Do you want to start a cake decorating company? If YES, here is a complete guide to starting a cake decorating business with NO money and no experience.
Okay, so we have provided you an in-depth sample cake decorating business plan template. We also took it further by analyzing and drafting a sample cake decorating marketing plan backed up by actionable guerrilla marketing ideas for cake decorating companies. In this article, we will be considering all the requirements for starting a cake decorating companies. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Why Start a Cake Decorating Business?
- Starting a Cake Decorating Business from Home – Market Feasibility and Research
- Starting a Cake Decorating Business from Home – Legal Aspect
- Is Professional Certification Needed to Run a Cake Decorating Business from Home?
- Starting a Cake Decorating Business from Home – Technical and Manpower Requirements
- Starting a Cake Decorating Business from Home – The Marketing Plan
Why Start a Cake Decorating Business?
This business is a great way to earn handsomely from what you enjoy or classify as a hobby. In the cake decorating business, each order is different, and people are always so happy and excited when they see the finished product. We believe there are a lot of misconceptions about running a cake business. A lot of individuals think it is just a hobby, as you can bake or decorate a two tier wedding or birthday cake in an hour.
But even though this may start out as a hobby for you, it is a business that can get you pocket large and filled. Note that passion and a talent for artistic culinary creations are a must if you are starting a cake decorating business, but it’s not enough. You have to have the organizational and business acumen for success.
It is very important to state that just like any other business; cake decorating requires hard work and long hours. But you can make those hours go by a little bit faster by learning the right way to run a cake decorating business. It doesn’t need to be for long, but you have to understand what starting a business looks like. Learn secrets, tips, and techniques to make your business as efficient (and delicious) as possible.
If you love to design and work with baked goods, consider combining those two talents to start a cake decorating business. We believe that this type of business doesn’t need a lot of resources, tools or equipment, and it is possible to start up the operation from your home. But to succeed, you need to diligently develop a list of regular clients.
Starting a Cake Decorating Business from Home – A Complete Guide
- Industry Overview
From our detailed research, we were able to note that businesses within this industry produce fresh and frozen bread and baked goods, including cakes, muffins and croissants but excluding cookies and crackers. Retail and commercial businesses in the industry sell these products to downstream supermarkets, convenience stores and food-service providers.
A lot of bakeries also sell their products directly to the public. With the economy recovering steadily and disposable income increasing, experts believe that industry revenue will grow at an average annual rate of 0.6% within the next five years to $39.9 billion. Also industry consumers are expected to continue to trend toward healthy eating and increase demand for items like fortified breads, gluten-free loaves and sprouted and organic sweets.
It’s very important that you understand that industry profitability will slightly grow over the next five years as the cost of primary ingredients stabilizes. Experts believe that within the next five years, bakers will more easily predict price fluctuations and adjust product prices as the cost of ingredients continues to rise.
One boon to profitability will be an annualized 1% decrease in wheat prices over the next five years. Merger and acquisition activity is expected to further enhance earnings and productivity.
We also believe that external competition has increased in this general industry over the past five years and imports will continue to grow at an annualized rate of 7.1%. But the ever growing demand for this product outside of the country will grow exports by 9.8% per year over the next five years and generate more income for the industry.
Starting a Cake Decorating Business from Home – Market Feasibility and Research
- Demographics and Psychographics
We all can agree that cake decoration is an art that is performed all over the world. Cake decoration is one of the sugar arts that use icing or frosting and other edible decorative elements to create patterns on plain cakes and make it more visually interesting.
A lot of people still see cake decoration as a hobby or passion; they are yet to see the profit potential of running a cake decorating business. You need to understand that cake is something that most people attach much importance to. For instance, no birthday party, wedding ceremony, event or anniversary would be complete without a cake.
So as a cake decorator, you will always be in business as long as people attach much significance to these events. Secondly, not only are people looking for attractively decorated cakes, they are also willing to pay anything just to have them.
Most people in the united states love cakes; men, women, kids of all ages, grandmas and grandpas – you name it!. A lot of people eat cakes for its sensational taste. But before you plan and open a cake decorating business, you need to find out if there is a demand or desire for the business in your chosen area. We suggest you conduct surveys, either by going door to door yourself or by hiring a research firm. Ask a range of people from all backgrounds, ages and genders in the area how they feel about cakes and cake decorations.
