Baked Goods Seller

You’ll have a much easier and more rewarding experience if you establish certain skills before jumping headlong into a home baking side hustle.

Baking skills

Odds are that if you’re considering opening your own home bakery business, you’ve probably already got pretty sweet baking skills. With that said, unless you’ve gone through baking school, you can probably stand to benefit from brushing up on baking techniques.

Regular baking knowledge isn’t all you need to run a baking business. For legal reasons, you’ll need a good understanding of food allergies and intolerances, food hygiene standards, and cooking safety protocol.

Business or entrepreneurship skills

It can be easy to forget that a bakery is more than just a sweet-smelling haven—it’s also a business. To actually make money, you’ll need to understand how to successfully run a business out of your home and avoid pitfalls that often threaten the success of first-time business owners.

• Suppliers: A major part of running your baked-goods business is knowing how to create supply lists and find suppliers to fit your needs.
• Market competition: Before you jump into the melee, you’ll want to do a lot of research on the competition. See what others are selling in your area, how they’re pricing their goods, and what methods they use to market themselves.

Additional skills (recommended by an expert)

We talked to Allyson Grant, the owner and founder of the Better Baker Club. She’s been in the baking business for more than 25 years and helps other home bakers start (and grow) their businesses.

Grant shared a few additional (often overlooked) skills that baked-good sellers should have:

• Payment processing
• Invoicing
• Bookkeeping
• Pricing baked goods

When we asked her where she acquired the skills required for this side hustle, she told us, “I started my home bakery almost 20 years ago, when online resources were almost non-existent. I used my local Small Business Development Center to get my questions answered and they were an invaluable resource.”

She recommended conducting an online search for “small business development center near me” to get started.

Today, Grant also provides some of this advice herself on her website, Better Baker Club. She maintains a baking blog that features free tips and recipes as well as several paid online courses.

Each state has its own rules and regulations surrounding the sale of homemade food items. The only way to know for sure that you’re selling cakes and other baked items legally is to check the laws, regulations, and legal requirements that govern this in your area.

It’s important to get to know these laws early in the business-creation process, as they’ll help you determine what food to sell, what ingredients you can use, and how your business is allowed to operate.

Cottage food laws

Any food business that you operate out of your own kitchen is legally referred to as a cottage food operation (CFO). This is in contrast to a commercial food operation. Cottage food laws give ordinary people a chance to try out what it would be like to run a business without making a major financial commitment.

Cottage food operations are subject to certain restrictions that commercial food businesses aren’t, particularly on the following points:

• What you can sell: Some states allow home bakeries to sell high-risk baked goods that require temperature control, such as products containing custard, meringue, cream or cream cheese, or fresh fruit. However, many prohibit these items. Look up the list of what you’re allowed to sell, which, according to Grant, is called the “non-potentially hazardous foods list.”
• Where you can sell your products: Many states, including Ohio, allow you to sell your bakery products to consumers directly from your home or through restaurants, but not through stores or markets.  Other states, like California, allow you to sell your home baked goods at food markets.
• How much you can earn: Many states impose a threshold on how much you’re allowed to earn from a cottage food business. In Michigan and Washington, this limit is $25,000 per year, whereas in California, it’s $75,000 or $150,000, depending on the type of cottage food operation you’re running.
• Whether you need a permit or license: You might or might not be required to get a home/domestic kitchen license, food safety license, or cottage food operations permit.

In addition to checking the laws in your state, you’ll also need to check the laws in your county or jurisdiction. Zoning laws may prohibit you from selling in one area, while allowing you to sell your baked goods for profit somewhere else.

Your state may also require you to get a food safety certification, undergo inspections, or pass health checks. You may even be required to make alterations to your kitchen to meet certain requirements.

Tax regulations

Each state has its own tax regulations for cottage food sales. Many states do not require sales tax on cottage food items, including baked goods. However, there are plenty of exceptions.

You’ll need to check the tax regulations on baked goods in your state to find out if you’re required to collect or pay sales tax and report it to the relevant tax authorities.

If you are selling taxable baked goods, then you’ll need to apply for a sales tax license. You can submit a registration form on your state government’s website.

Before you start placing bulk orders on sugar and flour, you’ll want to decide exactly what you’re selling. Choose a baking niche that fits your personal expertise (and what you like to eat, since you’ll be sampling a lot of your own product!) as well as what your target audience is interested in.

