Do you want to start a cookie baking business from home? If YES, here is a complete guide to starting a cookie baking business with NO money and no experience.
Okay, so we have provided you an in-depth sample cookie baking business plan template. We also took it further by analyzing and drafting a sample cookie baking marketing plan backed up by actionable guerrilla marketing ideas for cookie baking businesses. In this article, we will be considering all the requirements for starting a cookie baking business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Cookie Baking Business from Home?
If you have always had friends, family members, neighbours and colleagues rave about your cookies, then it is high time you start a cookie making business. You should however know that starting a cookie making business is different from making cookies to feed your friends and family as you would need to get a permit, acquire a business license, keep record of expenses and income, ensure that you have passed the food inspection test from the agency and also create effective marketing strategies in order to attract the right customers to your business.
Though the business is quite competitive, but if you have done your due diligence and have promoted your business properly, you are sure to break even in a short while. Below is a step by step explanation of how to set up a profitable cookie making business.
Starting a Cookie Baking Business from Home – A Complete Guide
- Industry Overview
The cookie industry which is combined with the cracker making industry has about 300 companies in the United States and they bring more than $11 billion revenue into the industry. However, only about 50 companies in this industry account for nearly 90 percent of the industry revenue.
Companies in this industry usually make food items such as fresh baked cookies, snack chips, fresh baked bread, hard or soft pretzels as well as refrigerated dough mixes. Demand for products in this industry is often driven by a growth in population and taste of consumers. The profitability of individual companies in this industry depends on the efficiency of these companies, a strong sales force and effective marketing.
According to IBISWorld, the industry – which is a combination of cookies, crackers and pasta – is one that generates revenue of $26 billion and grew at a 1 percent rate during the period of 2011 to 2016. There are more than 2,400 of such companies in the United States of America which employs more than 53,000 people. The industry over the period of 2011 to 2016 has grown due to the stable demand for its products.
Other factors that have contributed to the growing demand are the rise of cooking shows which has allowed the younger generation to get interested in baking. Also, fall in prices of key input products such as sugar has allowed producers to get high profit margins while still keeping the prices low to maintain their large customer base.
According to a recent study by Mintel International, the cookie and cookie bar market is valued at $5.2 billion. According to the study, even though brands have had to cope with sluggish sales, few brands have changed their marketing strategies and this has helped them offset their overall sales. The study has also shown that adults from the age of 18 – 44 are the major consumers in the target market enjoying all the new types, brands and flavors of cookies as opposed to the thinking that the major consumers were those from ages 6 – 17.
A decline of 2.3 percent has been experienced by the cookie and cookie bar market. The market share in the industry as regards products is mainly dominated by Standard Cookies. Even though cookies which are regarded as healthier have flooded the market, it has not had much success against standard cookies as consumers are likely to eat fewer cookies than having to buy healthy cookies. The losses experienced in the healthy and premium cookie segments in the industry has been offset a bit by the shift of consumers to private-label offerings.
According to research, sandwich, soft chocolate chip as well as vanilla wafers are the three most popular cookies that are consumed in the United States of America. Black and Hispanic households prefer vanilla wafers, while Asian households prefer chocolate chip cookies that are crunchy in nature.
Starting a Cookie Baking Business from Home – Market Research and Feasibility
- Demographics and Psychographics
The demographic and psychographic compositions of those who take cookies are quite diverse and therefore cannot be restricted to a certain group of people. Those who love cookies however have the flavors they prefer.
The ages of those who are habitual takers of cookies are 6 to 17 for children and teens, 18 to 44 for adults and 45 upwards for the adults and middle aged. Therefore, those who eat cookies cannot be restricted to a certain group of people.
List of Niche ideas Within the Cookie Baking Business That You Can Specialize in
The cookies making industry is one that caters to cookies and cookie bars as well as other types of baked goods. In starting your own cookie making business, you will need to know what kind of cookies you intend to make, know if you will be offering your customers only cookies or if you intend to add other products in order to attract more customers.