List of Niche ideas in the Cake Decorating Business
The very first thing you need to do when planning to start this business is to learn the necessary skills required to start a cake decorating business. After that, the next thing to do is to write a substantial business plan. Have it in mind that this business must cover every detail of the business such as niche, target market, financial projections, marketing plan and strategy, executive summary, goals and objectives, mission and vision statement, etc.
Cake decorators perform the same duties as those who work in a bakery, but often offer lower prices since they have lower overhead costs. If you want to start a small cake decorating business, you will need more than great recipes, creativity and talent to become successful.
You need to research carefully and choose a niche that suits your goals and visions. For example, we believe that you can decorate wedding cakes, special occasion cakes or cakes that resemble three-dimensional objects. Also note that your target market returns can be a niche in this industry.
We suggest you ask questions and verify your facts before you dive into this business. As a new cake decorating business, you probably want to offer a little of everything. But while that sounds like a good idea, it is in your best interest to focus on specific areas.
The Level of Competition in the Cake Decorating Business
The cake decorating business which is a niche in the general cake or bakery industry cannot be fully talked about without facts from the general bakery industry. We believe that the demand in the general bakery industry is driven by consumer preferences and by the extent to which grocery stores choose to operate their own bakeries rather than buy from commercial bakeries.
Profitability for individual companies is determined by efficiency of operations. Large companies have scale advantages in procurement, production, and distribution. Small companies can compete by offering specialty goods or superior local distribution services.
But to be more specific, the competition in the cake decorating business will always be determined by the rate of cake making and consumption. With the advent of technology and the birth of the sweet mouth generation, the need for cakes and its decorations will always keep growing massively thereby creating intense competition in the industry. Reports have it that an average cake decorating business will generate about $24,000-$60,000 a year.
But indeed it may take a few years to grow your business to that point. But once you do, you are really only limited by how many customers you can bring in. But have it in mind that there are about 2.5 million weddings in the U.S. every year. That breaks down to 6,850 weddings every day. And with a population of 320 million people in America, that’s 320 million birthdays in this country every year.
List of Well-Known Cake Decorating Business
- Duff Goldman
- Anna Heap
- Pink Cake Box
- Mike Amazing Cakes
- Dawn Foods
- Flowers Foods
- McKee Foods
- United States Bakery
- Allied Bakeries
- Grupo Bimbo
Reports has it that the U.S. Bakery industry is growing immensely and its consumers are hungering for both healthy baked goods and comfort foods. This industry has has an emphasis on products with natural and organic ingredients, as well as smaller portion sizes.
Same report has it that the U.S. baking industry was made up of commercial and retail baking operations that together generate $33 billion in annual revenue. While there were fewer commercial bakeries or 2,800, compared to 6,000 retail stores, the former produced 91 percent of the industry’s profits.
Also its stated that those profits seemed to be concentrated among the top commercial bakeries, whereas retail bakeries were more fragmented as a whole. Among the products sold to customers, bread and rolls surpassed cakes, pies and other retail bakery products combined.
We believe that smaller businesses can take care of people’s desire for handcrafted artisanal products and thus build a recognizable niche that larger operations would have a hard time replicating. We also believe they can make use of par-baked products to cut down on baking time, or appeal to growing demand for organic products by applying for certification. Small steps like these can swing the industry currents in a bakery’s favour.
Starting a Cake Decorating Business from Scratch or Buying a Franchise
Indeed this business can be started from your home with little or no expenses. But it still doesn’t guarantee that starting from the scratch is the best option. But it all depends on the size and visions you have for the business. If your dream is to start a large Cake Decorating business, we suggest you buy a franchise.
But if you are looking to turn your hobby into a small business, from home or so, we suggest you start from the scratch. Signing on with a franchise that has an established brand with proven systems can help jump-start a business, especially when there are so many other bakeries and cake decorating businesses vying for consumers dollars.
Plus, by becoming a franchisee, you will most likely be assigned an exclusive franchise territory. While competition may still exist against other bakeries, having your own territory ensure you won’t be rivaling franchisees of the same brand.
Possible Threats and Challenges of Starting a Cake Decorating business
Starting and building a cake decorating business is a great way to use your skills and creativity to make some money. Indeed it has been difficult for people to legally sell food out of their home kitchens, but in recent years, a lot of states have worked to change the laws to accommodate home food businesses. So you can start at home and still make very good money. Below are few threats of starting this business…
- Coping with multiple clients
In the cake decorating business, you will often need to offer your services to different clients, all within a tight time range. Yes, it can get confusing but your only option is either to turn down your clients or scale up by employing more hands and it is a known fact that getting passionate people to work for you is quite difficult.
