How to Start a Bakery | Opening a Baking Business

We want to help you get your bakery business off the ground. Since 2004, we’ve helped over 1,000,000 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.

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.

choose right structure for a bakery business

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.

Start Your Business with Us, Today!

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.

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.

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).

Renew Business Permits and Licenses

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

Prepare Your Taxes

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

File your taxes

You will need to file your taxes once a year.

Pay payroll and sales taxes

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

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.