While it is usually easy for large scale companies to offer more niches, smaller scale companies usually concentrate on offering just one or two niches so as to concentrate in giving their customers quality products. Below therefore are some of the niche ideas you can focus on when starting your cookie making business;
- Gourmet cookies
- Wafers and ice cream cones
- Crackers and biscuits
- Dry pasta
- Flour mixes and dough
The Level of Competition in the Cookie Making Industry
There is an intense level of competition in the cookie making industry and most of the dominant companies in the industry are usually in more locations, enabling them to boost their sales. Therefore, location has a lot to do with the success of your cookie business as most people usually prefer fresh cookies.
Large scale cookie companies dominate the industry because they are able to be in more locations than the small scale cookie companies. The inability to be in various locations at once has made it very hard for small scale businesses to compete and therefore has led to the latter resorting to different means in order to stay relevant.
While large scale cookie companies might have the economies of scale as regards equipment, labor, finances and ability to be in different locations, they are only able to mass produce a certain type of cookie at a given time. Small scale cookie companies on the other hand, are able to offer their customers specialty cookies and are able to bake different kinds of cookies in order to meet with the different tastes of their consumers and so in this aspect, the small scale cookie companies are able to compete against large scale companies.
List of Well – Known Brands in the Cookie Baking Business
In every industry there are brands that are well known and the cookie making industry is no different. The brands may have been popular due to their publicity strategies, their pro-activeness, their marketing and sales strategy, their pricing strategy, or how long they have existed in the market.
Below therefore are some of the well-known cookie making businesses in the United State of America and globally;
- Kellogg’s US Snacks Division
- Pepperidge Farm, Inc
- Mondelez International
- Brent & Sam’s Cookies
- Interstate Bakeries Corporation
- General Mills, Grupo
- Tasty Baking Company
- Richmond Baking
- Ralcorp, Rich Products Corporation
- Bloomfield Bakers
Demand in the cookie making industry is usually driven by the preferences of consumers as well as the places they prefer to purchase their cookies from. Most consumers usually prefer to purchase their cookies from grocery stores rather than commercial cookie stores.
Individual profitability for companies is largely determined by how efficient their operations are. Large scale companies are usually at an advantage especially in terms of procurement, production and distribution. Small scale companies on the other hand, use specialty goods to be able to compete over the large scale companies.
The profitability in the industry is expected to improve in the next five years especially as the cost of primary ingredients is expected to stabilize. This therefore means that during this time period, cookie makers are expected to easily anticipate fluctuations as regards to pricing and therefore use that to adjust the prices of their products even when the cost of ingredients rise. Companies in the industry are expected to merge, and acquisition is also expected to occur in a bid to enhance earning and productivity.
Households with children generate the largest portion of revenue for cookies. According to research, a household with married couple that has children are 54 percent more likely to spend on cookies than the average household without children. This percentage is however increased to about 73 percent if the household has children that are of school age. Even though the spending on cookies fell between the periods of 2000 to 2006, it has remained steady from that time period.
Starting Your Cookie Making Business from Scratch vs Buying a Franchise
The option of whether to start your business from scratch or to buy a franchise totally depends on what goals and vision your company has. Whichever option you decide to go with has its own pros and cons and so you must conduct thorough analysis in order to know which option will be best for you in the short and long run.
The advantage of a franchise is that you will not need to bother about paper work or having to market your business, as all these aspects will be handled on your behalf, leaving you with just having to deal with the sale of cookies.
Possible Threats and Challenges You Will Face When Starting a Cookie Making Business
There are always possible threats and challenges facing a business. While some of these threats and challenges might not materialize, as an entrepreneur, it is necessary that you remain proactive by having laid down strategies to deal with any threats and challenges that are likely to occur in the business.
Therefore, some of the threats and challenges that you are likely to face when starting your cookie making business in the United States of America are; an increase in competition from new entrants, dealing with already established and dominant cookie making businesses, fluctuation in price of ingredients and a change in consumer taste and preferences.
Starting a Cookie Baking Business from Home – Legal Matters
- Best legal entity to use for a cookie baking business
Cookie making businesses are often faced with three kinds of legal entities to choose from out of the five legal entities that exist in the United States of America. Therefore, the three legal entities that you would need to choose from are sole proprietorship, corporation and Limited Liability Company (LLC). The option with which legal entity to choose are often hinged on the ease of set up, flexibility, tax implications, issue of liability and so many other factors.