- Industry Competition
Indeed all lucrative businesses have intense competition and a focused entrepreneur shouldn’t be scared of it. We know that a lot of individuals see competition as a plague but competition is a benchmark for creativity in the cake decorating business. You should embrace it and let it motivate you to aim higher and do better.
- Getting Customers
One thing you will have to face squarely when starting a cake decorating business from the scratch is finding good customers. In the process of building your business, you will come to find out that there are good customers as well as bad ones.
Starting a Cake Decorating Business from Home – Legal Aspect
- Best Legal Entity for a Cake Decorating Business
The legal entity you choose for this business will depend on the scale and size you are starting with. You can’t form an LLC or a corporation if you are starting from home. It will all depend on the level and income you’re starting with. If you plan to start from home, then you can start as a sole proprietorship. But generally, an LLC will be the best entity for this business irrespective of the size, aside starting from home.
Unlike both types of corporations, LLCs don’t need a board of directors, shareholder meetings and other managerial formalities. Entrepreneurs can divvy up the profits any way they choose, as opposed to shareholders in corporations who have to carve them up in proportion to their percentage ownership in the company.
One benefit of this is that Entrepreneurs can tempt talented employees with a share of the profits, even if those employees didn’t pony up their own equity in the beginning. The LLC structure also gives tax-treatment flexibility.
An LLC’s profits can be taxed as a corporate entity (a C Corporation) or as a “pass through” entity (an S corporation), meaning that the company avoids paying tax on both corporate profits and the owners’ personal income. Most LLCs choose the pass-through option. However, in some cases, LLCs can choose a C Corporation tax structure and save money by funnelling profits back into the business tax-free.
Catchy Business Name ideas for a Cake Decorating Business
- Cherry On Top
- CUPS Cake Shop
- Froggy’s Cake
- Fun Land Cake
- Garden Berry
- Cake Island
- Granny’s Cake
- Green Fusion
- Humphrey cake
- Yoyo island
- Off The Wall Cake
- Penguin’s Cake
- Pure Bliss Cake
- Sparky’s Cake Shop
- The American Cake Company
- Cake Experts
Just like any other lucrative business, it is your duty to consider how you will protect your assets from damage and yourself from litigation. Even though your kitchen appliances may be covered by your homeowner’s insurance, you may wish to cover them with additional property insurance.
Also if you plan to deliver products to your clients or transport items to and from markets, you may want to consider inland marine insurance, coupled with the insurance you already have on your vehicle. Inland marine insurance covers the cost of goods and property in transit, which may include the food itself, cake stands, displays, tables, and signage.
It’s very necessary to state that General Liability Insurance is without doubt the most crucial kind of policy to have when starting your business. Note that this type of policy can protect you and your business if a customer files a liability lawsuit against you, and will usually cover attorney’s fees, court costs, and any damages awarded. These expenses can add up quickly and can easily bankrupt a small business, which means liability insurance is one of the best investments you can make.
- Intellectual Property Protection
You need to know and understand that recipes are not protected by copyright law. It simply means that if your business is built on a secret family recipe, be sure to keep it secret, as there are no legal protections in place to prevent your competition from using the same recipe if they can get their hands on it. We believe that the necessary legal problem that nearly every cake business owner will run into eventually is the use of trademarked or copyrighted characters.
Trademarked characters are popular on children’s birthday cakes, but these characters cannot legally be put on a cake unless you have permission from the company that owns the rights to that character. We all can agree that it can be tempting to side line these laws, but the fines if you are caught range from $750 to $150,000, not to mention the expensive lawsuits that could be filed by the company.
Is Professional Certification Needed to Run a Cake Decorating Business from Home?
When planning to start a cake decorating business or if you are currently majoring in marketing or information systems, you could benefit from earning a few certifications which may include retailing certification. These certifications include;
- Customer Service and Sales Certification (CSCS)
- Advanced Customer Service and Sales Certification (ACSSC)
- Retail Management Certification (RMC)
- certified food protection manager (CFPM)
- Master Baking Certificate Program
- Retail Business Credential (RBC)
Legal Documents Needed to Start a Cake Decorating Business
Before now, any food that was to be sold to the public had to be made in a commercial kitchen, with no exceptions. We believe that this led a lot of people to start and run this business illegally, which provided no legal protections to the baker or the consumer.
