How to Start a Bakery in 10 Steps

Updated on January 31, 2020
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Who doesn’t love the smell of fresh bread in the morning? Even better, the smell of fresh cupcakes? Bakeries bring joy and convenience to their communities, but the customers aren’t the only ones who will benefit from this small business. The owner has a lot to gain too. Imagine calling a kitchen filled with tasty treats your office. Sounds pretty great, right? Which is why you’re probably wondering how to start a bakery.

Starting a bakery will be hard work, but fun at the same time. With equal parts passion and elbow grease, you can start a business that has customers lined up around the block waiting for a chance to try your delicious treats. This guide on how to start a bakery will tell you everything you need to know to get your business off the ground. Let’s get started.

How to Start a Bakery: The Ultimate Guide

Before we get into the logistics of how to open a bakery, do you have what it takes? And by that we mean, do you have some really delicious recipes? One of the most important aspects of a bakery’s success is its baked goods, so get cooking! 

Once you have the recipes chosen and perfected, it’s also important to pick the right location, create an inviting atmosphere, and to keep all of your financial ducks in a row. Let’s learn more about these aspects.

Step 1: Choose a Bakery Format

You don’t have to have a bustling storefront on your town’s Main Street for your bakery to succeed. There are multiple bakery formats that you can choose from. There are even some options without the overhead costs of a pricey store location. These are a few bakery formats worth considering, but feel free to get creative—you may just have a brilliant new idea for starting a bakery. 

  • Counter style: This format is the most typical and recognizable format of a bakery, and it has its benefits. Very little space is required in the front of the bakery if you simply offer a counter that customers can order from. (Of course, you’ll still need space in the back for your kitchen.) Usually there is no dining space, which keeps this type of bakery a lean and mean operation. But this format does limit your options for serving food and keeping customers on site where they might order more food and drinks over time.  
  • Bakery and cafe hybrid: Unlike a counter-style cafe, this option will have plenty of seating for customers. Seating can allow you the space you need to serve meals if you ever want to expand past just baked goods. Even if you only want to sell baked goods like cupcakes or croissants, you can still add seating if you want to encourage customers to stick around for a while. You may want to add coffee or tea to the menu, as well. If you offer comfy seats and free WiFi you’ll likely find success amongst the working crowd.
  • Food truck: Ready to hit the road? A food truck is a cost-effective venue for starting a bakery and can help you reach a variety of customers. Take your baked goods along for the ride and park your food trucks at street fairs, by offices, and at special events. Generally, you won’t have the space to bake in the truck. But you can easily pack up your truck with baked goods you made in your home or commercial kitchen space. 
  • Home bakery: Not ready to make the leap into renting spaces or buying industrial-sized equipment? Keep things simple and opt to start a bakery business from home instead. You’ll require less startup capital and can easily sell your goods online, at local farmers markets, or offer catering services. You may even be able to make deals with local coffee shops or cafes to sell your goods in their locations by offering them a cut of the profits. 

how to start a bakery

Step 2: Write a Business Plan

Writing a business plan is hard work, but it’s a step that will help guide you and provide focus. A business plan can also show stakeholders such as investors, lenders, and potential partners where your business is heading. You don’t need an MBA to write a strong business plan; in essence this process will provide you with structure to organize your ideas, plans, goals, services or products, financial plans, and operational structure. Getting these ideas all down on paper serves as a roadmap to help you plan and review the work you’ve done so far. While you can customize your business plan to suit your needs, it should generally contain the following information.

  1. Executive summary: This first section does not need to be longer than a page or two, but it is important. The executive summary should outline your business’s purpose, where it currently stands, where you see your business in three to five years, and why your business will succeed. 
  2. Company overview: A company overview is an elevator pitch of sorts. You’ll explain what your business does, give a look at the industry and marketplace that your business is a part of, and will lay out the structure of your business, as well as share your value proposition. 
  3. Market analysis: Here, you’ll share an in-depth analysis of your industry, market, and competitors. 
  4. Business organization: You’ll explain who does what in your business, what everyone’s background is, and how their past experiences benefit the team. If you’re a one-person operation, this section won’t take long.
  5. Products and services: Provide a detailed look at exactly what your business will be selling—in the case of starting a bakery this can be a look at your menu and how the bakery format you chose in step 1 will serve your customers.  
  6. Marketing and sales plan: Explain how you’ll market and sell your bakery to the people.
  7. Financial plan and projections: Even though this section is at the end of your business plan, it’s very important. You should provide at least three years of financial projections as well as any financial data from your business’s past performance. You’ll want to prove that you have a plan to take your bakery from an idea to a profitable enterprise. 
  8. Appendix: The last section of your business plan will include any supporting information you didn’t include in the meat of your plan, such as any data points, charts, footnotes, or further explanations.

It’s a lot of information to pull together, but completing your business plan will ensure you have a strategy to develop and grow your business and will guide you through the process of starting a bakery business. You can also use a business plan template or business plan software to help you arrange your ideas and make everything look professional and polished.