If you’re struggling to formulate a product list, ask yourself these questions:

• What are the baked items you make most often?
• Which of your creations gets the most compliments?
• Do you want to make sweet baked goods (e.g., cakes, cookies, pies, sweet pastries, or other desserts), bread, savory baked goods (e.g., quiches or savory pies), or a combination of different types of products?
• Do you have any original recipes you’d like to market?
• What products are and are not sellable under your local cottage food laws?

It’s equally important to decide what items you won’t sell. Being overly inclusive when coming up with your menu or product list can make it hard to keep up with diverse demands and may also lead to supply issues.

Think about what foods are easy to prepare, bake, and sell together, and which ones require unique ingredients and complex prep work.

This might not be the most fun and exciting part of starting your own baked goods service, but creating a business plan is a necessary step.

Your home bakery business plan should include the following components:

• Executive summary: Your mission statement, including why you want to start your own bakery business and what your long-term goals are.
• Business description: What you’ll sell and how your business will stand out from the competition.
• Organizational structure: Who will be working in your company (i.e., whether it’s just you or you plan to hire staff). Allyson Grant pointed out that many states’ cottage food laws don’t allow home bakery businesses to employ paid staff, so check your own state’s regulations.
• Industry/market analysis: Overview of the home bakery industry and its current trends.
• Customer analysis: Description of your target customers and their buying habits.
• Financial plan: How much money you need to start and maintain your bakery business and where you plan to get these funds.

While this may seem like a rudimentary step, outlining your business’s goals, creating actionable steps to achieve them, and making realistic projections will have an enormous impact on your home bakery’s success.

Next, you’ll need to gather the materials, ingredients, and equipment needed to start your baking business.

Remember that when you’re baking professionally, you may need large quantities of certain items. As Allyson Grant noted, “Buying in bulk is a good way to keep costs down.”

She also pointed out that many states don’t allow commercial equipment to be used for home-bakery businesses. She recommends reading the guidelines in your state carefully, considering what capabilities your at-home equipment has, and making a plan to expand when the demand is there.

Separate baking area

Although a baking studio or commercial kitchen is ideal for running a bakery business, it isn’t realistic for most home bakers. However, one thing you should prioritize is establishing a separate kitchen space you use only for your business. This will help you avoid contamination and manage your stock, and more to the point, it may be a legal requirement, depending on where you live.

“Most states require home bakers to keep their supplies in different areas,” Grant told us. She added the caveat that hers does not, and again recommended tailoring your business to what is permitted in your state.

“One helpful tip is to have a rolling cart that you can set up on baking days, and tuck away for family time,” she said.

Again, she stressed the importance of learning your local laws and ensuring your kitchen spaces fits them. For example, some states’ cottage food laws don’t allow pets to be in the same space where you bake sellable goods.

Separate communication lines

Set up communication lines that are exclusively for your baking side hustle. This will make your life a lot easier and add some legitimacy to your business.

You should establish all of the following for your side business:

• Email address
• Phone number
• Website
• Social media profiles
• Google Business profile

Packaging

Many states have laws requiring homemade food items to be packaged and labeled prior to sale. In general, good packaging is important for keeping your baked products fresh and safe, and protecting your brand’s image.

Labeling is also an important part of appropriate packaging, so you’ll need to acquire a label maker. As Grant noted, many bakers use print-at-home labeling templates to make this process easier. This is especially helpful when you’re starting out.

Baking ingredients

This is a big one—you won’t be able to run any kind of baked goods business without ingredients. Create a list of inventory you’ll need to produce the items you plan to sell and find reliable suppliers.

Grant added a few recommendations based on her own experience, such as to:

• Stick to your core menu offerings
• Keep an inventory list of items you regularly use
• Reorder with enough lead time to maintain your inventory
• Buy in bulk
• If you are offering a seasonal special with different ingredients, buy all of your supplies before you start your promotion

Depending on where you live, you might or might not be required to register your home bakery as a legal business. If you’re required to get a business license, be prepared to pay a licensing fee.

