How to Start a Bakery Business in 8 Simple Steps
Have you been dreaming about opening a bakery? With careful planning and attention to detail, you can establish a successful business. This article walks through the steps involved in planning, organizing, and marketing a bakery, including finding a bakery loan.
How To Start A Bakery
Before opening a bakery, you need a business plan, financing, location, permits and licenses, and specialized equipment. You also need a marketing plan and protocols for hiring employees.
Step 1: Build Your Bakery Business Plan
You’ll need a business plan to apply for loans or solicit investors.
Include the following:
- Executive Summary- Includes the names of owners and contact details, history, market opportunity, how you’ll compete, highlights of your financial information
- Description of Business and Structure- What kind of bakery will you be? For example, a home bakery? Small retail space? A specialty bakery? Describe your legal structure
- Market Research- Describe your marketing strategy and sales forecasts
- Employees- Add bios of key personnel and discuss how their expertise will help you meet your business goals
- Financial Documents- Includes profit and loss projections, balance sheet, and cash flow statement for the first three years
Step 2: Take Out A Bakery Loan
Make a list of all the equipment needed to start a bakery, including tools, appliances, and other items you’ll need. Add your rental, utilities, and other operating expenses, such as employees or delivery service. Unless you set up a savings account to fund your bakery, you’re going to need a loan.
Here are three online options to consider.
- Fundera: an online lending marketplace. It doesn’t directly provide loans, but it’s an excellent platform for finding startup loans. Based on the information you provide, Fundera will match you to the most appropriate lenders. You receive loan offers and can select the one that works best for you
- PayPal: a good resource to help you cover operating costs. You’ll need a PayPal business account and need to be in business for at least nine months. Everything is handled online. Payments are made weekly via automatic deductions from your bank account
- LendingClub: an online loan platform that offers business loans from $5,000 to $300.000. You don’t need an excellent credit score, but must have been in business for at least one year and have $50,000 in annual revenue
Step 3: Leasing A Location
If you’re going to operate from home, leasing space isn’t an issue. If not, you’ll need at a minimum commercial kitchen space. If you want your customers to be able to browse your baked goods and maybe even eat on location, you’ll need to lease retail space.
Location is important. What’s your target market? Do you want to catch people on their way to work? Do you prefer a walkup business, or do you need a place that has ample parking?
Shop around. Talk with businesses in the neighborhood, compare prices, and consult with real estate professionals.
Step 4: Check Regulations For Permits and Licenses
Even if you operate your bakery from home, you’ll need a license. Licensing laws vary by state and municipality. An urban location requires a different license than a bakery in the suburbs. If your baked goods are available for takeout only, you’ll need a different license than if you have an eat-in space. At a minimum, you’ll need a business license, sales permit, Health Department permit (applies to home bakery too), and Fire Department permit.
Step 5: Design Your Bakery Shop
How customers experience your bakery will determine what happens next as the atmosphere is important. If your bakery shop is crowded or disorganized, customers might leave out of frustration. Your bakery shop should have space for customers to browse. The longer a customer stays in your shop, the more likely they’ll purchase.
Step 6: Buy Equipment Needed to Start a Bakery
Most of the equipment and appliances that you need to open a bakery are one-time purchases. These include:
- Refrigerators and freezers
- Commercial mixers
- Dough proofer
- Utensils, such as spatulas, spoons, mixing bowls, pastry knives, flour sifters, etc.
- Sheet pan racks
- Bread slicer
- Display case
- Delivery vehicle (if you intend to offer delivery)
When you open your bakery, you’ll also need to purchase supplies and baking ingredients. That’ll be an ongoing purchase.
- Packaging, such as cardboard, plastic, waxed paper
- Serving trays, plates, and cutlery
- Aprons, hairnets, hats
- Administrative supplies, such as filing system, accounting software, merchant account
Step 7: Hire And Train Your Employees
As you grow, you’ll need help. In the beginning, there are tasks you can quickly turn over to an employee, such as packing and shelving baked goods. When you’re ready to bring on additional bakers, recruit only those with experience. Be prepared to train and exercise substantial supervision.
Step 8: Invest In Marketing And Advertising
If you’ve selected a location on a busy street, your marketing campaign will be less intense. However, you still need to do a few things to alert pedestrians to your new bakery shop. Signs and balloons can help. Get a few volunteers to stand on the street and pass out coupons.
For a home bakery or less visible location, you’ll need to invest more in marketing. Take advantage of community boards and flyers. Utilize social media and messaging apps such as WhatsApp. Once you have customers, ask them to share photos on social media of your baked goods.
Your business plan is written, your financing is in place. You’ve rented the perfect location, and all of the equipment and supplies are in place. You’ve also put up signs and passed out coupons. The only thing that’s left is to start a baking business and prepare for your exciting bakery gala opening. Hopefully, the steps in this article will help you understand how to start a bakery business.