A Limited Liability Company (LLC) is a hybrid sort of legal entity because it takes several advantages from the partnership form of legal entity and from the corporation form of legal entity. The LLC is easy to set up and does not require all the formality of the corporation, which is why most entrepreneurs starting this business usually prefer to choose an LLC as their legal entity.
Catchy Business Name Ideas Suitable for a Cookie Making Business
Choosing a business name for your cookie making business is very important as the name you choose will go a long way in determining how customers perceive your business. It is important that you choose a name that is unique, creative and memorable.
Therefore, if you are considering starting your own cookie making business and are stumped for names, here are some that you can choose from;
- Tina’s Cookies
- Paul’s Gourmet Cookies
- TTT Cookies Inc
- Mama Dermot Cookies
- Crunchies Cookies
- Delta Line Cookies
If you intend starting your cookie making business, there are a number of insurance policies that you will need to purchase in order to protect your business and self from liabilities that are likely to occur. If you are confused on what insurance policies to choose for your cookie making business, you could approach an insurance agent or broker so as to be guided on the best insurance policies for your cookie making business.
Some of the basic insurance policies that you should however look towards purchasing if you intend to start your cookie making business in the United States of America are;
- General Insurance
- Liability Insurance
- Workers Compensation Insurance
- Unemployment Insurance
- Disability Insurance
- Medical Insurance
- Commercial Vehicle Insurance
- Bakery Insurance
Intellectual Property Protection/Trademark
Even though you will be making products that may be unique in design and taste, but applying for an intellectual property for these unique designs may result to wasting your resources as implementing laws against design and taste theft in the cookie making industry might be hard. Therefore, most entrepreneurs do not bother at all in applying for an intellectual property protection.
If you are however concerned about your company logo, trademark, slogan and production materials, you might apply for an IPP on them.
Is Professional Certification Needed to Run a Cookie Baking Business?
Baking is based on skills and constant practice, therefore professional certifications are not really considered by most consumers in the industry. While there are some cookie makers that have undergone some sort of certification, it is not a parameter for anyone intending to start their own cookie making business.
If you intend to get some degree or certification, it would most likely be used to give your company profile a boost but will not increase or decrease the number of consumers who buy their cookies from you.
List of Legal Documents You Need to Run a Cookie Making Business
It is very important that you have a list of legal documents before starting your cookie making business in the United States of America. This is because you cannot run your business legally without having these basic documents and if you attempt to, your case will not be treated lightly as you might not only pay a fine but be banned from ever running the business or something similar to it. Therefore, in order for you to run your business in accordance with the law, it is important that you get the necessary documents.
It should be noted that the documents may differ depending on the states where you will be operating your cookie making business from. But by and large, the documents listed below are the basics you will need to run your cookie making business;
- Certificate of Incorporation
- Operating Agreement for LLCs
- Business License and Permit
- Business Plan
- Insurance Policies
- Employment agreement
- Contract Document
- Food Preparation License
- Food Handlers Permit
- Federal tax identification number
- Employee Identification Number (EIN)
Financing Your Cookie Making Business
If you have a nice concept without having the necessary finance to bring it into reality, your business idea would remain just an idea.
Therefore some of the options that you can explore when sourcing for start-up capital for your cookie making business are;
- 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
- Sourcing for capital from private investors
Choosing a Suitable Location for your Cookie Baking Business
Another important decision you will need to make when starting your cookie making business is where you intend to locate your business. There are some cookie making businesses that are being run from home and if this is your intention, then you might need to visit the city hall to know if making cookies for sale from your residential kitchen is allowed. If yes, you might need to make some renovations to the kitchen to meet the standards of the state.
Those entrepreneurs who usually start their business from home in states where it is allowed are those who intend to run the business either on a part-time basis or on a very small scale and do not intend to make the business into one that will become nationally known. If however, your intention is to run your cookie making business as a full scale business that will be nationally and internationally known, then you might need to rent or lease a facility.
