strategies, pricing strategy, penetration strategy as well as other kinds of strategies.
Therefore, below are the well-known baking businesses in the United State of America as well as globally;
- Bakers Delight
- Allied Bakeries
- Dunkin’ Donuts
- Bimbo Bakeries USA
- Finsbury Food Group
- Flowers Food
- McKee Foods Corporation
The baking business suffered a bit during the recession but has started showing signs of recovery with an increase in demand for baked products that are not only small and easy to hold in size but ones that also have natural and organic ingredients.
According to the Center for Economic Vitality, the baking business industry in the United States was comprised of two sectors; the commercial and retail sectors and both brought in a combined $33 billion in revenue annually. Although the commercial bakeries were fewer in number – 2,800 – when compared to the retail bakeries – 6,000 – it was the commercial bakeries that brought in more revenue for the industry, close to 91 percent.
The baking business industry is a challenging place and so in order to survive, wholesalers and retailers in the industry have had to adapt and remain proactive. Some of the challenges that have been faced have been from a saturated market, increased competition as well as fluctuating prices in food and fuel, which has led them to use future products in order to limit the number of losses to be incurred.
Due to the economies of scale, smaller bakeries are finding it hard to compete with larger bakeries, with some of these small bakeries being bought off by the larger bakeries.
Bakeries are becoming proactive as they have begun to use the trend in consumer taste to not only stay in business but increase their sizes as well. Smaller bakeries have been able to create niches for themselves by giving their customers handcrafted artisanal products, a feat that larger bakeries, due to their mass production cannot attain. Also, most bakeries are now making use of par-baked products so as to meet the growing demand and cut down on baking time.
According to the Consumer Price Index for Food as well as the United States nondurable goods manufacturers, the increase in shipments of food products has shown that the revenue in the bakery industry has increased as well better than previous years.
Starting Your Baking Business from Scratch versus Buying a Franchise
As an entrepreneur, starting your business from scratch or buying a franchise is a decision that will purely be based on what your corporate end goals and vision is. Both options have their disadvantages and advantages and so you must carefully weigh them to decide what is best for your business.
Starting from the scratch will allow you learn thoroughly about the business and you will be able to determine what routes you should take and can also change a strategy that isn’t working well for your company. However, starting from the scratch means you are prone to making more mistakes during startup, which if not well handled well might lead to your business failing.
On the other hand, buying a franchise means allowing the company whom you are buying the franchise from handle certain decisions for you, such as marketing, paperwork and products. This option is good if you want to understand how the business is run without having to worry about starting from the scratch.
It is however important to note that you cannot change strategies as you aren’t fully in control of your business. This therefore means that you would need to conduct a thorough research on the company from which you intend to purchase a franchise from so as to know what exactly you are getting into.
Possible Threats and Challenges You Will Face When Starting a Baking Business
Every business faces challenges and threats either during the course of start up or during the course of running the business and the baking business is no different. Having challenges and threats is not important as being able to handle them when they eventually crop up.
And so the threats and challenges that you are likely to have when starting your baking business in the United States of America are; change in consumer tastes and desires, an increase in competition, a saturated market, and fluctuations in prices of ingredients. As an entrepreneur, you should be aware of these trends and have laid down plans on how to combat them.
Starting a Baking Business from Home – Legal Matters
- Best legal entity to use for a baking business
When starting a business, you will need to worry about what legal entity would be best for your business and the baking business is no different. This is why it is important that as one who is about to start a business, you approach an attorney or an accountant who is well versed in the business you are going into, and can look at your business and tell you the pros and cons of each legal entity which would then help you determine what legal entity would best suit your baking business.
As a new baking business, you are faced with three legal entities option such as C Corporation, S Corporation (S Corp), and a Limited Liability Company (LLC). Choosing any of these three legal entities will help you avoid personal liability that you are likely to incur in the course of running your baking business, as your liabilities will not only be separate but will be limited to the capital which you have invested into the business.
The C and S Corporations are not really different with the slight exception of taxes. A C Corporation for instance pays tax on the profits the business has generated. For an S Corporation, the business is not required to pay taxes, as it is the shareholders in the company that are taxed on their profits.
A Limited Liability Company (LLC) is one that has the combined advantages of a corporation and the tax benefits from a partnership form of legal entity. This means that profits are reported via tax returns. Most entrepreneurs starting this kind of business usually go for an LLC, with others going for an S Corporation and only a few going for a C Corporation. The reason why only few go for a C Corporation is that they are not tax friendly.
Catchy Business Name Ideas Suitable for a Baking Business
Choosing the right business name for your bakery business is very important as the name should be unique, creative and memorable for customers and other stakeholders in the industry. The business name should also indicate the industry you are in for easy referencing.
