How to Start a Home Bakery
Starting a home bakery is in some ways much easier than opening a retail location, but there are trade-offs. Here’s what you need to start a home bakery, both in terms of equipment and licenses and in terms of expectations.
This is what the fantasy is: You have a natural flair for baking, and you need some extra money. So you make a few deals with local restaurants and coffee shops to sell your baked goods that everyone has been raving about for years. You make hundreds of dollars a week right away, and within a couple of months you are making thousands of dollars a week. It is the greatest home business ever.
Here’s the reality: most of the coffee shops and restaurants that said they would take your baked goods actually end up turning you down when you show up with a few dozens items for them. The one or two places that do take your stuff do not take it all the time, and they pay you very little for it. In fact, after you’ve figured in the cost of your supplies, plus your gas costs, versus what you get paid for the baked goods, you realize you are making less than minimum wage per hour baking.
You are also starting to get some push back from your family about why they are being sent to eat out so many times a week because your business has taken over the kitchen. Your spouse gently points out that any profits arising from this venture are being immediately eaten up every time you send the family to eat out. After about a month of this, you are very tired. Then the manager at the coffee shop that is your best client asks if you have a food preparation license. You tell them the truth (you don’t) and they say they are extremely sorry, but they can’t sell your food anymore.
Sorry for the downer. Better you know now than later, though. And, now that you know what can go wrong, you may already have enough knowledge to make a home bakery work. For instance, you really should call or visit your local town hall or municipal building just to see what the requirements are for home bakeries in your town. In some places they are pretty easy to fulfill. If that’s the case where you are, budget some money from your startup budget get a proper business license and a food prep license. If your kitchen will not pass the food inspection, consider asking a local restaurant or bakery if you can “rent” their kitchen for a few hours a week to prepare your wares.
Next, get real about your pricing. Can you make your baked goods profitably? Can you make enough to pay yourself, and pay the taxes (they’re 25% or more for the self-employed) and still have the net result be worth the time and energy it is going to take from the rest of your life?
Finally, how many options do you have for selling what you make? Is there a restaurant (or hotel, or even an office building with some vending machines) that likes your cookies/cakes/breads etc so much that they’d be willing to sign a contract affirming that they will accept your products when you deliver them? Will they pay on the spot, or 30 days later? Can you rely on them paying you?