How to Start a Home Bakery — Your Step-by-Step Guide

How to Start a Home Bakery — Your Step-by-Step Guide

Two nights ago, I made chocolate-chip banana bread with some overripe bananas. Last night, I whipped up some delicious currant scones.

Baking is a hobby for me, but I’ve often thought it could be something more.

Maybe you’ve thought about turning your passion for baking into running a bakery from home.

If you’re wondering how to start a home-based bakery business, this article will provide tips you need to begin. 

Starting a Home-Based Bakery

How to Start a Home Bakery — Your Step-by-Step Guide

The good news is that you don’t need a storefront to sell your baked goods — you can start baking treats and selling them from your kitchen. Starting a baking business from home is an excellent option for bakers who want to start small.

Think of what you bake well, and pick one or two items to focus on. Here are some examples of baked goods you can easily make at home:

• Cookies, brownies, and bars
• Muffins
• Pastries
• Cakes and cupcakes
• Bread 
• Pies 

• Dog biscuits

That’s right — dog biscuits. I know a caterer who turned a failed waffle recipe into a thriving dog biscuit business. Inspiration happens in a flash, so you never know when a brilliant idea will reveal itself.

Home Bakery Cottage Food Laws

Before you begin the process of starting an at home bakery business, you need to make sure that home bakeries are legal in your state.

You can visit your state’s Department of Health website to check the laws in your area, particularly cottage food laws(1). So, what are cottage food laws? They’re food safety laws that vary by state, which may impact kitchen requirements for home baking businesses. Cottage food laws often limit the types of foods you can make and the amount of homemade food you can sell.

Additionally, there may be limitations on where you can sell your products. If you’re planning to sell your baked goods at farmer’s markets, local farm stands, events, or online, be sure to check your local zoning laws to find out if it’s allowed.

But don’t let sales limits stop you from pursuing your goal of starting a small baking business. Most home bakers won’t hit their limits in their first years of business, so if you’re starting small, this likely won’t become an issue until your business grows.

Growth is a good sign that you’re going in the right direction!

How to Start a Bakery at Home

If you’re often asked to bring a dessert to a dinner party or to supply the cupcakes for an annual event, your baked goods are likely tasty — if not downright irresistible.

But running a home-based bakery business takes much more than baking skills alone. It requires planning, marketing, and more.

Before you turn on the oven, follow these steps to learn how to start a home bakery:

1. Create a bakery business plan.

Think of your bakery business plan as a recipe. If you have all the right ingredients and follow the instructions, you’ll end up with a successful home bakery business.

Start with a mission statement.

Describe your business in a sentence. What items will you offer? What makes your business unique? The more specific you are, the better.

For example, instead of calling your business a home-based bakery, use language that more clearly defines your business intent.

You could advertise that you’re a home-based baking company specializing in custom cookie care packages. Now it’s clear what you’re baking and how you’re supplying it to your customers.

Once you know what you’llll offer, start thinking about other aspects of your business. Writing a business plan takes time, but it will help you think through your goals and objectives.

Use our free business plan template to help answer important questions such as:

• Who needs or wants your baked goods?
• How much will you charge?
• Where and how will you sell them?
• What equipment is required?
• What funds are needed to start your business?
• How much money will you make in the first year?

Name your business.

Before you start your own bakery, it’ll need a name. The only thing more fun than baking may be coming up with a catchy name for your business — the more unique, the better. And baked goods business names can be especially fun. People love creative business names, but make sure it’s clear what you’re selling. 

After you decide on a name, check that another bakery doesn’t already own it. If your business name is available, be sure to register it and obtain a Federal Tax Identification Number(2).

Define your target market.

Your business plan should include a clear vision of your target market.

Do you want to sell your sweets to local customers? Or do you have your sights set on restaurants, schools, and companies? The more you define your target customer, the easier it will be to meet their needs.

There will always be a market for home-baked goods, but there also could be fierce competition. Look for the sweet spot to help your business attract more customers and stand out from the pack.

2. Get your business in order.

It’s important to define your business structure before operating your home bakery since it will affect how you pay taxes. There are a few ways you can establish an at-home bakery business:

A sole proprietorship is usually inexpensive, offers tax benefits, and is easy to form. The downside is that it doesn’t protect you from liability, so your personal assets are at risk if someone were to get sick from your baked goods.

A Limited Liability Corporation (LLC) is often the preferred way to set up a small bakery business since it offers a combination of tax benefits and liability protection — in addition to any LLC liability insurance you purchase separately — for small business owners.

It may be helpful to seek advice from an accountant or financial advisor on how to start a bakery business from home. The business structure you choose will be the one that makes the most financial sense for you.

Either way, you should determine if you need to collect sales tax on your bakery goods. Contact your state’s tax or comptroller’s office for more information.

Licenses and permits — It’s time to find out if you need a license to run your at home bakery business. Some states require both a business license and a food license ⁠— and possibly a permit — to sell baked goods from your home, while other states may not require a license or permit.

Your state’s cottage food laws will tell you if any licenses or permits are required. Be sure to check with your local governments — city and county — to learn if they have licensing requirements.

3. Prepare your kitchen for the home bakery.

Before you start frosting those cupcakes, you’ll need to know that your home kitchen is in tip-top shape.

To avoid trouble down the road, keep these in mind:

Health requirements — Since you’re selling a consumable product, you’ll need to comply with local health codes and regulations for your home bakery kitchen. Some states won’t allow you to use your residential kitchen for commercial food production, so be sure you understand any restrictions.

Call your local Department of Public Health to inquire about the laws and regulations regarding the foodservice business. You may be required to take a state-approved course to obtain a food safety certification.