Therefore, if you are considering starting your own baking business, here are some catchy names you can choose from;
- Bakers World
- Tasty Delight Pastries
- Unik Cakes and Bread
- Sheila’s Cakes
- S&M Foods Corporation
- Miller’s Bakery
Having insurance for your bakery business is mandatory if you intend to operate your business without any sort of hitches in the United States of America. There are several insurance policies that you would need to get, and while you might need to create a budget for those you intend purchasing, it would be best if you first approach an insurance agent or broker, so as to be guided on the best insurance policies for your baking business.
Some of the basic insurance policies that you should however look towards purchasing if you intend to start your baking business in the United States of America are;
- Workers Compensation Insurance
- Unemployment Insurance
- Disability Insurance
- Medical Insurance
- Commercial Vehicle Insurance
- Bakery Insurance
Intellectual Property Protection/Trademark
Getting intellectual property protection for your baked products might be easy enough to apply for in principle in order to protect your designs, especially if you are a cake designer. However, enforcing the IPP law in this industry is hard and very expensive; also even if the case is taken to court, one might likely not win.
Therefore most entrepreneurs in this industry usually do not bother with applying for an intellectual property protection except when they have to apply for IPP on their company logo, slogan or jingle.
Is Professional Certification Needed to Run a Baking Business?
Even though the baking business is one that is based on skills, having a certification or more will go a long way to boost the profile of your business and allow you to be able to bid for jobs at corporate and other levels. And so while some entrepreneurs do not deem it necessary to get any certification due to the small scale operations they might be operating, others are doing so in order to have an edge over their competition and because once you have reached a certain level, then it is deemed necessary.
Some of the certifications that you would need to look on getting in order to run your baking business and stand out are;
- Baking and Pastry Arts Certification
- Retail Bakers of America (RBA) Certification
- Certified Journey Baker (CJB)
- Certified Baker (CB)
- Certified Decorator (CD)
- Certified Master Baker (CMB)
It should be noted that the more certifications you acquire, the easier it would be for you to be able to compete and bid for jobs.
List of Legal Documents You Need to Run a Baking Business
Every business requires a list of legal documents that will enable it run legally in the United States of America and the bakery business is no different. Regardless of the fact whether you intend to run your bakery business from home or from a leased facility, there are certain documents that you will need to possess so that you don’t risk running into problems with the regulated authorities and get banned from ever running the business again.
Even though certain documents might differ depending on the state you intend running your bakery business from, there are some legal documents that remain basic. You should however find out from your state what will be needed to run your bakery business. But some of the basic legal documents you would need to run your business are;
- Certificate of Incorporation
- Operating Agreement
- Business License and Certification
- Business Plan
- Contract Document
- Food Preparation License
- Food Handler Permit
- Insurance policies
- Employment agreement
- Federal tax identification number
- Employee Identification Number (EIN)
Once you have found out all the necessary requirements and have met them, you will need to pay a fee and complete an application in order to obtain the necessary licenses which will include a food handlers permit as well as a food preparation license. Also, the necessary authorities may have need to inspect the location where you intend to use in baking goods for sale.
It will also be in your business’ best interest to create labels that will indicate the ingredients and nutritional contents in the baked goods you intend to sell. The packaging and labeling has to meet the guidelines of the local health department as well as the Food and Drug Administration.
Financing Your Baking Business
Every business idea remains so if there is no finance to ensure that the idea becomes reality, which is why having the necessary finance to start and run one’s business is very important. Finance is one of the reasons why it is important to write a business plan as this will detail what your business is about, how much your business needs as well as possible ways to generate funds to run the business.
Therefore, some of the options that you can explore when you are sourcing for start-up capital for your baking business are;
- Sourcing for start-up capital from investors and business partners
- Raising capital from personal savings as well as sale of personal stocks
- Raising soft loans from family members and friends
- Applying for loan from the bank or financial institution
- Approach the Small Business Agency (SBA) for loan
Choosing a Suitable Location for your Baking Business
Choosing the right location for your baking business will depend on the scale of business you intend to run. If you are going to be running a small bakery business, then you might need to run it from home. If however, you intend to run a large scale business or intend to be serious with your bakery business, then you would need to lease a facility.
Before starting your bakery business at home, you must endeavour to carry out a research based on the laws regarding baking from home in your jurisdiction. This is because in some jurisdictions, selling baked goods from your kitchen is prohibited.
After conducting your research, it will be necessary for you to contact your state’s department of licensing and inspection so as to further learn if operating your bakery business from your kitchen is legal. If it is legal, you might need to carry out some requirements like renovating your kitchen and having an official from the health department carry out an inspection on your premises.
If you are going to be operating from home, you might need to create a website and use social media platforms to reach a wide range of your customers to spread more awareness about your bakery business. However, you should be aware that you would only be able to cater to those in your locality as consumers want the fresh taste of baked products.
Starting a Baking Business from Home – Technical & Manpower Details
In starting your bakery business, you must not be only concerned with your capital and location but also the equipment and ingredients you would need as well as those that will be needed to work in your bakery. Also, you would need to ensure that your products meet the taste of your customers.
