Bakeries have always been profitable and in demand for centuries. Although starting a bakery can be a good idea, it can become messy quite easily. Having the right knowledge and skills is an essential requirement to start a bakery business. However, if you have a passion for serving bakeries, supplemented with a business plan, you can make your business successful. To learn how to start a bakery business, read on through to the end of the article.
In this article, you will first get a general overview of bakery businesses and the bakery industry. Furthermore, this article will guide you on how to start your bakery business in a step-by-step manner. Hence, after reading this article, you will have enough information on how to approach your bakery business.
Bakery Business In 2024 – A General Overview
If you have a passion for baking and good staff management skills, opening a bakery business is a great option. Each year, the baking industry generates more than $30 billion, and bakery products constitute almost 2.1% of the US GDP.
According to Small Business Chron, “The American Bakers Association reports the economic impact of baked goods produced and sold in the U.S. totals $423 billion. Retail bakeries generate around $3 billion in revenues, and commercial bakeries sell $31 billion in products. However, profits are not particularly high because of the rising costs of wheat and sugar. Bakeries are not always able to pass on these increased costs to consumers by raising prices.”
However, if you want to become a commercial bakery, you will need to have a large source of capital. This is because of the cost of equipment. Furthermore, you will also face strong competition from some of the bigger brands in the area.
On the other hand, if you want to go to a small bakery, it will be easier for you to start, as there is less initial investment. Furthermore, it will be easier for you to establish yourself if you have special products. As a result, you can also develop a loyal customer base for yourself.
How To Start Your Bakery Business? – 8 Steps To Follow
According to NerdWallet, “Starting a bakery will be hard work but fun at the same time. With equal parts passion and elbow grease, you can start a business that has customers lined up around the block waiting for a chance to try your delicious treats.”
The following are some of the major steps you will need to take if you want to start your bakery business in 2024:
1. Decide Your Niche
Basically, a niche is a concept that describes a specialized area of a market. In this area, you can differentiate your business and your produce from your direct competition. To find your niche market, you will need to determine your strengths and passions. Find out what types of customers or markets will buy your product.
The following are a few things to consider if you want to find your niche:
- Ask what type of baking you want to serve – sourdough cakes, simple cakes, intricate decorations, etc.
- What types of ingredients do you use? – organic, local, vegan, etc.
- Find out what your local market lacks. Check other shops and find out what type of bakery items they lack. Always look for gaps where you can fill in with your product and service.
- Consider catering to a target audience – diet-conscious, vegans, those who want allergen-free items, etc.
- Do you have a signature item to offer, or do you use a special ingredient? – Capitalize on that.
- Can you make items for special events – weddings, parties, birthdays, etc.? You can create beautiful/special cakes as per demand for special occasions.
2. Create Your Brand Identity
To build your brand identity, here are some aspects you must consider:
- Focus on creating an origin story for your brand, and create the brand around the core values that you believe in.
- Find your target customers on the basis of demographics, age, gender, profession, and behavioral pattern.
- Develop a brand voice for your business. Here, try to make a tone for the brand that goes with the brand story. Also, try to make a unique tagline that summarizes the essence of your brand.
- Ensure that your business has a unique visual identity. Hence, choose to create your logo, fonts, and color scheme for your business and maintain it on all platforms.
3. Make A Strong Business Plan
According to Shopify, “If you consider yourself a talented baker with entrepreneurial dreams, starting a bakery is an excellent business idea you can do from home or from another brick-and-mortar space. But before you launch into how to start a food business with your baking prowess, it’s important to write a bakery business plan.”
A business plan will not only help you get access to loans faster, but it will also guide you through your business processes. Generally, while creating a business plan for your bakery business, make sure it contains the following:
- Make sure you have a catchy executive summary. Here, you will have to describe your bakery idea, target market, financial growth, expected revenue, etc. Since this is the first impression of your business plan, make sure it is really good.
- Describe the company and the products and services of your bakery business. Here, explain your business’ mission statement, uniqueness, menu, signature items, and how you are willing to serve.
- Make sure the business plan consists of an industry analysis, competitive analysis, and your growth potential in the market. Also, you will need to define your target customers and how you plan to cater to them.
- Share the actionable steps of your business, such as the location of the shop, supplies, equipment, accessibility, production, human resources, etc.
- Create a market strategy for your business and share details about marketing channels, branding strategy, pricing, promotion, etc.