But now a lot of states in the United States now have what are called cottage food laws, which allow people to produce certain food items for sale in their home kitchens, often without licensing or inspections. Currently every state except for Hawaii and New Jersey has cottage food laws, though some states are more restrictive than others, with Wisconsin and Oklahoma having very tight restrictions on what is allowed.
But you need to understand that each state’s requirements and restrictions for cottage food sales differ. This is why you will need to do your research when planning starting a home cake decorating business to see what your local laws are. You might encounter some of these common laws:
- A lot of cottage food laws will state explicitly what types of food you can make, usually determined by the risk level associated with the food type. For example, items that require refrigeration are less likely to be allowed.
- Cottage food laws will also tell you where you can sell your wares. A lot of states do not allow wholesale sales to retailers or restaurants, but they may or may not allow sales directly from your home, at a flea market or farmer’s market, or online.
- We also believe that a lot of states ask that any home producing the food be pet-free. Others may only require that pets are not allowed in the kitchen.
- You may be needed to complete a food handling course
- Your kitchen may need to be inspected, or your food may need to be sent to a lab for testing.
- Note that some states in the United States do not need any registration at all, but in those that do, a registration fee may be charged.
- All cottage food laws need a disclaimer somewhere on the labelling that the item was made in a home kitchen.
Financing your Cake Decorating Business
You need to understand that your budget in this business is a roadmap that tells you how much money you have available to spend on everything. Note that it should include all your startup costs and recurring expenses. Having this will tell you how much money you have available to spend on marketing and how much money can be taken out of, or reinvested into your business. Here are some costs to consider:
- Training: This can include recipe books or live classes, ranging from $20 – $200. Check YouTube for free how-to videos.
- Food handler’s license: Plan on a yearly cost of about $40 – $90.
- Permits: Check with your city’s clerk of courts. These can cost about $100.
- Baking ingredients: If you’re running your business from home, you only need minimal ingredients and should budget $50 – $100.
- Baking supplies: Unless you already have these, expect $150 to start. These include mostly reusable supplies like pans, oven mitts, whisks, baking sheets, piping bags, fondant cutters, etc.
- Packaging: Expect to spend $100 on packaging to start.
- Insurance: Plan on a yearly cost of about $150.
But if you have all the incentives you need, then you are good to go. If you need additional funds before you can kick start your cake decorating business, you will need to approach an investor, the government, a bank, or some other loan-giving establishment. This is where your business plan will have to become even more instrumental. If your business plan is compelling and portrays a bright future for your business, then investors would be willing to fund it. Ways of getting funds may include…
- Raising initial capital from family and friends
- Getting Capital from angel investors
- funds from Venture capitalists
- Taking your company public through IPO
- Getting small business loans
- Getting funds through Crowdfunding
- Raise Funds through Mergers and Acquisitions
- Finance your Business Expansion with Equipment Leasing
Have it in mind that the location of your business can in a very big way tell the success or failure of your cake decorating business. We strongly suggest you conduct research as to the best place to locate your business. Also, you need to determine if your business would have a retail component.
Visit shopping malls, outdoor marketplaces, downtown areas and locations that receive heavy foot traffic due to the proximity to restaurants, movie theaters, grocery stores and local entertainment, such as theme parks or miniature golf courses. Choose a location with ample counter and display space, room for seating, freezer space and a commercial kitchen for preparing cake and other items.
Starting a Cake Decorating Business from Home – Technical and Manpower Requirements
Even if you start from home or build a commercial kitchen, note that you will need some basic supplies to bake and decorate cakes. Having the right supplies can make baking and decorating easier, as well as help you stay on the right side of your local cottage food laws.
- Storage containers let you to store ingredients while keeping them easily accessible. We believe that some ingredient bins meant for dry ingredients come on casters and have scoops to make removing product easy, and some have a first-in-first-out barrier to help you keep your ingredients fresh. Some cottage food laws require you to store ingredients for your business separate from your personal ingredients, which is something to keep in mind when planning your food storage.
- Anti-fatigue mats can make the long hours you spend standing in your kitchen a little more comfortable, while helping prevent back and leg pain.
- Getting the right mixer can make your prep work go smoothly.
- We suggest you have a selection of cake pan sizes and shapes at your disposal to help you fulfill customer requests.
- Mixing bowls, measuring cups, sifters, and whisks are all basic tools you should have ready before baking.
- Pastry tubes and bags are a necessity for any professionally-decorated cake. Find a set of cake decorating tips that will cover the basics, or put together your own custom set by buying individual pieces.