Starting a Cookie Baking Business from Home – Technical and Manpower Details
In starting your cookie making business, you would not only need to be concerned with how much you have to start the business, where you intend to locate the business and what scale of business you intend to run, but you will also need to be concerned with where to source for your ingredients and how many of your equipment you would need to get brand new and others fairly used. If you will be getting your equipment for fairly used, ensure that is still in good condition so that it will last you for a long time.
If you intend to lease or rent a facility for your business, it has to be one that is large enough to contain all your equipment and also be conducive enough for your employees. Therefore, regarding the equipment that you would need in order to start your cookie making business, they are; oven, mixers, mixing bowls, sheet trays, labels, packaging materials et al.
The number of employees that you would need to be able to run your cookie making business successfully are; chief executive officer (owner), admin and human resource manager, marketing and sales executive, business development executive, customer service executive, accountant, cleaner and driver.
In summary, you would need at least 9 key staff in order to not only start but run your cookie making business successfully.
The Service Delivery Process of a Cookie Making Business
The process involved in making cookies for sale usually starts from sourcing for the necessary ingredients. Due to the fact that most of the natural ingredients used are perishable in nature, entrepreneurs often try to ensure that they synchronize demand with production. While cookies can stay for a long while on the shelf, cookie makers try not to cause oversupply in the market.
Once the ingredients have been sourced, they go through the production process such as mixing, shaping, baking and then cooling before they are then packed and labeled to be sold to either grocery stores or directly to retailers.
In selling to grocery stores, entrepreneurs usually have to compete with other brands and will therefore need to engage in certain measures such as marketing and publicity in order to get consumers to notice their products.
Starting a Cookie Baking Business from Home – The Marketing Plan
- Marketing ideas and strategies
Every business is established with the aim of generating revenue and maximizing profit and the major way by which revenue can be generated is through marketing. Marketing is not an aspect to be taken lightly because it will involve you using your unique selling point to stand out and compete favorably against your competitors. Marketing strategies that are done right enables the business to penetrate the market.
In order to draft the right marketing strategies for your cookie making business, you would need to conduct a market survey. The importance of a market survey is to allow you know who your target market is, what they expect from you and what you should expect from them as well.
Because marketing can be a bit overwhelming, some entrepreneurs usually seek the services of a marketing consulting company who has an understanding of the industry, to help in creating the needed marketing strategies that will help the company generate revenue that will grow and sustain its business.
Some of the platforms which you can leverage on to market your cookie making business are;
- Introduce your cookie making business formally by sending a brochure with pictures of your cookies, your prices as well as contact information to industry stakeholders
- Place adverts about your cookie making business in local newspapers and magazines as well as on radio and television stations
- Ensure that your cookie making business is listed in yellow pages as well as online directories
- Engage in direct marketing in order to generate revenue for your cookie making business
- Use the internet and social media platforms such as Facebook, Twitter and Instagram to market your cookie making business
- Distribute handbills and fliers in various strategic locations
Strategies to Boost Your Cookie Brand Awareness and Create Your Corporate Identity
If your dream is to grow your cookie making business beyond your region or locality to become a national and even international brand, then you have no choice than to create publicity for your business.
There are a combination of methods that can be used to achieve this and the internet has made it really easy for businesses to get the needed publicity. The internet has also made it cheap and therefore a little budget can go a long way.
If you are just starting your cookie making business, you might find publicity a bit overwhelming and if this is the case, you can always hire a publicity consultant to help you draft the right strategies that will allow you boost the awareness of your brand and also create a corporate identity for your cookie making business.
Below are the platforms that you can use to boost the awareness of your brand as well as create a corporate identity;
- Distribute your handbills and fliers in conspicuous and strategic locations
- Encourage your loyal customers to engage in word of mouth publicity
- Visit forums and blogs that are popular in order to create awareness for your cookie making business
- Place adverts in local newspapers and magazines as well as on radio and television stations
- Create an interactive website and use that to create awareness
- Make use of your social media platforms such as Facebook, Twitter and Instagram, to create the needed awareness for your cookie making business