Baked pastries are a cultural culinary speciality all over the globe. Who doesn’t like the aroma of freshly made bread? A bakery often operates from a shop in a city or town’s commercial district. Many entrepreneurs, however, have successfully managed bakeries from their homes, garnering clients via word of mouth and small-scale advertising. Others rent commercial kitchen space and sell their baked products wholesale to local cafés, restaurants, and convenience shops.
Retail bakeries produce their products in-house and sell them directly to clients, with some locations providing seats for their customers.
Commercial bakeries do not have a physical storefront and serve as providers to companies who want to sell baked products but lack the ability to create them in-house.
Table of Contents
Start your own bakery by following these ten steps:
Prepare your Bakery
Make your bakery a legal entity.
Register your bakery for tax purposes.
Create a Business Bank Account and a Credit Card
Create an accounting system for your bakery.
Obtain the Required Permits and Licenses for Your Bakery
Purchase Bakery Insurance
Create a Bakery Brand
Make a website for your bakery.
Configure your Business Phone System
Starting a company entails more than just registering it with the state. We’ve put up this short guide to getting your bakery up and running. These stages will guarantee that your new company is well-planned, correctly registered, and legally compliant.
STEP 1: Make a business plan.
A well-thought-out strategy is vital for entrepreneur success. It will assist you in mapping out the intricacies of your organisation and uncovering some unknowns. Consider the following crucial topics:
What are the initial and continuing expenses?
Who is your intended audience?
How much money may you charge your customers?
Fortunately, we have done a lot of the legwork for you.
What are the expenses of starting a bakery?
The cost of your business varies greatly based on your region, the quality of your materials (organic vs. nonorganic, for example), and the scale of your operation. Are you a baker that works from home? From a shopping centre counter? Or do you want to open your own sit-down restaurant where customers can come for a snack or a full meal?
Learn about the products and equipment you’ll need to start a bakery, how much to spend, and where to make purchases by reading our bakery buying guide.
What are the continuing costs of running a bakery?
Your monthly expenditures, like your startup costs, will be heavily influenced by your location, the quality of materials you utilise, and the size of your crew
Who is the intended audience?
A bakery may appeal to a broad range of clients. Doughnut companies such as Dunkin’ Donuts and Krispy Kreme thrive by providing excellent pastries at a reasonable price. Doughnut Plant in New York City, on the other hand, serves eggless doughnuts prepared from fresh, organic ingredients, drawing a health-conscious and vegetarian population willing to spend a somewhat higher premium for a higher quality product.
Depending on your particular interests, beliefs, and talents, you may choose to target a certain market with your bakery. A bakery that specialises in personalised cakes, for example, will benefit from advertising at weddings, birthdays, graduations, and retirement celebrations. Other things, such as bagels or fresh bread, may appeal to consumers who wish to incorporate high-quality baked goods in their daily diet.
What is the business model of a bakery?
Bakeries earn a specific amount of money for each item sold. In many bakeries, the income from beverages such as coffee, tea, juice, and other speciality drinks exceeds the profit from baked items.
How much money may you charge your customers?
Individual baked items typically cost $2.00 to $5.00, depending on the cost of ingredients and the demography of your store. In general, labour and ingredients should account for 30-50 percent of the ultimate retail price. This implies that a $1.50 treat may sell for anywhere from $3.00 to $4.50.
What kind of profit can a bakery make?
According to the American Institute of Baking, ordinary bakeries earn between $30,000 and $60,000 per year from the sale of baked products. Those that sell drinks, such as coffee or juice, may generate much more money since these items are easy to mark up. A glass of juice, for example, that costs $0.40 is typically sold for about $2.00.
How can you increase the profitability of your company?
Serving coffee, lattes, and other speciality beverages is by far the most efficient and successful approach to boost your earnings. People often order coffee or tea with their baked products, and it is simpler to earn a profit from beverages than from baked goods since they need significantly less effort to create.
To improve income, consider giving seasonal promotions as well as discounts on large purchases. Breaking into the commercial bakery market by locating neighbouring cafes and restaurants who wish to buy your items wholesale and sell them to their clients may significantly increase your revenues.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
If your bakery is sued, becoming a formal business organisation, such as an LLC or corporation, prevents you from being held personally accountable.
STEP 3: File your taxes
Before you can begin for business, you must register for a number of state and federal taxes.
To register for taxes, you will need to get an EIN. It’s really simple and completely free!
Taxes on Small Businesses
Depending on the business form you choose, you may have multiple choices for how your company is taxed. Some LLCs, for example, may benefit from being taxed as a S company (S corp).
These guides will teach you more about small company taxes:
Taxes on LLCs
LLC vs. sole proprietorship
Corporation vs. LLC
S Corp vs. LLC
How to Form a S Corporation
S Corporation vs. C Corporation
There may be state taxes that apply to your company. In our state sales tax guides, you may learn more about state sales taxes and franchise taxes.
STEP 4: Establish a company bank account and credit card
Personal asset protection requires the use of distinct business banking and credit accounts.
