Starting a baking business from home allows you to channel your passion for baking into an income stream without the overhead costs associated with a brick-and-mortar store. You can also set your own schedule, try new recipes with less risk, and grow the business at your own pace.
This was the case for Lulu Naideau, founder of Bodega Cakes, who started her baking business from home after her astrology-themed cakes went viral on Instagram.
“I love that I’m the accountant, and the social media person, and the creative ideas person,” Lulu says of being an entrepreneur. “How many hours do I work a week? One hundred plus. But it’s never boring.”
This article covers everything you need to know to start a baking business from home, including legal requirements, making a business plan, pricing strategies, and marketing tips.
How to start a baking business from home
- Fulfill the legal requirements
- Identify your niche
- Conduct market analysis
- Calculate startup costs
- Determine your business structure
- Set your pricing
- Create a business plan
- Set up your business
- Build an online store
- Market your home bakery
Here are some steps to take to set up a home bakery business:
1. Fulfill the legal requirements
Home bakeries fall under cottage food laws, which dictate things like:
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Annual revenue caps
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Who can and can’t sell homemade baked goods
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Whether products can be shipped, sold online, or sold at in-person venues like farmers markets
Cottage food laws vary by state.
When securing a cottage food license from your local jurisdiction, clarify who you intend to sell to in order to receive a license in the correct class. For example, selling direct to consumers (D2C) may be one class of license, while selling both D2C and wholesale (such as to local coffee shops and grocery stores) may be another class.
Keep in mind that cottage food laws require you to limit your home bakery offerings to low-risk foods pre-approved by your jurisdiction’s health department. In addition, you’ll also need food safety certifications, which vary by state.
You’ll also need to apply for your state’s standard business license to charge sales tax, determine your business structure (like a sole proprietorship or limited liability company), and apply for business insurance.
2. Identify your niche
Determine the unifying theme or story behind your baked goods. Ask your friends and family what they see as your signature, make a list of stylistic choices you’re frequently drawn to, or look to your ideal customer for inspiration.
“I’d always baked for friends and family, so I decided to make 12 little cakes that were all piped as different astrological signs,” Lulu says. “I posted them on Instagram, and that was it.”
For example, if your target customers have dietary restrictions or preferences, they may be willing to pay for gluten-free and vegan creations. In Lulu’s case, she let her experiences growing up in a toy store in Brooklyn guide her toward vintage and kitschy designs for her home bakery.
“It had a strong focus on timeless pieces, a lot of nods to vintage, kitschy, nostalgia, all that kind of stuff,” she says. “So I think that I have always been sort of drawn to that world, and loved things that tapped into a certain level of joy.”
3. Conduct market analysis
To help you determine what to sell and how much to charge, look at similar home bakery businesses in your area. Peruse directories like The Front Porch, Google Maps, or social media to learn how you might fill a local need or map out a differentiation strategy.
If you find that you have plenty of competition, don’t be discouraged. Lulu recommends highlighting your individual execution.
“There’s a handful of amazing cake artists in New York who are inspired or drawing from vintage references, but we all have our own style, too,” she says. “So while there is a component of looking at the marketplace, there’s also a sense of: we’re all unique. In a medium where you’re creating something with your hands, it’s impossible not to put your own spin on it.”
4. Calculate startup costs
For a home bakery business, most startup costs go toward equipment, ingredients, and packaging after licensing fees have been paid. Your goal will be to spend less on these things than the revenue you generate, so try to price out your expected startup expenses as accurately as possible.
Take inventory of what equipment you already have and what additional pans, trays, bowls, mixers, or other tools you may need. Be practical about what you can get by with to start—you can always reinvest some of your earnings into additional equipment later, as Lulu did. About a year after starting Bodega Cakes, she bought a second refrigerator so she could increase the number of cakes she could keep cool prior to pickup.
Think about the recipes you plan to start with and then work backward to determine your ingredient quantities and associated costs. After your business is up and running, documenting your monthly spend. Note which ingredients fluctuate in price and which ones don’t. It will help you project your expenses from month to month and quarter to quarter.
“Butter prices vary drastically from month to month. Same with eggs,” Lulu says. “Things like flour and sugar stay relatively consistent.”
For packaging, you can go the DIY route, using such widely available materials as foil, parchment paper, and paper bags, or you can look to a specialty company. ULINE and noissue both position themselves as budget-friendly options for small operations. Keep in mind that many packaging companies require minimum order quantities (MOQs).
5. Determine your business structure
Home baking entrepreneurs can choose from a number of different business structures. You might decide to take individual pre-orders from a weekly menu, drop off fixed quantities of your baked goods at local markets, or offer a monthly subscription box packed with a curated lineup.
Based on your goals, any interest you’ve already generated, and what your schedule will allow, determine your ideal business structure. Then map out what your workflow will look like, from the ordering process to the baking window, followed by pick-up or delivery.
