How to start a bakery business
Could you turn your passion for home baking into a money spinner? This step-by-step guide covers all you need to know to start a bakery business...
Key areas to consider when starting a bakery business are:
What are the bakery opportunities?
In no small part fuelled by the overwhelming popularity of the BBC’s hit show Great British Bake Off, baking is enjoying a resurgence in the UK – with thousands discovering its nostalgic charms and delicious produce.
Whether you want to open a single specialist bakery, sell luxury cupcakes or release a range of specialist baking tools and equipment, there’s never been a better time for you to don an apron, dust off the rolling pin and start a bakery business.
Baked Worthing founder Lauren Roffey decided her local area was crying out for a decent bakery:
“From my travels elsewhere I saw a gap in the market in Worthing and that felt that I could offer, and bring, something to the area that didn’t exist”, she explains, adding that she was motivated by a desire to use “skills and knowledge in baking and business management to create something of my own, something I could be really proud of”.
While Harpreet Baura, founder of bespoke cupcake company Crumbs Couture and Bijou Choux – the company behind the éclair-donut hybrid Le Chouxnut – was compelled to quit her job in a law firm to take advantage of the booming cupcake trend a few years ago:
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
“I’ve always had a passion for baking and decorating cakes and enjoyed making treats in my spare time while I was at Law School and whilst working as a lawyer”, Baura says, “During this time, I found baking very therapeutic and felt it would be a great idea to turn my hobby into a business. The cupcake boom was in full swing at that time, and so I decided to set up a company specialising in cupcakes”.
Launched in 2009, Crumbs Couture allows anyone from brands to brides to match their logo, colour scheme, invitation patterns or dress design to its intricate design. This approach has seen it win a number of high-profile contracts, with cupcakes produced for London Fashion Week, Vogue and Tatler.
For detailed advice on starting a cake-making business, click here.
For Rosie Ginday, founder of high-end macaroon business Miss Macaroon, starting a bakery business was all down to a desire to combine passion and social conscience: “I started a bakery business as I wanted to combine my passion for beautiful hand crafted patisserie and my desire to provide jobs for unemployed young people in Birmingham”.
Miss Macaroon, an O2 Business ambassador, provides employment and training through Macaroons That Make a Difference: a four-week pastry training course for 18 to 25 year-old, long-term, unemployed individuals in the Midlands.
If these inspiring founders have given you the bakery business bug, then it’s time to prepare the first essential ingredient – the business plan.
What should you include in a bakery business plan?
Like the sturdy sponge that forms the foundation of grand gateau, a well-made business plan is absolutely essential if you want your bakery business to rise.
Covering everything from financials to strategy and ambitions, your business plan will act as a blueprint to guide your business growth.
Baura cautions that you should include “a large dose of realism, which far too many people do not do. It is important to remember that most areas in the baking industry are very saturated, so you need to be extremely realistic about your market and your projected sales”.
With this in mind, Baura encourages aspiring bakery entrepreneurs to “Be unique. Think long and hard about your branding, but back that up with a product that has real substance and appeal.” She asserts that “today’s baked-good customer is very savvy” and warns that, unless “the buzz and promotion of your bakery is then followed up with a top quality product, customers will grow weary of the hype”.
To conclude, Baura says it’s important to take advantage of social media and focus on the “careful branding of your product”. It is also important to utilise the help of a PR team that specialise in the food and beverage sector.
Roffey advises you to include “vision, values, aims and objectives, a review of your competition, a look at your product, a review of the location, a sales strategy, a recruitment strategy and financial projections”. However, Roffey says that as she was “an unknown entity, with little capital”, one of the most important and valuable things she detailed in her business plan was her marketing strategy.
Roffey adds that the best piece of advice she was given when starting up was “that a business plan is a fluid document, not a static one, and one that should grow and evolve as your business grows and evolves”.
As your bakery business grows, your priorities and values may change and you can adapt by detailing a new strategy. This is also useful in the event of things not going so well: a business plan offers you a solid base to fall back on and adapt accordingly to changing circumstances.
Roffey admits that she “spent around six months working on” her bakery business plan before “signing on the dotted line”. She explains that this was because if “numbers didn’t add up, or my gut said no, then there was no shame in not taking it forward”.
Miss Macaroon’s Ginday agrees with Roffey and believes “you should include an understanding of exactly who your customer is what they like and where they like to shop, knowing your numbers, your gross profit margin and your overheads and your marketing strategy in a bakery business plan”.
To help formulate your business plan you may find it useful to download our free business plan template.
So you’ve got all the ingredients together for a fantastic business, but before you go any further, it’s time to deal with some rules and regulations…
Are there any rules and regulations to start a bakery business?
As you’d expect, the main regulatory issue you’ll have to contend with when starting a bakery business is food hygiene and safety.
Baura advises: “As well as the usual legal and accounting requirements to opening any sort of business, you will need to comply with your local authority’s Environmental Health Officer’s requirements of your bakery business”.
This statement is echoed by Roffey who advises you to look into “food hygiene regulations and training”, as well as allergen regulations and health and safety training. Depending on the nature of your bakery business, you should look at Control of Substances Hazardous to Health (COSHH) and Hazard analysis and critical control points (HACCP) as important areas of concern. If you run a food business, the government requires you to have a HACCP to keep your food safe from biological, chemical and physical food safety hazards.