- Avoid burns with heat-resistant oven mitts.
- Food prep gloves can help you follow all food handling regulations and keep your customers safe.
- An apron will help protect your clothing and keep messes to a minimum.
- Cake stands can provide a way for you to display and transport your finished products.
The Service Process Involved in a Cake Decorating Business
Note that even if you have been making cakes for family and friends for years, analysing and building a menu to offer to the public can be a very hard task. Even though you may be creating a cake decorating business, a crucial aspect is the cake itself – a beautifully decorated product isn’t going to sell well if the cake inside is dry or bland.
While in some baking circles there is a stigma bonded with using a boxed cake mix, a lot of bakers conserve time by developing their own recipes using box mixes. We suggest you research and experiment with different recipes and flavours until you have a list of cakes you are confident you can offer your customers. So even if you have been decorating for years, you may not need classes or feel like you need certifications, but have it in mind that pimping up your skills will do you more good than bad.
Note that immediately you have decided the specific types of cake to offer, then you are very ready for the next big issue: pricing. Have it in mind that there is no industry-standard for pricing and you will need to do some research in your area to see what custom-made cakes sell for.
We strongly advise that you neglect Grocery Store cakes when comparing prices; those are mass-produced, while yours are made individually for each client. We suggest you call local independent bakeries to see what they charge for several standard-sized cakes, and consider your target demographic when setting your prices.
Also have it in mind that cake prices are often determined by how many servings the cake will provide, but another option is to charge the base price of your ingredients plus a certain amount.
Starting a Cake Decorating Business from Home – The Marketing Plan
- marketing strategies for a Cake Decorating Business
Even though a lot of cake decorators, especially home cake decorators, depend solely on word of mouth, marketing can really help you build a foothold in your community. We suggest you make use of social media and consider advertising in local newspapers or magazines.
Also if your local cottage food laws allow it, you may also want to consider selling small cakes and cupcakes at farmer’s markets and flea markets, to supplement your income and help introduce your products to more people in your neighbourhood.
Have it in mind as a cake decorator, that you are also entering an industry that gains greatly from networking. Party planners, wedding coordinators, florists, photographers, and anyone else who works in the event industry are great people to get to know and work with.
We suggest you offer display cakes to photographers for photos shoots. Note that this results in publicity for you and better photographs for them. We believe that knowing these professionals can result in referrals and help you know whom to recommend to your customers as well.
Strategies for Winning competitors in the Cake Decorating Business
With the increasing competition in the Cake Decorating industry and stores coming up from every corner, you have to make consumers aware of your shop. You need to understand that each community vary and some marketing tactics will work in some areas and others will not.
The key is to try different things and find what works for you. And remember that what worked yesterday, might not work tomorrow. The only limit to your marketing is your own creativity. Some ideas can be expensive, but there are plenty that are not.
- School fundraisers with your local elementary school
- Coupon mailers
- Daily deal websites
- Create a flavour contest
- Loyalty programs
- Group contest
- Street marketing
- Sponsor or advertise at local races
- Social marketing
- Cross market with local businesses
- Online marketing
Increasing Customer Retention in your Cake Decorating Business
Have it in mind that your current customers are the best asset your Cake Decorating business can have. This is because they already know the brand, they know the products and they know their service. We suggest you channel your time and energy on these individuals as against always trying to find new customers.
This can be a powerful way to supercharge revenues for your Cake Decorating business, especially over the holiday season. There are many ways to retain and maintain your customers and make them to always want to come back. These ways may include;
- Friendly employees
- Satisfy your customers
- Patronage discount and coupons
- Loyalty and reward programs
- Be lenient
- Help desks and support systems
- Customer feedback survey
- Light personalization
Strategies to Boost your Cake Decorating Brand Awareness and Create a Corporate identity
Have it in mind that brand awareness and affinity serves several objectives for retail companies seeking to increase sales in the marketplace and it can do same for your Cake business. A brand awareness campaign needs to be flexible enough to grow with the business and adjust if needed.
Ways to promote brand awareness and create a corporate identity in your Cake Decorating business may include holding an event, exhibiting yourself, sponsor something, create an experiential stunt, take to social media, organize a public relation campaign, invest in promotional merchandise, join forces with other businesses etc.
Cementing a good corporate identity through good brand awareness strategies with a little imagination and an understanding of your customer, the sky (and your budget) is the limit when it comes to getting in front of your competitors.
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