Choose a Business Entity

As you’re writing your business plan, particularly the business organization section, the question of how you plan to structure your business likely came up. Choosing a business entity is an important step to starting a bakery—or any business. You may want to consult a business attorney, accountant, or another resource to help you decide what type of business entity to form, as this decision will affect your taxes, legal responsibilities, and more. Consider one of the following most common types of business entities. 

  • Sole proprietorship: Unincorporated business that either has one owner or is jointly owned by a married couple
  • General partnership: Unincorporated business with multiple owners
  • Limited liability company (LLC): Registered business with limited liability for all of its members
  • Corporation: Incorporated business; most common types being an S-corporation or C-corporation

Choose a Business Name

You may have already decided upon a business name, but if you haven’t yet, now is the time. Once you have an idea of what you’d like your business name to be, you will need to make sure it hasn’t already been taken by another business. A quick Google search should be your first step for ensuring no other business is already using your desired name. Not only will this save you potential confusion with customers down the road, but you can also help escape any legal repercussions. 

To really make sure you’re not infringing on any trademarks, you can search for trademark filings with the U.S. Patent and Trademark Office. You can also begin a Secretary of State business search to discover if there is another business in your state that operates under your dream name. Want to really cover your bases? If your budget permits, hire an attorney to do this research on your behalf. You’ll save a lot of time and have some added peace of mind that you are legally safe to move forward with the name of your choice. 

Step 3: Find the Right Location

Now that you’ve chosen the type of bakery you want to move forward with, you’ll be able to narrow down your search for the right location. If you’re opening a brick-and-mortar location, finding a commercial real estate agent who specializes in finding business spaces for purchase or rent can make your search much easier. Try to find someone who primarily assists the tenants, not the landlords, with the rental process. You’ll want to make sure your agent has years of experience in your chosen community. That way they’ll know what the fair prices are and where the best locations are. They may even be able to help you find a rental space that comes with some of your necessary equipment like large refrigerators or ovens. Make sure the space you rent comes with plenty of room to store equipment and extra baking supplies. 

If you’re more interested in the food truck route, you won’t need a real estate agent to help you with that. There are specialty car dealers online and in-person that sell food trucks and trucks that can be adapted into food trucks. To get a better deal, you may want to search for a used food truck on websites like Craigslist. Or ask your local food truck owners, they may be looking to sell their own truck or know of other owners who are. 

Step 4: Get the Appropriate Licenses and Permits

You’re well on your way to opening your bakery, but while you may have a business plan and location, you still need to take care of some of the legal processes. Each state will have different regulations, so you must check with your local government to see what business licenses and permits you’ll need to start a bakery in your area. Even your city or county may require specific business licenses and permits. You should review the government websites for your state, county, and city to make sure you have all the documentation you need. Your needs will vary depending on what type of bakery you start, but you may encounter the following licenses and permits when starting your bakery. 

  • Sales privilege license: If you are opening a retail location, you’ll probably need a sales privilege license. This type of license will be necessary to sell your goods in a retail format. This allows your company to collect your state’s sales tax alongside what your goods cost. 
  • Food handler’s license: Any business that handles food will need a food handler’s license or a food and safety certificate. You will need to prove that you have the proper knowledge regarding food handling and storage. The owner will need this license as will any employees who will assist in the cooking of your baked goods. 
  • Catering license: If you choose to pursue a catering-style bakery business, then you may need a catering license. This generally applies if you make the food yourself and deliver it, not if you prepare the food in the client’s kitchen. 
  • Kitchen health and safety inspection: Any kitchen space will need to pass a health and safety inspection in order to be properly certified. Researching these rules is especially important if you want to learn how to start a bakery business from home. 
  • Zoning laws and permits: If you’re running a bakery out of a residential space, you’ll want to review your local zoning laws to see if you can operate a business out of your home. Other permits may be necessary. For example, a permit may be required if anyone is coming to your home to pick up food. 
  • Homeowners association rules: Love them or hate them, your homeowners association is here to stay. If you want to run a bakery business from home, you’ll need to check the homeowners association rules and regulations first to make sure that operating a business out of your home is allowed. This is more commonly an issue that affects those who live in townhomes or condos. 

how to start a bakery

Step 5: Register for Taxes and Obtain an EIN

All businesses have varying tax, licensing, and employer requirements. Learning about these requirements before you start a bakery will help you avoid costly and time-consuming mistakes. Your chosen business entity, as well as some other factors, will affect the business taxes you’ll be responsible for paying. If you haven’t already, it’s a good idea to consult a tax professional to make sure you’re aware of your tax responsibility and on track to file the appropriate paperwork on time. 

If you plan on hiring employees to help you run your bakery, you’ll also need to apply for an employer identification number, also known as an EIN or business tax ID number. You can do this through the IRS and this number will be used when filing your business’s income tax return or payroll tax return, as well as when you’re opening a business bank account and credit card or filing for a business loan. Even if you don’t need to obtain an EIN—sole proprietorships and single-member LLCs without employees are the only businesses that don’t—there are still benefits of getting an EIN you should consider.

Step 6: Brand Your Bakery

Finish this sentence: Break me off a piece of that…. You know exactly which crunchy candy bar goes with that song, right? Well that’s because of branding. Good branding is key. The colors, logos, music, taglines, and packaging can all tell your bakery’s story to the world. There is no reason your bakery can’t make a splash thanks to some solid branding. These are the following areas where you can start planning your bakery’s branding. Now is the time to let your creativity shine.