6. Set your pricing
Taking into consideration your startup costs, your revenue goals, and your own time and labor, determine what you plan to charge for your items. You might consider approachable prices for low-effort and low-cost batch bakes, such as brownies or cookies, but more premium prices for custom or highly detailed baked goods like artisanal breads or cakes.
Lulu advises accounting for the hours you will be putting into your business when setting your prices. Beyond baking, your daily tasks may include prepping ingredients, cleaning up, packaging and delivering your baked goods (or scheduling them for pickup), plus creating and publishing marketing content.
“In the beginning, it was like, ‘My ingredient costs are getting covered, that’s so cool,’” Lulu says. “But I’m working until four in the morning, and that isn’t getting paid for. Think of yourself as an employee who has to get paid, just like any other employee would.”
Lulu also takes a cooperative approach to pricing to help customers arrive at a desired vibe.
“Some people will say, ‘I want to do X, but realistically, my budget is Y,’” she says.
Making small changes, like moving to a mid- or smaller size, eliminating a filling, or swapping components, helps them get there.
7. Create a business plan
Use the information above to craft a business plan. This will help you articulate your short- and long-term business goals and tasks—to yourself as well as to potential employees, partners, and investors.
8. Set up your business
With your legal requirements fulfilled and your business plan drafted, it’s time to set up your actual business operations. Purchase your equipment and ingredients, and build your online store or set up whichever platform you will use to accept and fulfill orders.
Food drop platforms like Hotplate offer you little customization over how your business is presented. Building your own online store lets you customize the user experience, collect orders 24/7, accept secure payments, and showcase product photos and customer reviews. You could even sell merchandise like branded swag or gift cards to generate additional revenue.
9. Build an online store
Setting up an independent online store lends a layer of professional legitimacy to your business and allows you to retain control of your customer data. It also helps surface your home bakery in Google search results, expanding your reach to customers who aren’t on social media. Shopify websites come with customizable templates, inquiry forms, and secure ecommerce functionality so you can take orders.
Lulu says she uses the Bodega Cakes website as a way to set pricing expectations.
“When you’re building something that’s so customizable, there just can’t be a flat rate price,” she says. “It’s helpful to have starting points for the sizes and the add-ons so that people can comprehend what something like this is going to cost and we’re all on the same page.”
The website form is also a way to gather extended information from your customers about what they’re looking for.
“A big part of it is giving people some language to describe what they’re thinking about,” Lulu says. “There’s room for them to brain dump their vision, but in a way that’s understandable for me.”
10. Market your home bakery
Once you start accepting orders, it’s time to start marketing your home bakery. If you haven’t already, establish an account for your business on one or more major social media platforms, which can be powerful drivers of interest and discovery. Prioritize visual platforms that will help you show off your baked goods. Design a social media strategy you can stick to and create content that will attract customers, such as behind-the-scenes videos and beautiful product photography.
Create a Google Business Profile to boost your local visibility through search and Google Maps. You don’t have to use your home address, but you should include a link to your website, your social media handles, and your contact info so customers know you’re a local business. A Google Business Profile also typically highlights customer reviews and key offerings that potential customers might be searching for.
In-person sales can be another key marketing tactic. Secure a vendor booth at local events, such as fairs and farmers markets. There you can interact with your target audience one on one, hand out business cards, and gain valuable exposure in your local market. If you plan on accepting other forms of payment beyond cash, consider investing in a point-of-sale (POS) system for the necessary hardware and software to simplify the checkout process for you and your customers.
How to start a baking business from home FAQ
What licenses do I need to bake at home?
Cottage food laws vary by state. Many states, for example, require completing a food handler’s course before you can sell to the public, and liability insurance is recommended in case a customer ever gets sick after eating your food. Check with your local health department about your jurisdiction’s local laws and necessary business licenses, permits, food handler certifications, and insurance.
How profitable is home baking?
Because overhead costs are generally low, baking from home can be a profitable career, provided you have a regular stream of customers. One way to maximize your profits is balancing low ingredient costs and simple execution with high perceived value in your mix of baked goods.
What baked goods can I sell from home?
Cottage food laws, which vary by state, determine what is and isn’t permitted to be sold from a home bakery. While South Dakota, South Carolina, and Vermont permit confectionery and baked goods only, other states have more expansive lists. Commonly allowed baked items include pastries, cookies, brownies, cakes, breads, muffins, and scones. Typically, homemade baked goods for sale must be shelf-stable (no refrigerated items). Check with your local health department for guidance and legal requirements.
Can I start a bakery with no money?
Yes, you can start a home bakery with very little money. Before you start selling your baked goods to the public, your only necessary startup costs will be for your ingredients, packaging, and fees for your state-required licenses or permits. If you want to accept forms of payment beyond cash, you may also need to invest in a POS system or other type of payment processor.