When you combine your personal and business accounts, your personal assets (your house, vehicle, and other possessions) are at danger if your company is sued. This is known as penetrating your company veil in business law.
Furthermore, understanding how to develop corporate credit may help you get credit cards and other financing in your company’s name (rather than your own), lower interest rates, larger lines of credit, and other benefits.
Establish a business bank account.
Opening a business bank account is not only required when asking for business financing, but it also:
Separates your personal assets from the assets of your firm, which is required for personal asset protection.
It simplifies bookkeeping and tax reporting.
Create a net 30 account.
Net 30 accounts are used to develop and grow company credit while also increasing cash flow. Businesses use a net 30 account to purchase items and refund the whole debt within a 30-day period.
Many net 30 credit suppliers submit information to the main business credit agencies (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how firms establish business credit in order to get approved for credit cards and other lines of credit.
Apply for a business credit card.
Obtaining a business credit card benefits you in the following ways:
Put all of your company’s costs in one location to separate personal and business spending.
Build your company’s credit history, which will be important for raising funds in the future.
STEP 5: Establish business accounting
Recording your numerous costs and sources of revenue is crucial to assessing your company’s financial status. Keeping precise and thorough accounting also makes yearly tax filing much easier.
STEP 6: Obtain all required permissions and licences
Failure to get appropriate permissions and licences may result in significant penalties or possibly the closure of your firm.
Requirements for Federal Business Licensing
Federal laws govern what may and cannot be added to, marketed as, or processed with food. A Food and Drug Administration resource on the procedure of opening a food company is attached: How to Launch a Food Business
Requirements for State and Local Business Licensing
A bakery company often requires state permissions and licences. Visit the Small Business Administration’s reference to state licences and permits to learn more about licencing requirements in your state.
Furthermore, while selling food, you will need to get a licence from a local health authority; all places serving food must pass a health inspection.
For additional information on local licences and permissions, please visit
Check with the clerk’s office in your town, city, or county.
Contact one of the local organisations mentioned in the US Small Business Associations database of local business resources for help.
Occupancy Certificate
If you want to operate your company from a commercial kitchen, as many owners do, you will need a Certificate of Occupancy (CO). A certificate of occupancy certifies that all building rules, zoning laws, and government requirements have been satisfied.
If you intend to rent a space:
In most cases, it is the landlord’s obligation to get a CO.
Before signing a lease, be sure your landlord has or can receive a valid CO for a food preparation company.
A new CO is often required after a big remodelling. If your location will be refurbished before opening, incorporate wording in your leasing agreement saying that lease payments would not begin until a valid CO is given.
If you want to buy or develop a commercial kitchen:
It is your responsibility to secure a valid CO from a local government entity.
Examine all building rules and zoning standards for your bakery’s site to verify compliance and the ability to receive a CO.
STEP 7: Obtain commercial insurance.
Insurance, like licences and permits, is required for your company to operate safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
There are several sorts of insurance plans designed for various types of companies with varying risks. If you are unaware about the hazards that your company may encounter, start with General Liability Insurance. This is the most popular coverage required by small companies, so it’s a good place to start for yours.
Workers’ Compensation Insurance is another important insurance product that many companies need. If your company will have workers, your state may require you to purchase Workers’ Compensation insurance.
STEP 8: Establish your brand
Your company’s brand is what it stands for, as well as how the public perceives it. A strong brand will help your company stand out from the crowd.
How to Market and Promote a Bakery
The greatest method to market your brand in the food sector is to give a memorable client experience. This implies that the menu should provide a range of appetising selections, the price should appropriately represent the quality of the ingredients, and the bakery’s entire appearance should appeal to your target demographic. Succeeding in these areas keeps consumers returning for more, frequently accompanied by friends who may become new regulars. This kind of word-of-mouth advertising is the finest marketing plan a food company could have.
Inviting local news and food-related newspapers to write a review of your business is another wonderful approach to get your brand out there.
Finally, regularly releasing new flavours and baked goodies encourages repeat customers to pop by and sample your newest offerings. Selling holiday-themed delicacies, such as pink Valentine’s Day frosted cookies or Chinese New Year sticky rice cakes, is another fantastic approach to attract new consumers.
How to Keep Customers Returning
Never let your menu to go bad. Keep track of your best-selling goods, as well as those that consistently fall short of your sales targets. You’ll ensure a steady stream of customers by changing the menu to ensure that every product is a winner.
STEP 9: Create your company’s website.
After you’ve defined your brand and designed your logo, the next step is to build a website for your company.
While developing a website is an important step, some may be concerned that it is out of their grasp due to a lack of website-building skills. While this was a fair concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the primary reasons why you should not put off developing your website:
Every genuine company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for your own business website.
STEP 10: Install your company phone system.
Getting a phone for your company is one of the finest methods to keep your personal and professional lives distinct and private. That isn’t the only advantage; it also helps you automate your company, provides it legitimacy, and makes it simpler for prospective clients to identify and contact you.