Cake Business

Friends love your lemon-chiffon pound cake. Coworkers at the office beg you for the recipe for your chocolate cupcakes with devil's food swirls and cream cheese icing. At your last family reunion, so many people devoured your fruit cakes, even though you thought you brought enough to have leftovers for your neighbors. Your cake-baking hobby might just be your next lucrative foray. Why not make doing what you love into a cake business? Whether you have cake business ideas around baking birthday cakes, wedding cakes, or everyday cakes for dinner parties and special events, your cottage food business can begin once you know about your state’s licensing laws, you get your cake business logo and website up and running, and you have a solid plan for how to start a cake business.

No pun intended, home-baked cake businesses are on the rise. If you peruse Instagram, there’s plenty of inspiration to help you get motivated. Say Lee with Flowers, and The Whisking Well are some cute names on the platform among thousands if you’re looking to name your home-based cake business, too. Now that your creative juices are flowing, let's talk about business plans for your cake-baking business.

Homemade Cake Business Plan

Every good business starts with a solid business plan. It's the blueprint to tell you how things will work and exactly what your cake business will do. What should you include in your homemade cake business plan? When you’re just starting out, an online cake shop business plan may seem like a gargantuan task, but if you break it down into smaller components, and know that planning upfront will save you tons of frustration later, then it won’t be too difficult to tackle. Have a slice of cake and some tea, set aside some time to focus on creating your business plan, and before you know it, you’ll have your own “recipe” for success, as this is all a business plan really is.

First thing’s first though. You may need a baking license for an at-home business, even if you’re just baking cakes. Every state has its own cottage food laws, and states like New York require you to pay for a license, check in with a local health department office, and in some cases undergo a kitchen inspection. Other states are much more friendly toward cottage food entrepreneurs and require no license and no inspections. Places like Texas allow you to start running your business right away and earn up to $50,000 annually selling cakes.

Fortunately, you don’t have to recreate the wheel. There are home bakery business plan templates, and bakery business plan samples all over the Internet. Bplans.com offers an online cake business plan that includes an executive summary for cake businesses, pastry businesses, specialty bakers, and more.

When you sit down to write your business plan, it will give you an opportunity to figure out your homemade cake business description – will you sell specialty cakes, cakes for children’s birthday parties, adult-content cakes, nature-themed cakes, family recipe cakes, cupcakes? There’s really no end to the possibilities, but figuring out exactly what you want to focus on, in the beginning, will help you with branding, marketing, and staying true to doing what you love the most. If cupcakes are your specialty, then stick with what you know people love. If themed cakes are where you are most true to your art, then your business plan should outline that as your focus.

Planbuilder also offers a templatized executive summary for cake businesses if you need an example of how this should look in its final version. You’ll also need to figure out your profit margin in bakery products based on where you’ll likely source your ingredients, how much they’ll cost, and what you think you can charge to figure out your budget.

Cake Business From Home

Cottage food laws in some states make working in your own kitchen very easy. If you want to run a cake business from home in some states, you’ll have no trouble once you pick your business theme, create a business name, and complete your business plan. You can simply start baking and selling.

Farm to Consumer provides a map and chart of every cottage food law in the U.S. so you can check your state for laws governing a cake business from home. Your successful home bakery business starts with knowing what licensing and laws you have to obey.

For example, there’s a $20,000 annual profit limit on cakes sold from home in Alabama and you can sell any foods that are non-time or temperature-controlled, including baked goods. In Colorado, you’re subject to a $10,000 limit in profits per product and your cakes may be subject to food sampling and inspection. You also have to take a food safety course, join an online registry, and are highly encouraged to have liability insurance.

Don’t let licensing and food safety courses dissuade you from starting though. These are small hurdles to overcome and then you can let your home baking business ideas run wild.

Online Cake Business

Getting your online cake business started from home is much easier when you use a software app that allows you to put up a website in less than an hour, present your products, take sales through a POS system (so no more checks and random payments through social media), as well as market and track sales on a single platform. Castiron is one software that makes running an online bakery shop much easier. Trying to gather orders from emails and social media is a thing of the past once you have an online store and website set up. Castiron allows you to do this with ease, maintain the site, and grow it with your business as you grow. You could literally start with a single product and grow from there.

Once you have a website, it’s much easier to know how to start a cake business on Instagram and how to promote a cake business on Facebook. You can use product images and moving gifs (pictures that are taken in quick succession to give the appearance of your product in action but are uploadable as a single file to social media platforms) to promote your items and then redirect people back to your website to make the final sale. You can share online cake business ideas with friends who are also bakers, and even share baking tips to increase your followers.

Now that you know a few tips about how to market your cakes, let’s talk money.

Cake Business Profit

What is the typical cake business profit? A 20% profit margin on baked goods in the cottage food industry is very reasonable. While some experience cake business profits that are even higher for luxury cakes, like wedding cakes, or special order and custom cakes, you can expect to make between 10% and 40% profit if you are doing it right.

How can a home baker calculate their profit?

Your cake business profit will depend on the following variables:

• Cost of goods and materials
• Cost of labor
• Cost of packaging
• Cost of marketing
• Cost of energy (running an oven and the AC at the same time, etc.)

You’ll also want to figure out variables as opposed to fixed costs. Maybe organic butter is cheap now but usually goes up in price later in the year. If you have start-up costs for purchasing baking tins, decorating supplies, parchment paper, labels, etc. You’ll also need to calculate that in your overall cost analysis to make sure you are truly staying profitable.

To figure out how to price cakes for a profit, add up the above costs, and then add at least 20% to the total to ensure a 20% profit margin. If you think the market will tolerate a higher mark-up percentage, then, by all means, try a 30% or even 50% addition to your cost of goods and labor. The profit margin for a home bakery can be relatively good, since you don’t have the extra overhead of a commercial kitchen.

You can also learn how to grow your cake business over time, and start with smaller profit margins just to get a solid customer base, then grow your cake business profits over time. A successful cake business is based on many months of refining recipes, costs, and profit margins, so expect this endeavor to be a work in progress. Maybe you decide you can be more profitable with a cupcake business instead of baking cakes. You won’t know until you try.

Cake Business Success Stories

There are tons of cake business success stories, but Forbes recently presented the story of a Tyler, TX-based baker, Janie Clapp, who has been able to create a thriving cake business for over three decades. She started out making wedding cakes and evolved over time to include cakes for many occasions. In the beginning, she started humbly. She took orders by phone and hand-delivered them. Now she ships her cakes in the thousands all over the world. There’s no reason you can’t do the exact same thing that Janie did.