  • Name
  • Color scheme
  • Social media
  • Packaging
  • Product names
  • Decor

Ask yourself, what story do you want your brand to tell? Then use that story to guide each of your branding decisions. Your story should be unique. You want a name and logo that is immediately recognizable as belonging to your bakery. The same goes for your decor and packaging. Establishing social media pages for your bakery is also crucial to getting the word out about your new business while building your brand at the same time.

Step 7: Separate Your Business Finances

Starting a bakery can feel like a very personal affair, but you should do your best to keep your personal finances separate from your business finances. One of the best ways to do this is by opening a business bank account. For some businesses, this step may be legally required. 

When you open your business bank account, you’ll have to decide if you want a business checking or a business savings account. Usually, new businesses will be best served by a business checking account. Businesses that are more established, and have plenty of cash on hand, will probably prefer a business savings account so their money can grow with interest. Either way, its best to have some form of business bank account to keep your business finances organized and running smoothly. The last thing you need to worry about is confusing your personal expenses with your business ones come tax season. 

Another way to help keep your business and personal expenses separate, is to obtain a business credit card. While you have several options available to you, you may also consider a 0% introductory APR business credit card, which can be particularly helpful to cover any initial startup costs of your business. Keep in mind, though, you will need to make sure you have a plan to pay off your balance by the time the introductory offer ends for this to be a beneficial tool.

how to start a bakery

Step 8: Secure Business Funding

You have the tasty recipes and passion to start a bakery, but do you have the funding to make your dreams a reality? Starting a bakery can be an expensive endeavor, so you should start your funding process by doing some serious research. Find an answer for the following question: How much does it cost to start a bakery? The answer will vary based on your location, type of bakery, and required supplies, but you need to find a rough answer so you can plan your funding options accordingly. If you need help funding your new bakery, consider the following options. 

Some popular bakery funding options include:

  • Startup business loans: Finding funding as a new business can be difficult, which is where startup business loans come in. These can be anything from an SBA microloan to a small business grant. It’s worth noting that SBA loans are the most coveted funding option for their low interest rates and long repayment terms. While traditional SBA loans aren’t easy to qualify for—especially as a new business—their microloan program can be a good alternative. It’s worth reiterating that a 0% introductory APR business credit card can also be a great startup funding option.
  • Business line of credit: With a business line of credit, you’ll have access to a maximum credit limit that you can borrow against for any business expenses. You’ll only pay interest on the amount of capital that you borrow from your credit line, and you don’t need great credit to qualify, which makes them appealing for new businesses.
  • Equipment financing: Bakeries require a lot of equipment, so you may want to consider equipment financing to help with the upfront costs. And since the equipment will serve as collateral on the loan, they are also easier to qualify for than some other funding options.

Step 9: Mix Classic With Trends

Remember the cronut? Well the cronut was a combo of a donut and a croissant created by the famed Dominique Ansel, owner of Dominique Ansel Bakery in New York City. This buttery creation was so popular people would line up around the block in the early hours of the morning to try to get their hands on a cronut before they sold out. Well a few years later, the cronut isn’t exactly making headlines anymore. Which is why it was smart for Ansel to also sell other baked goods, including classic favorites. 

When starting a bakery and crafting your menu, keep Ansel in mind. It’s okay to set and follow trends, as long as you are known for having some reliable staples available too. That way, when everyone is over the latest trend, they know they can still come to you for their favorite classics. Ansel now has multiple bakery locations in New York, Los Angeles, and London and sells new inventions (like frozen s’mores) and timeless baked goods. 

Step 10: Set the Atmosphere

If you do choose to go with a storefront or cafe-style bakery, then it’s time to amp up the atmosphere. You want your bakery to offer all the good vibes, right? There are a few tricks of the trade that will help you create a successful bakery. For example, put your most eye-catching baked goods (like those fancy frosted cakes) at eye level in your display shelf. Less exciting staples like baked bread can take up some of the space on the lower levels of your display or behind the counter.

Find a way to make that tempting freshly baked cookie smell waft into the entryway of your bakery. Vanilla or freshly baked bread scents will have you selling out in no time. Invest in plush couches, cozy decor, and oversized coffee mugs. Make sure your customers feel at home and like they know who is running their favorite bakery. As the owner, get to know your customers. It’s important to train all of your staff members to be equally friendly. And of course, a free sample or two never hurts.

How to Start a Bakery: The Bottom Line

Hopefully, these 10 steps helped you learn how to start a bakery. Once you find the right space, have the funding you need, and are up to date on all your licenses and permits, you can get to the best parts. Baking, branding, and getting to know your lovely customers.

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Contributing Writer at Fundera

Jacqueline DeMarco

Jacqueline DeMarco is a writer and editor based in Southern California. She has written on everything from finance to travel for publications including LendingTree, The Everygirl, Coveteur, and Apartment Therapy, among others. In her spare time, she enjoys traveling, especially if going somewhere she can spend time with animals.
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