How to Start a Bakery Business

Bakeries are a growing industry in the US. It’s easy to see why, as people shop for their daily bread or seek out cakes and other sweet treats. Specialty baking is on the rise too, with products designed for people who have particular dietary choices or digestive issues.

We want to help you get your bakery business off the ground. Since 2004, we’ve helped over 500,000 people to become entrepreneurs, starting exciting businesses and bringing their ideas to life. We’ll give you the support, guidance and advice you need to create a business and make it into a success.

Here is our simple guide to starting up a successful bakery business.

From exploring the types of business you can start, through research, to the legalities of setting up your business and the realities of your day to day operations, this guide is here to help.

Read on for some insight into creating your own bakery business and becoming an entrepreneur. In this guide we will cover:

From exploring the types of business you can start, through research, to the legalities of setting up your business and the realities of your day to day operations, this guide is here to help.

Facts and figures on the success of bakery businesses

Learn if a bakery business could be right for you

Ideas for the type of bakery business that you could form

Proving your bakery business can work

Useful online tools for bakery business owners

Choose the right business structure for your bakery company

Where to find bakery business groups, forums and support

Business plans for bakery companies

How to start your bakery business with information on equipment, employees, location, pernits, finance, taxes and more

Why You Should Open a New Baking Business

You might not think of the humble bakery as a powerhouse for business, but the stats say otherwise!

11K

There are more than 11,000 bakery cafes in the US

$300B

Bakery products make up over two percent of the GDP of the US, which works out to over $300 billion a year

$350

Average spending of each US household on bakery products

The following products make up the bakery market in the US:

32%Bread
19%Rolls
15%Cakes
10%Retail Bakery Products
8%Soft Cakes
2%Pies

Sales from retail bakeries are expected to increase by over five percent a year

Two-thirds of bakeries have fewer than ten employees

Gluten-free baking is rapidly increasing in popularity, with almost 30 percent of people purchasing these products

The time to take advantage is now — we’ll help you be a part of that success!

Is Owning a Bakery Right for You?

Before deciding to open a bakery, it’s important to understand the skills and approach you’re likely to need.

A Day in the Life of a Bakery Business Owner

Here are some of the typical tasks you’ll be performing for your bakery business on a daily basis.

Understanding customer demand for the products you’re intending to make

Purchasing ingredients for baking products

Preparing ingredients for baking

Working out the costs of ingredients, selling prices and profit margins

Baking products and putting them out for sale

Storing products as needed

Marketing your bakery

Managing bakery employees

Dealing with customers

Skills Needed by a Bakery Business Entrepreneur

The following skills will be very useful in your role as a bakery small business owner.

An excellent grasp of the art and science of baking

Good soft skills and talking to customers to find out what they want

Math skills so you can work out the ingredients you need and what you should sell products for

People management skills for your behind-the-scenes and front-of-house staff

Marketing skills to get people into the bakery

What Your Bakery Customers are Looking For

Someone coming to your bakery is likely to want:

Delicious, fresh, high-quality baked products

A good variety of breads, pastries, cakes and more

A place to sit, relax and chat with friends

Reasonable prices for baked goods

Drink options like tea and coffee

What Type of Bakery Business Should You Start?

If you want to start a successful bakery business, it’s important to know what your options are. Here are some of the more popular business ideas:

A specialized bakery that makes top-of-the-range products like bread or cakes

Bakeries where consumers can personalize products like cakes for special occasions like weddings

Gluten-free bakeries that serve people with gluten intolerances

Vegan bakeries that produce goods without using eggs, milk or other animal products

A bakery food truck that makes sandwiches and other to-go food

Bakeries that cater to a specific audience, like bagel bakeries for people who want to grab breakfast

Validating Your Bakery Business Idea

These areas are just starting points — there are many different types of bakery businesses. Once you’ve identified the type of bakery you’d like to run and what you want to sell, you need to validate your business idea.

Start by checking you have the right skillset. Bakers work long hours and need sufficient technical skill to make great products. You’ll need to deal with employees and customers too, and there’s a lot of planning that goes into running a successful bakery.

The thing to learn here is that it’s okay to say “no” to your first, second or third bakery business ideas. Very few entrepreneurs get it right first time. In fact, getting it wrong is often a badge of honor! Still, you don’t want to waste too much time, energy or money on the wrong initiatives, so ask and answer these questions honestly to find the right way forward.

Before committing too much time, energy and money into your new bakery business, it’s important to test the marketplace.

Identify your business’s unique selling points (USPs)

You need something that’s going to help your bakery stand out, whether that’s the quality of your products, the range of what you sell, the ambiance of your location or something else.

Look at who your competitors are in the space

Having competitors is a good thing as it shows there’s a market, but if there are too many local challengers, you’re likely to struggle without a really good unique selling point. Don’t just look at other bakeries, you also need to see how many grocery stores and regular cafes you have in your area.

Understand your customers

Talking to customers will help you find out what they’re looking for, so you can tailor your products and offerings accordingly.

Get involved with local business communities and discussion groups

There are plenty of great communities and discussion groups. Get involved in them and learn the ins and outs of your chosen market before committing.