It’s also important to remember to comply with the rules established by the Food Standards Agency, which has established guidelines about labelling, ingredient safety, and health claims. These guidelines can be found here.
Ginday says that “it’s really important that you think through how you’re making, storing and transporting the product to your customer so that you ensure quality and reduce the risk of making people ill”.
Whether you’re involved in the storage of your product or not, it’s important to keep tabs on how your baked goods are being transported and stored by others in the supply chain. Even if it’s not your fault, if a consumer ends up with a product which doesn’t meet food hygiene and safety requirements, then this reflects badly on you.
So you’ve cooked up a brilliant business plan and you’re aware of the rules and regulations you’ll have to abide by – now it’s time to talk costs…
How much does it cost to start a bakery business?
How much your bakery business is going to cost you will depend on the scale of your ambitions. As with any new business, it’s best to be fairly conservative with your spending while you’re finding your feet so you can adapt to changing plans and maintain a steady cash flow.
“Bakeries range from businesses run from a domestic kitchen on a small scale to large-scale industrial baking plants that produce items using machinery”, explains Baura, “On a small-scale, bakery business set up costs can be very low, which explains why there are so many wonderful home bakers who bake in their spare time to make a bit of extra money”.
Roffey advises you to “budget a third more than you think” – a figure that was “pretty spot on” for her: “I had to completely gut and refit our premise (including full soundproofing). I budgeted for £23,000 and it came in nearer to £30,000″.
To fund her bakery business, Roffey turned to “a mix of start-up grants, start-up loans […] a crowdfunding campaign, and personal investment”. There are many different options for start-up finance and some will be more appropriate than others for your bakery business. Small business grants, for instance, are a great source of finance as there is no interest to be paid and are generally non-returnable. Make sure your business plan details how you intend to finance your business.
Having not budgeted for any advertising, necessity proved the mother of invention for Roffey: “In two and a half years I have not paid for any advertising […] . A strong story before launching (via a blog and Worthing’s first crowdfunding campaign) provided Baked with an army pre-launch, with social media marketing and word of mouth our key strategies after this (the latter crucially important in a busy marketplace, and from customer feedback how many people find out about us).” Find out more about DIY marketing here.
Ginday’s eventual spend wasn’t far off Roffey’s start-up costs: “In my experience it costs £500 to set up a bakery business. I had a lot of support from the catering college I trained at, UCB, with free kitchens for a while. When I set up our own kitchen I spent about £25,000”.
Again, hopefully you will have included a fairly comprehensive outline of your initial outlay in your business plan. While you don’t have to strictly adhere to it, a rough budget will help you to prioritise your spending and manage cash flow in the early days of your bakery business.
Business plan written and costs defined, it’s time to throw everything into the mix and start your bakery business – but how much could your enterprise going to earn you?
How much can you earn running a bakery business?
Are you planning on creating a bakery business empire or just be the proud proprietor of a single charming bakery? This is largely what will determine your earning potential and that will depend on how scaleable your business model is.
“[Earnings] will vary wildly depending on the scale of your business”, argues Baura, “It can be anything from a small supplementary income to millions, depending on the size of your operation.”
Whatever your ambitions are, Baura advises you not to “assume that you will have a ready made customer base from day one, and that profits will come easily from the start”.
Echoing her earlier comments that you should make sure to include a healthy does of realism in your business plan, she adds: “It is extremely important to have a financial buffer to keep you ticking over until you are running a profitable business, which can take months, if not years”. Don’t be too ready to give up on your day job and throw yourself into full time in your business – as in baking, even if you follow the recipe to the letter, businesses don’t always come together in the way you want them to.
Baked Worthing’s Roffey admits that she had other motivations above financial gain, saying that she “didn’t set out to earn a fortune by running Baked, or to build a multi-million pound empire”:
‘I was pragmatic in that at the beginning I ran my personal budget on taking a very little salary from the business”, she explains, “reinvesting rather than taking a huge salary home each month, with a view to increasing my share as the business grew (something I have been able to do)”.
This may not be an approach that works for you, but accepting a frugal lifestyle early on could pay larger dividends later. “I was lucky in that I had few financial responsibilities when first starting out, and equally, was willing to forego a lot of what, perhaps, my peers were enjoying (e.g. holidays and house buying)”.
However, Roffey warns you not to “expect success overnight”. Instead she advises you to focus on developing a brand that people trust and recognise, which takes time: “Even with the best made plans, those early months at Baked were filled with uncertainty but I held my nerve, believed in the product and vision, and here we are about to head into our third Christmas”.
As long as you’re driven, sensible, flexible, with a healthy dose of pragmatism, the only limit to the potential of your business is your own ambition.
Ready to launch your bakery business? The next page has some useful tips and contacts…
Tips and useful contacts
- Include a healthy dose of realism in your business plan – the bakery sector is heavily saturated
- You business plan is a fluid document, not static, and should grow and evolve with your business
- Today’s baked-good customer is very savvy, so follow up the hype with a top quality product
- Budget a third more than you think to prepare for spiralling costs
- Don’t assume that you will have a ready made customer base from day one, and that profits will come easily from the start
- Focus on developing a brand that people trust and recognise
- Craft Bakers Association (CBA): Supports craft and artisan bakers in the UK
- The Food Standards Agency (FSA): The UK government body responsible for protecting public health in relation to food
- Cake Craft Shop: Sells a range of cake decorating and baking equipment and offers bulk discounts to businesses
- bakeryinfo: An online British bakery magazine