Starting an At-Home Baking Business. How Can I Get Started?

Is it really that easy?

So, you are thinking of taking your baking passion to the next level...but...not sure where to start. Trust me, it's quite a setup process, however very important to look at every single detail before you open shop. I was in your shoes, from Googling what I needed, what regulations and laws I had to pay attention to, and even state licenses. It sounds like a lot, maybe even a bit too much and now you are thinking about changing your mind, just trust me, it is all worth it! Please know I am in no way an expert and if you do have any legal questions after reading, contact your state. I am however happy to answer any questions to help you get started!

Let's look into what basic steps are important to follow before you start shipping some delicious goodies.

Gathering Legal Information and Understanding Cottage Laws

What are Cottage Laws?

Selling homemade food from your home is considered "Cottage Food", and with this, each state has its own Cottage Food Laws you need to follow depending on where you live. These laws are regulations you need to follow in order to sell your food to the public and will tell you where and what you can and cannot sell. They will also tell you how you need to label your ingredients. Some states even limit how much you can earn profit-wise, or tell you, you do not need to follow the cottage laws unless you make a certain amount annually...but it is always good to follow them regardless.

For example: Since I live in South Carolina, I looked up South Carolina Cottage Food Law and found a direct PDF to the state's Cottage Food Law. If you doubt yourself, remember you can always contact your Cottage Food Law group from your state.

It is very important to read everything the state has written on this, so you do not accidentally sell something that is against the law.

Understanding Your State's Hazardous Food List

These foods may differ from state to state, however, are the most common to see in each cottage food law. Each hazardous food list are foods that you are unable to sell or use to make food and or unable to sell as is. These are normally set due to the possibility of making your customers sick.

Some examples include:

• Meat (Or meat containing products)

• Cream

• Pie

• Bread

• Beverages

• Cake (Cheesecake or Pumpkin)

• Canned Foods

• Syrup

It's important to review specifically what your state allows and does not allow if you are interested in starting your Cottage Food Business.

Do I Need a Business License or Other Licensing?

In all honesty, this one depends! Well, on your state laws of course. Some states may not have a business license for the state as a whole, but your specific counties and municipals may still require one. More than likely you will need to get one for your state and/or your county.

For example: In South Carolina, the state does not have a state business license, however, each county and town requires specific licensing. I hold a Sales/Use tax license and am Registered with the state as a Sole Proprietorship, along with holding a Cottage Food Certification Number.

It is important to contact your state and county to double-check what you will need before selling your homemade goods, especially depending on the type of business you want to open. We'll take a look at that next!

Sole Proprietorship or LLC?

Not sure which one to choose? Don't worry! I was right in your same shoes. Personally, I started out with a Sole Proprietorship rather than going straight to an LLC for a few reasons:

• The cheaper option of the two

• Started my business mid-way through the year

• Started out completely new, with no experience in marketing, and had few supplies

• Wanted to test out how it would go first

• Knew I would not make a lot of money the first full year

Remember, that was my personal choice, and you may prefer to go straight to an LLC! A sole proprietorship is great for those wanting to test the waters before diving straight into it. I didn't want to purchase everything needed for an LLC and the bakery not work out...especially being a stay-at-home mama. Just know, as a sole proprietor, you are responsible for all your business debts and liabilities (if applicable).

An LLC, which is easy to transfer from a Sole Proprietorship, is a structure that covers those business debts and liabilities for you. Depending on your state, the fees may be different and/or more expensive.

What is an EIN and Do I Need One?

An EIN or an Employer Identification Number is a number given to you by the IRS after applying for one, here. You can apply using their online application system or by mailing/faxing to their address.

The purpose of these is strictly for the purpose of tax administration either for just you, or you and your employees. To know if you can be exempt from one is to determine if your business qualifies for tax-exempt status. It is also important to see if your state requires you to have one regardless. If you are unsure if you need one, you may view the IRS Form SS-4 and view the 2nd page.

I personally utilized the IRS site a lot while researching taxes and what I needed or did not need for my bakery.

Cost Breakdown and Out of Pocket Purchases

I have to say it again, it does depend on your state! Everyone will have a different experience on what they need to get started, however, here are some expenses you may encounter like I did.

• Registration with your state

• Business Insurance

• Food Liability Insurance (I use FLIP)

• Licensing and Permits

• Tax Registration

• Ingredients

• Supplies (equipment and shipping)

• Courses you decide to join ( I took both a Food Handler and Food Allergy Saftey Course accepted by my state, here)

Business Planning: Should I Do it?

Absolutely! Well, I cannot force you to, but I can highly recommend it. I purchased a small notebook just to write down everything I came across for my business, including what I needed, who I needed to contact, pricing of licenses, contact information, and more. I found that creating a business plan helped out tremendously because I will be honest, it can get quite confusing.

Creating your Cottage Food Business

Choosing a Business Name

Okay, now that we are past the legal stuff, let's get into the fun part! If you have not done so already, you will want to first pick out a business name. While picking one out, I like to search on Google, Business Lookup websites, State business lookup, and domain search to make sure no one else has the same name and to see what has already been taken. It is important to not rely just on Google.

Here are some tips I took into consideration while making mine:

• Make it easy to spell and pronounce - try not to add any difficult-to-spell wording so it is easy for your customers to search and refer you

• Keep it simple - avoid a very long name, keep it short and sweet!