4. Secure Your Business On The Legal Front
The Forbes Advisor explains – “With a fledgling business, passion for a product or service usually comes easily. Less exciting are the legal requirements for operating legitimately. Requirements vary dramatically depending on the industry, type of business and location. […] Be sure you understand what’s needed before getting too far into your business planning.”
The following are some of the major steps you will need to ensure to clear out the legal aspects of your bakery business:
1. Decide on the legal structure of your business. If you are starting out, it will most probably be a sole proprietorship. However, it is always a good option to consult a legal expert to decide what is the best fit for you.
2. Make sure you have access to the necessary licenses and permits. Here are some of the important licenses you need:
- Food business license from your local health department.
- An Employee Identification Number from the Internal Revenue Service (IRS).
- You will also need a resale permit for your business if you purchase wholesale items.
- If you are operating your business from your home, you will need a “Home Occupation Permit.” This permit contains specific regulations for home-based bakery businesses.
3. Ensure all your food items and ingredients comply with the FDA regulations or any other local regulations.
4. If you create packaged items, you will need to show the ingredients list, expiry dates, and allergy information on the package labels.
5. Make sure that the place that you operate from is compliant with food business zoning regulations and business taxes.
It is always a good idea to keep a legal expert with you who will inform you about legal changes from time to time. Hence, you can update yourself as per changing requirements.
5. Decide On The Location Of Your Bakery Business
The location of your business must depend upon where your target customers are. You will need to be present in an area where there is a high demand for what you serve. Hence, it is essential to find and understand your target market. (For more details, check the first step)
Basically, you will need to be present in an area where your shop is visible. The best places to choose are areas around cafes, malls, grocery stores, etc. Also, make sure there is ample parking availability.
Furthermore, you will need to ensure that your target customers are able to pay according to your pricing strategies. You must also consider the competition in the area. If there are multiple bakery shops in the area, you will find it hard to get new customers.
6. Having The Right Equipment Is Essential
If you want to ensure the success of your bakery, you will have to invest in the right equipment. Here are a few factors that you need to ensure:
The first thing you need to ensure is to buy the essential equipment, which is essential for the bakery to function. However, you will have to consider your specific menu and volume of production. The following are some of the essential equipment you need to have for your bakery business:
- Ovens: Consider the size, type, and number of ovens you need for your baking purpose. It all depends on your output.
- Mixers: If your operations are smaller, you can buy a hand mixer. However, if you work with heavy dough and batters, you should buy a stand mixer.
- Baking instruments: Other instruments include different types of pans, spatulas, whisks, mixing bowls, rolling pins, etc. Make sure you have access to all of them when you are about to start your bakery shop.
On the other hand, you must also ensure that the equipment you buy for your bakery is energy efficient. This will not only save you money but will also reduce environmental impact. Furthermore, with the help of this, you can also improve the condition of the workplace and make the environment of your kitchen more comfortable.
7. Bring Staff To Your Business
Your team can either make you or break you. Also, since you run a bakery, it is essential to have a team who understands your ways. Here, you will need to identify all the roles that you need to ensure that your business runs smoothly. Basically, you must consider these positions for your bakery business:
- Bakers: These are the people who have the essential knowledge to make and prepare baked goods for the business.
- Decorators: These people make the baked items more visually appealing for the customers.
- Salespersons: These staff are the ones who interact with your customers, sell the products, promote them, or even resolve their queries.
8. Bring Customers Through Marketing
Finally, you will need to attract your customers to your bakery. One of the easiest and most effective ways to find new customers is using online tools. Here are some of the best ways to do so:
- Start by creating accounts on top social media platforms like Instagram, Facebook, TikTok, X, and more. This way, you can showcase your bakery business, where you can share photos of your items and offers. Furthermore, you can also directly engage with your audience.
- Build a website to have a strong online presence. Use the website to promote your products and show the menu to your target customers. Apart from that, the ideal, story, and contact information about the shop should be shown on the website.
- You can also list your business on online directories. This will help people find your bakery faster when they search for your shop online.
Another way to promote your business is to build relationships with local businesses. You can do this by teaming up with complementary businesses in your area to promote each other. Also, you can promote your bakery by showing up with your business at local events, community fairs, etc.
Wrapping Up
Hope this article was helpful for you to get an idea of how to start a bakery business. Although it is not difficult to start, it might still get messy if you make early mistakes. Hence, you must consider it essential to have a business plan and ensure you maintain legal compliance. However, to get more customers, make sure you research the market and promote your brand in the right manner.
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