Regarding the equipment you would need for your bakery business, the basic equipment you would need are; boxes, cardboard containers, Styrofoam, bags and cellophane. You will also need packaging supplies and labels.
The number of employees you would need in order to effectively run your bakery business successfully are; the chief executive officer, admin and human resource manager, marketing executive, business development executive, customer service executive, accountant, driver and associates. In summary, you would need at least 8 key people to start your bakery business and run it successfully.
The Production Process Involved a Baking Business
Baking businesses usually control inventory from the point of production to the point of sale. This is because the perishable nature of the most of the ingredients means that production must be synchronized with demand. Demand is often planned based on orders, thereby lowering the occurrence of surplus.
Meeting the demands of customers can be very hard, which is why baking companies that engage in direct deliveries to even the point of purchase have found it easy to understand the consumption pattern of consumers. This is why most bakeries operate an automated system so as to get information that is up to date so that sales and production can easily be synchronized with the demand of consumers.
The baking process usually involves purchasing the ingredients and scaling it, mixing, shaping, fermentation, baking and then cooling before the goods are packaged and sold to either retailers or consumers.
Starting a Baking Business from Home – The Marketing Plan
- Marketing ideas and strategies
Running a bakery means you would need to get the necessary customers that will allow you to generate the intended revenue for your business. Even though almost anyone can bake and sell, it takes those that have something unique to offer to be able to stand out from others, even those baking the same thing.
And so, to be able to prove your worth to your market, you will need to ensure that you build a loyal customer base with your unique baked goods that might start with your family members, friends and neighbors.
Marketing your bakery business is one way by which the major part of your revenue is going to come from and so it is necessary that you draft effective marketing strategies that would allow you to not only penetrate your target market and capture their attention but also to have a fair share of the market and compete favorably against your competitors.
Before drafting your marketing strategies, it is very important that you know who your target market is and understand their needs before striving to meet those needs and this can only be done once a market survey has taken place. A market survey is very important because it will take several factors such as your location, your product, your target market and your competitors into consideration.
After conducting a market survey, you would need to ensure that you create a compelling profile for your company and even for yourself. It is important to allow your customers and stakeholders know if you have any qualifications and experience as it would allow you to have an edge over your competitors. The profile of your company will also help boost your chances in the market place especially when it comes to bidding for jobs from certain institutions.
Therefore, some of the platforms that you will need in order to market your bakery business in the United States of America are;
- Ensure that you introduce your bakery business formally to the corporate target market and other stakeholders by sending a brochure with the picture and description of what you do and their prices with your contact information attached
- Ensure that your bakery business is listed in local directories (yellow pages) as well as online directories
- Ensure that your bakery business is advertised in local newspapers and food magazines as well as on radio and television stations
- Empower your marketing and sales executives to engage in direct marketing and sales on behalf of your bakery
- Use the internet and social media platforms – such as Facebook, Twitter, Instagram and YouTube – to market and grow your business
- Encourage your loyal customers to help spread word about your bakery
One of the competitive strategies that you would require in order to stay ahead of your competitors is to ensure that you offer unique recipes for your baked goods so that customers will always have a reason to patronize your product. Another strategy is to ensure that you offer your customers incentives and discounts on your products whilst also ensuring that your prices are affordable.
Strategies to Boost Your Baking Business Brand Awareness and Create Your Corporate Identity
Every business no matter how long it has been established requires a constant promoting of its brand awareness. The reason why even companies that have had customers and even been in the game for long still engage in publicity and brand awareness campaigns is because it is a way of continually communicating the values of the company as well as what it stands for. Also, publicity ensures an increase in revenue generation.
The internet has however made it very possible for businesses who are new and might not have a large budget like its already established competitors to be able to engage in publicity campaigns that have far reaching effects than would have been possible if using physical strategies only. The internet has also allowed businesses to be able to penetrate the market and get a fair share of the market whilst also favorably competing against its competitors.
However, not all brand awareness campaigns have to be online as one should be able to promote the brand offline as well by ensuring that they advertise in print magazines and also join bakery and other related associations in order to network and have contacts that might be helpful for future purposes.
Below therefore are some of the platforms that can be leveraged on to boost one’s brand and increase awareness of one’s bakery business;
- Encourage loyal customers to engage in word of mouth publicity
- Ensure that adverts are placed in local newspapers and magazines as well as on radio and television stations
- Make use of the internet and social media platforms such as Facebook, Twitter, YouTube Linkedin and Instagram to increase awareness and also promote the baking business
- Distribute handbills and fliers in strategic locations around the area where the bakery is
- Create an official and interactive website and employ Search Engine Optimization (SEO) strategies in order to pull traffic to the site
- Ensure that the official car and other attires worn by the staff during work hours are branded with a unique logo