• Choose something unique - Create a name that means something to you, but also is easy for customers to know what you are selling. For example: (Sweet Eats By Rachel, you can assume I may sell some type of desserts or sweets)

Choosing Your Logo and Theme

Choosing your logo and colors are more simple than you may think. Utilizing a design program such as Canva is a great source to create your logo, and it's free!

Here are some tips for creating your logo and theme:

• Keep your colors to a minimum - I would focus on no more than 5 colors

• Keep your design simple - you can search on Google for ideas, or on Canva and use an available template

• Create a brand theme - Use the same colors in your logo for your website and social media to keep it consistent

• Create a bold and solid brand image/voice

• Use unique packaging - presentation is key!

If you are not confident in creating your own logo, you can always hire a digital designer to do so for you.

Pricing Your Homemade Goods. How Much Should I Charge?

Pricing can be a bit tricky, especially if you are not confident in mathematics and costs like I am. It is important to set your prices to what you are offering and to match your skill level but to also create a profit each month. If you set your prices too low, you may be losing money instead.

Some tips I recommend are to keep track of your recipe expenses. For example, know how much your ingredients cost, how much total with your ingredients your end baked good costs, along with your packaging and labels. After all those expenses combined, you should still be ahead by making a profit, if not, try to adjust your prices. Remember, the time it takes for you to make the goods needs to be a priority as well, from start to finish (aka; from Baking to Packaging)

A common website I see Cottage Bakers using is CakeCost. It is designed for calculating your costs from your recipes. This is what I used to make things so much easier!

Keeping Track of Expenses

It is super important to mark down all your expenses...and I mean all of them! This is for both your keeping and for tax purposes. I use a binder specifically for my bakery containing everything from Recipes to Expenses, to Product Inventory and Orders.

Here are some I recommend keeping track of:

• Monthly and Annual Bills (Can include Licensing, Websites, or Marketing Bills)

• Ingredient Prices

• Equipment/Supplies

• Gas (if you deliver)

• Fees (such as vendors or farmer's market fees)

• Shipping Fees

• Taxes

As I stated above, using a specific place to keep track of everything is really important. Due to the possibility of losing access or your computer dying, I keep everything in my Bakery Business Binder. However, if you don't mind keeping your things online, utilizing programs such as QuickBooks, Excel, and Google Sheets are great options.

If you would like to utilize my binder expenses logs, I have attached them at the end for download.

Choose Your Options for Payments

Choosing what type of payments you want to accept will determine who you also attract to your business. However, be sure to choose the ones that best fit your style and how you want to run your bakery.

Here are some forms of payment you can choose from:

• Cash - One of the best ways, as there are no fees associated with it

• Check - Not as common, however a good alternative if you don't want to take payments through an app or online

• Apple Pay - Available on iPhones

• Debit/Credit Cards - You will most likely have fees or interest associated with any payment transaction made, however with technology these days, is the most common for merchants and customers

• Digital Apps - These you will need to set up prior to being able to accept payments through them. These can include PayPal, Square, Venmo, and others

Marketing Your Business to Sell

Where Should I Sell?

Where you can sell will depend on your state and individual vendors and markets. For example, South Carolina only allows in-state sales and shipping either in person or online. However, being able to Market your goods online is a great way to get your business out there. It can be a slow process at first, so don't put yourself down if you don't get a good start right away!

Some places can include:

• Instagram

• Facebook

• LinkedIn

• Google Ads

• Business Website

• Vendors

• Farmer's Markets

• Festivals/State Fairs

It is important to use all that those places offer, such as running online ads through Instagram, Facebook, and Google. Or when you go to a farmer's market, purchase some banner's with your logo to bring people in. Make sure to also utilize hashtags! It may seem like a pain, but if you plan on creating an Instagram page for your bakery, using hashtags related to your business on your posts will boost your views!

Here is an example from my Instagram Page:

As you can see, I placed hashtags related to both my business and the photo I posted. This means anyone who follows or searches a similar or identical hashtag, will come across my photo.

How Can I Grow My Business?

Be sure to keep up with your social media and advertising. The more you create or upkeep on, the better chance you reach more potential customers. Utilize asking for reviews after selling an order. Reviews will be a number one helper in growing your business!

A few other tips I recommend can include:

• Passing out business cards (I utilize Canva and Shutterfly for printing)

• Make sure your business is verified and listed on Google (that way your business pops up in a search)

• Offer free samples at markets

• Offer new bakery goods often to change up your menu/services

• Join baking groups on Facebook or in-person

• Be CONSISTENT!

Overall Conclusion

Hopefully, all these tips help you out in getting started! Of course, there are lots of questions and tips I can still go on and on about, however if you do have any questions, I would be happy to help you out further.

Don't be afraid to put yourself out there! Be creative, be consistent, and just be yourself. Don't be discouraged on getting started, as it can be a slow process at first. Starting a baking business is probably going to be one of the best decisions you will make...I mean you are doing what you love, right?

Take the time to review EVERYTHING, make sure to get your business set up before selling, and learn what your customers have to say, even if that is good or bad. Insight and reviews help you grow!

The best part? You get to work on your own time, your own schedule, and be your own boss.

Now get out there and do your thing.

Business Binder Files

.pdf

Download PDF • 134KB