Your Bakery Needs a Business Plan

You need to define how you’re going to run your bakery business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight business plan. It will help you get your thinking in order and show your commitment to your bakery business.

You will also need to look at financial projections for your bakery business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others?

If you can, try to plan your revenue for the next month, three months, year and two years. It’s vital to take into account the cost of setting up a bakery business in the first place, also factoring in utility, staff and other costs.

1

An executive summary with the most important points from your business plan

2

Your goals and what you hope to achieve with your bakery business

3

A description of your bakery business, background information and context

4

A market analysis and likely demand

5

An overview of how your bakery business is structured

6

Your business model

7

How you will market and sell your offerings

8

Financial projections, revenue and profitability

9

Appendices

We’ve got the perfect guide to writing your business plan.

Choose the Right Business Structure and Register Your Bakery Business

There are five main business structures you can have in the US, and it’s important to choose the right one. We’ve shared your options below. They are:

Sole Proprietorship

If you don’t choose to form a legal business entity for your bakery business, you will be a sole proprietor by default. This won’t give you the legal protections you need, so we do not recommend this.

Partnership

This is a type of business that is formed when two or more people work together without creating a more formal business entity. Like a sole proprietorship, it may not give you all the protections your bakery business may need.

Limited Liability Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your bakery business.

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organization.

C Corporation

These are the largest and most complex types of businesses and are far more than the average entrepreneur or business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your bakery business.

In most cases our recommendation would be to create an LLC. We have a complete guide to everything you need to do, and we can set one up for your bakery business. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

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Setting up Your Bakery Business Operations

Once you've legally created your bakery business, you’ll need to get some other things in place.

Location Of Your Bakery Business

The location you choose will depend on the type of bakery you want to run. If you’re only producing baked goods to sell to other businesses, you won’t need a shop front. On the other hand, if you’re selling to the public or operating as a bakery cafe, you’ll need a retail location.

Equipment For Your Bakery Business

Bakeries will require specialized equipment. You’ll need a professional kitchen that’s licensed for commercial food production. You’ll need counters, shelf fixtures, display cases and other furniture to show your products. You’ll also require tables and chairs if you want people to eat at your bakery.

Employees

Unless you want to do everything yourself, you’re going to need employees. Bakery owners often work very long hours, and you can’t be making products and service customers at the same time. You’ll need to attract and employ great staff that are well-versed in customer service.

Finances and taxes

Unless you want to do everything yourself, you’re going to need employees. Bakery owners often work very long hours, and you can’t be making products and service customers at the same time. You’ll need to attract and employ great staff that are well-versed in customer service.

Software And Processes

There’s some specialist bakery software out there, and of course you’ll need a point of sale (POS) system. There are many other apps that can help you, see our list at the end of this guide.

Marketing

Marketing will probably be part of your bakery business. At the very least you’ll need signs to attract people in, but you should also look into local advertising, both offline and online. It’s also a good idea to create a website where you can share details and photos of what you bake.

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

Rules, Regulations and Taxes for Your Bakery Business

You will need to explore local, state and federal licenses and permits, especially around food preparation and hygiene. We can also help out with researching your business licensing needs.

Taxes

Taxes are a fact of life if you’re in business, and there are various ways you will need to file and pay them. This can include self-employment tax, state income tax and federal income tax. Depending on where and how you’re selling products and services, you may also be liable for sales and use tax.

As a rule of thumb, we recommend holding back around a third of your earnings to pay your taxes. We can also prepare and file your tax returns for you.

Maintaining Your Bakery Business

There are certain forms and legalities you need to follow to keep your bakery business in good standing.

1

File an Annual Report

Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.

Annual Report
2

Pay estimated taxes

You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).

3

Renew Business Permits and Licenses

Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.

4

Prepare Your Taxes

You will need to work with your accountant to prepare all the taxes you need to pay.

5

File your taxes

You will need to file your taxes once a year.

6

Pay payroll and sales taxes

If applicable, you will need to make payroll and sales tax payments on a regular basis.

Insurance for Bakeries and Other Baking Businesses

Most bakery businesses should have comprehensive business insurance. There are various types.

Workers Compensation Insurance

Workers’ compensation insurance provides coverage for job-related illnesses, disabilities or injuries that affect employees. Regulations for this insurance vary from state to state. It typically covers areas like medical costs, loss of earnings, compensation and retraining.

General Liability Insurance

This insurance protects your bakery business from claims due to being sued. This may include injury to members of the public, property damage, personal liabilities, legal defense and more. It can help protect your business from financial penalties and bankruptcy. This type of insurance could be essential to your bakery business as you [rewrite]...

Home and Auto Insurance

If you are working from home, for example on the administration of your bakery business or driving a vehicle for work, check whether your existing home and auto policies cover you for work use of your home or car. If not, you should either expand your policy so you’re covered or get dedicated business insurance.

Useful Online Tools for Bakery Owners

Here are some really great online tools for managing your bakery business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.

Conclusion

A bakery is a great way to provide amazing food to friendly people, and is an industry that’s still seeing growth in the US. If you can find a great niche, understand your competitors and put together a solid business plan, you will have every chance for success

Start your Bakery Business with us, today