Even if you aren’t required to formally register your home bakery side hustle, it has benefits that make it worth considering. For example, commercial food businesses usually have fewer restrictions on where they can operate, what they can sell, and how much they can earn. Limited liability companies (LLCs) also have added protections and may qualify for certain tax benefits.

“As your business expands and you become more exposed, having an LLC can help protect you from vulnerability,” Grant told us, noting that liability coverage is especially important if customers will pick up orders from your home. “Also, if you sell to stores, you may want to consider additional protection. Having an LLC can demonstrate to your customers that you are a professional.”

Applying for business insurance

Business insurance is incredibly important for any home food business, and you may be required by law to get it.

The Small Business Administration (SBA) defines six main types of business insurance:

• General liability insurance: Covers financial loss due to bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments.
• Product liability insurance: Protects against financial loss due to product defects that cause injury or bodily harm.
• Professional liability insurance: Protects against financial loss due to malpractice, errors, and negligence.
• Commercial property insurance: Protects against loss and damage to company property due to various events, such as fires, natural disasters, or vandalism.
• Home-based business insurance: Coverage that you add to your homeowner’s insurance to cover your home business equipment and liability for third-party injuries.
• Business owner’s policy: Insurance package that combines all of the typical coverage options into one bundle. This simplifies the insurance buying process and can save you money.

Thankfully, many insurance companies have policies specifically for home bakeries. You should compare offers and choose a policy that’s comprehensive enough to protect your baking business.

Interestingly, Grant told us that she has business insurance through her homeowner’s insurance policy (not all policies provide this, so check yours if you’re not sure).

She added, “Many home bakers use a company called FLIP which specializes in food business liability coverage” (FLIP stands for “food liability insurance program”).

Once you’ve set up your home bakery, you can finally start making money by selling your baked goods from home. There are two routes you can take:

• Selling to customers in person in your local area
• Selling online to customers across your state or even nationwide

How to sell baked goods locally

There are several places where you can sell your baked goods in person:

• Your home
• Farmers’ markets
• Restaurants
• Grocery stores
• Community events
• Bake sales

As mentioned, however, the options you’ll have for where and how you sell your bakery goods depend on the cottage laws in your area.

In many cases, you’ll need to sell your products directly to customers and not through a third-party retailer.

Selling products in person is a totally different ball game from selling them online or through a third party. You’ll need to work as a salesperson, which involves advocating for your products, hooking potential buyers, and forming interpersonal connections to establish repeat customers.

Grant recommended selling your goods in as many places as possible to increase your initial exposure. She also said that hosting an event at your home and handing out samples is a good way to start getting the word out about your food. Even if a full-fledged event isn’t in the cards, she recommends giving samples to as many friends, neighbors, and coworkers as possible.

How to sell baked goods online

Selling your baked goods online can save you a lot of time, hassle, and stress if you’re tech-savvy and feel comfortable performing some of your business operations digitally.

There are a few online routes you can take:

• Creating your own website: When done well, this option gives you the most control and the highest earning potential.
• Selling on social media platforms: Create accounts for advertising or selling your baked goods on social media sites like Facebook and Instagram. This is a good approach if you already have a large online social network or following.
• Using online marketplaces: Sign up to sell your products on Amazon, Etsy, or another online marketplace if your state allows it. It’ll be easier to reach a wide audience, but you’ll likely have to sacrifice a cut of your profits (as the platform will probably take a commission).

Regardless of which approach you choose, it’s a good idea to make a website for your business anyway. This is an important part of establishing your brand.

Your website and social media accounts should include an “about” page that explains who you are and why you started your business, a list of the items you sell, information about your opening hours and availability, shipping information, and contact details.

From a financial perspective, starting your own home-based bakery business has several major advantages, including the following:

• Low startup costs
• Low maintenance costs
• Reliable market demand (people always want delicious home-baked goods)

But that’s not all—a home bakery can also be rewarding on a personal level.

“For baking enthusiasts who have dreamed of opening their own bakery, selling baked goods from home is the perfect solution!” Grant told us. “The start-up cost is low, and there is less risk than committing to a brick-and-mortar shop. You can learn necessary business skills as you go, and because the overhead expenses are lower than in a bakery shop, you’ll keep more of your profits for yourself.”

She added that, “Whether you want to create a part-time income or go all in and make baking your full-time job, selling baked goods from home is a great way to make extra money doing what you love.”