Even if your state doesn’t require it, you may want to take a food safety course to learn more about proper food handling, storage, and preparation techniques. It’s helpful information to have, especially if your state requires you to pass a health inspection.

While a home kitchen inspection sounds intimidating, it typically isn’t as rigorous as a commercial kitchen inspection(3). Still, you’ll want to be prepared.

Here’s what your health inspector will likely be assessing:

• Do you have a clean, fully functioning kitchen space?
• Can you demonstrate how to sanitize your area and equipment?
• Are you storing your perishables at the proper temperature?
• Are your dry ingredients in sealed containers at least 6 inches off the floor?
• Do you separate your business baking ingredients and equipment from ingredients intended for personal use?

The health inspector’s job is to ensure that your kitchen — and ultimately your baked goods — are as safe as possible. With some preparation, you should be able to pass your inspection without any issues.

Kitchen equipment — If you’ve been baking for years, you may already have a well-equipped kitchen. The question is whether it’s sufficient to start a home baking business.

Depending on your kitchen’s current layout, you may need to add equipment or make adjustments such as these:

• Adding shelves or creating a pantry to separate your bakery food and equipment from your personal items.
• Adding or updating a sink, convection oven, or refrigerator.
• Upgrading your ventilation system or oven hood.
• Purchasing more equipment such as a heavy-duty commercial mixer or a proofing cabinet.

Ingredients — Starting a home bakery requires a mind shift, including how you purchase certain items.

When you think about how much you’ll charge for a cake, you should factor in the time, ingredients, and supplies it requires. For a home baker, time is money. You don’t want to waste time running around shopping for ingredients.

Instead of spending time and money at grocery stores, you can buy quality bulk baking ingredients from online bakery wholesale retailers.

Be sure to label your baked goods clearly. In addition to listing ingredients, you should identify which products are gluten-free, nut-free, and/or vegan.

4. Market your business.

Whether you’re selling fancy macarons or kitschy cupcakes, you need to let your customers know you’re open for business.

Here are some ways to get the word out:

Social media — One of the easiest ways to attract customers is via social media. Create a Facebook account. Set up an enticing Instagram page.

Post photos of your treats, and find ways to interact with your customers online. Your social media presence is a great way to highlight your offerings and gain attention.

Website — A website is an essential tool for your business. It’s where you can tell your brand’s story, share photos of your treats, or blog about your baking tips.

Your website should be simple, but be sure to include a menu,  ingredients, pricing, and information about ordering.

Your community — Engaging in your local community is a great way to build relationships with customers and other small businesses. When you participate in local events, people will be able to see and taste your treats so that the name of your bakery will be on everyone’s lips.

Check out these helpful guides for more on marketing your home bakery business:

What are the Do’s and Don’ts of a Small Business Website?

Creating Consistent Facebook Content For Your Business Page

Word of Mouth Marketing: How to Grow Your Business

5. Future-proof your bakery.

You can start small when you’re trying to start your own bakery at home. Offering a limited selection of goodies you bake well is better than getting overwhelmed by biting off more than you can chew.

Stick with the crowd-pleasers — Don’t shy away from your tried-and-true recipes. After all, these are the baked goods that got people talking in the first place.

Add items gradually — You’ll likely get into a rhythm of baking and producing more quickly. It’s always best to wait until you’re operating efficiently before adding new items to your menu.

Stay creative — Baking is an art and a science, so keep experimenting. New flavors, decorative touches, and innovative packaging will keep your home bakery from getting stale.

Go with the flow — Like many small businesses, your home bakery will encounter ups and downs. Preparing for the unexpected, good or bad, is part of owning a business.

Why is Business Liability Insurance Important for a Home Bakery?

As a baker, you know that one missing ingredient can cause a cake to collapse. That’s why, for  a home bakery, business insurance is vital. Without it, your business could suffer devastating consequences.

Whether your home bakery is a sole proprietorship or an LLC, insurance can offer peace of mind. Follow these steps to ensure your at home bakery business is adequately covered.

1. Don’t rely only on a homeowners policy.

If you’re operating a home-based bakery, you may think your existing homeowner’s policy will offer you the protection you need. Think again.

Your homeowner’s policy likely has a business exclusion, which means it won’t cover a claim related to your baking business. So if your equipment breaks or your customer comes to pick up her cake and slips and falls in the kitchen, that could mean serious financial repercussions for you and your business.

Simply put, a homeowner’s insurance policy typically isn’t the right fit for your home bakery business insurance coverage.

2. Understand your risks.

When it comes to small businesses, accidents happen, and they can be costly. There are many risks you need to think about when running a home-based bakery:

• Your burned cookies could start a small fire in the kitchen.
• A customer could slip and fall when picking up an order.
• Someone could have an allergic reaction to your baked goods.

Cases like these could result in significant property damage or a potential lawsuit. Without home bakery business insurance, the costs relating to those incidents would come out of your pocket.

3. Get home bakery business insurance.

Unexpected events happen. But for a home bakery,t business insurance can provide financial protection for you, your bakery business, and your equipment.

The most common insurance for home-based bakers is general liability insurance coverage. It provides coverage against costs associated with certain third-party accidents, third party property damage, and bodily injury (up to your policy limits).

Here are some examples of what home bakery general liability coverage can cover:

• Third-party bodily injury 
• Third-party property damage that occurs during the normal operation of your business
• Personal and advertising injury
• Medical expenses
• And more

Getting general liability coverage for home bakers is fast and easy. It usually takes just 10 minutes to get a free business insurance quote with our online quote comparison tool.