Cakes are an essential component of many festivities, from birthday parties to weddings and other important events. Consumers may now make their confectioner’s fantasy a reality, and bakers can be more creative with their products thanks to industry developments. A cake company may be formed in a variety of ways, depending on the entrepreneur’s business strategy and ultimate objectives. Many small company owners serve the whole community while focusing on a certain niche market depending on their baking skills and public demand.
Follow these ten steps to start a cake business:
Plan your Cake Company
Create a legal entity for your cake business.
Register your Cake Company for Taxes
Create a Business Bank Account and a Credit Card
Create an accounting system for your cake business.
Get the Permits and Licenses You Need for Your Cake Business
Purchase Cake Business Insurance
Define your Cake Company’s Brand
Make a website for your cake business.
Configure your Business Phone System
Starting a company entails more than just registering it with the state. We’ve put up this basic guide to getting started in the cake industry. 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 cake business?
As previously said, many beginning bakers begin in their own kitchen. While this method may be restrictive depending on the size of your kitchen, it considerably saves start-up expenses. Many home-based cake makers report a $1,000 initial investment. When deciding how much capital you need, budget for the following items:
Licenses – The cost of a licence varies based on your state’s Department of Health standards. Fees range between $50 and $400.
Insurance – Speak with a specialist about the sort of coverage you need. Policy premiums vary based on your organization’s details.
Bakery materials and decorating tools- Use the time you’ve spent working with other bakers to figure out which products and brands work best for you. When you have money to reinvest, a professional quality mixer and oven are likely to be on your list.
Ingredients are obtained on an as-needed basis to ensure quality. Your first ingredient cost will most likely be less than $150.
Refrigerator – Having a fridge specialised to baking can help protect materials from being contaminated and will keep your own fridge from becoming overloaded with baked products. A secondhand one may be had for as little as $200.
Shelving – You’ll have a lot of goods to keep between ingredients and baking utensils. A cupboard may be bought new for $100 and will save you a lot of trouble in the long run.
Marketing materials – While you don’t have to spend a lot of money on it, your packaging is just as important as the cakes themselves. For packaging, an initial cost of about $300 should suffice. Ads, printed materials, and business cards should all be part of your early marketing campaign.
Website – Your website should be straightforward and tidy, with enough information about your talents to entice prospective customers. Websites may be constructed for free, however typical hosting costs will apply once they go live.
What are the continuing costs of running a cake business?
Apart from ordinary overhead expenditures, your continuing expenses will be rather low. Your operating licence and insurance will need to be renewed yearly and might cost anywhere from $700 to $1,500. The majority of your spending will be spent on cake ingredients, packaging, and promotional goods. These charges vary depending on how active you are during that given month. Regular maintenance and repair of your equipment will reduce the expense of replacing broken things. If you provide delivery, you will additionally need to budget for gasoline, vehicle expenses, and extra insurance fees.
Who is the intended audience?
When creating your business strategy, you should determine your target market. Investigate other bakeries in the region and uncover unmet community requirements. Do any of those niches pique your interest? Organic cakes, vegan items, and gluten-free alternatives are all possibilities. Do you want to specialise on wedding cakes, or do you want to bypass this market entirely? Once you’ve found the aspects of the company that most appeal to you, you can start creating buyer personas and marketing to them.
How does a cake company generate money?
Whether you build a retail presence or concentrate only on custom orders, the sale of each cake will produce cash for your cake company. Each design will be priced differently depending on a number of criteria.
How much money may you charge your customers?
Ingredient expenses make up just a tiny fraction of what buyers pay for. Prices should always take your baking and decorating abilities, as well as your time, into account. Don’t undervalue yourself. Consider how long each job will take and price appropriately.
How much money can a cake shop make?
The cake company provides a possibility to make a considerable profit, especially as your reputation in the community grows. Because this is an industry where individuals depend largely on word of mouth, it is recommended that you have a safety net in your bank account before starting this company. Bakers that prefer to stay small, with just one store, report profits ranging from $41,000 to $65,000. Profits range from six figures to over a million for those that desire to branch out and go further. Revenue is strongly related to your company vision and ambition to achieve those objectives.
How can you increase the profitability of your company?
Profits might be increased by using the following strategies:
Teach baking lessons to pupils, where they will learn everything from baking to decorating. But be cautious not to reveal too many trade secrets.
Consider adding baked products such as cupcakes, cookies, and pies to your menu. If you have a storefront, combine these things with high-quality coffee and you may have a winning combination.
Seek collaboration with high-end hotels and restaurants in the region. Depending on your skills, time availability, and overall objectives, you might become their primary contributor for dessert goods or provide help for huge occasions alone.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
If your cake company is sued, becoming a legitimate 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!
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
To run a cake company, certain state permissions and licences may be required. Visit the SBA’s reference to state licences and permits to learn more about licencing requirements in your state.
For information on local licences and permissions, 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.
A bakery with a commercial kitchen is usually where a cake business is operated. A Certificate of Occupancy is often required for businesses that operate from a physical site (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 leasing, ensure that your landlord has or can get a valid CO for a cake 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 intend to buy or create a location:
It is your responsibility to secure a valid CO from a local government entity.
Examine all building rules and zoning standards for your business’s location to verify compliance and the ability to acquire a CO.
Regulations Concerning Food
When selling food, you must get a licence from your local health authority; all enterprises serving food must pass a health inspection. Tips for Passing a Health Inspection
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 Promote and Market a Cake Shop
Ultimately, word of mouth will be your most powerful marketing strategy. Consider free web tools like social media and local business registrations as you create your brand. If you join any organisations, ask about their online listings, which are sometimes provided free of charge to members. Distribute mailers in your neighbourhood and become a sponsor of local charitable events. Participate in charity events featuring local cooks in your community to obtain awareness.
Contact local wedding and party planners. These experts are often approached for advice. If you associate with the appropriate people, your company might skyrocket with minimal marketing effort.
How to Keep Customers Returning
Your customers want the greatest, mouth-watering experience. The appropriate formula will speak for itself, providing the ideal combination of tastes and aesthetics. This, together with excellent customer service, will assist you in establishing a robust client base. When experimenting with new recipes or ideas, get feedback from your clients. Your customers will notice that you are always looking for new ways to innovate and that you value their feedback.
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.