How to Start a Baking Business

Before starting any business, you will need to conduct market research. This process will allow you to assess your potential customers and competitors, giving you a clear idea of the direction you want to steer your business in.

Use the internet to examine rival companies’ offerings, talk to people in the industry, visit similar companies and find out as much as you can about customer preferences. 

These are two key questions to keep in mind:

1. Is my product or service in demand?
2. Who am I targeting?

After completing your research, use it to help you decide the type of business and product you want to create. Some different types of baking businesses include:

• Bakery café: A bakery café gives customers a space to sit and enjoy their food and drink on-site. Challenges associated with this kind of business include finding premises, employing staff, sourcing furniture, decorating the space and offering a broad range of options. For example, while a bakery café might offer freshly made cakes, pastries and bread, it might also serve sandwiches, soups and other simple dishes. 
• Counter service: This is a stripped-back version of the bakery café. A counter service bakery will likely need less staff as menus are generally smaller, more specialised and served on a takeaway basis. As with a bakery café, creating an attractive atmosphere is essential as you will need to tempt customers in from the street outside. 
• Commercial bakery: If you want to sell directly to businesses rather than members of the public, starting a commercial bakery could be for you. A commercial baker will win contracts with shops, restaurants, cafés and catering companies, using wholesale deals to bring in a regular and more consistent form of income. There is also less need to be showy, as you can operate out of a commercial kitchen without having to worry about attracting passing customers inside, and you will not need front-of-house staff. 

A business plan and budget are essential for any new business. They will outline how much money you will need at each stage of your journey, as well as the goals and objectives you’re aiming for. You will likely need a business plan to apply for a loan.

For a detailed guide, read our article on how to write a business plan.

Next, you need to put a budget together. Make sure to account for all one-off and recurring expenses. For a baking business, some important costs to consider include: 

• Premises: You might be running your baking business from home, but otherwise you need to find premises to rent or buy. These are locations you will use to bake and/or sell your products, so they could include a market stall, a high-street shop or a commercial kitchen.
• Equipment and furniture: You are probably going to need more than a rolling pin to get started. Fridges, mixers, food processors, ovens, trays, tins and pans can add up and be expensive, so this is a key area to consider. You might also need to source things like tables and chairs for customers to use.
• Renovations: If you are opening a high street bakery or café, investing time and money into creating an attractive storefront and welcoming premises can be key to attracting customers inside.
• Food and supplies: Calculating how much you will need to spend on ingredients can be one of the hardest parts of making a budget for a baking business. You may refine this element of your budget over time, but start with sensible estimates of how much your regular supplies will cost.
• Bills: You are going to need electricity, water and gas to run your baking business, so make sure you factor in their cost. You might also have to pay other regular bills, such as internet, security and insurance.
• Qualifications: There is no need for any formal training if you want to start a baking business. However, some qualifications might offer the opportunity to gain valuable new skills. The Food Standards Agency urges people starting food businesses to train for a food hygiene qualification. Get in touch with your local authority to find out which courses might be best for your business.

For a detailed guide, explore our five-step guide to creating a small business budget.

A key part of registering your business is deciding on a business structure. You can keep things simple by registering as a sole trader, but other options such as partnerships and limited companies are also available. Find out more about picking the right choice by reading our clear and simple guide to business structures. 

» MORE: Should I register as a sole trader or limited company?

As well as the above decisions which apply to anyone starting a new business, you may also need to obtain certain licences and be aware of certain rules that apply to businesses that work with food.

Register with local authorities

If your business is involved in the sale, cooking, storage, handling, preparation or distribution of food it is mandatory to register with your local authority. Make sure to do this 28 days ahead of your opening. It’s important to bear in mind that this registration is free and cannot be turned down by authorities. 

Food safety and hygiene inspections

Food hygiene inspections are something that can be sprung upon you at any time following your registration with local authorities. As such, you need to keep the hygiene of your preparation areas and procedures consistently high, as these will be assessed in each inspection.

If you perform badly in these inspections, you can be banned from using certain equipment or processes, which can be enormously detrimental to your business. Any bans can be lifted if future inspections witness clear positive progress, but it is best to never fall short in the first place.

The best way to be prepared for these visits is to gain food hygiene training and develop a good understanding of UK food safety rules.

Other key rules and regulations for baking businesses

Here are some other key rules that may apply to your business:

• Music Licence: This is required if you want to play live or recorded music to a public audience at your place of business. Costs of the licence vary depending on the applicant, with applications taking place through the PPL PRS website.
• Food labelling: Product labels must contain an ingredient list if they are made of more than one ingredient. If your product contains any of the 14 key allergens, these must be labelled clearly with a different style, font or background colour.  
• Food Safety Management System (FSMS): Most businesses that prepare food are required to have a written FSMS, which outlines how employees will control safety hazards and ensure food is safe to eat.
• Bread and flour regulations: There are rules about the required nutritional value of flour, which can mean flours need to be fortified to meet requirements. Flour produced in the UK is required to meet these standards, so you might need to be careful about adhering to these rules if importing flour from abroad.

With a budget, business structure and licences understood, it’s time to get down to the serious business of funding your baking business.

If you are starting a small-scale baking business, you might want to use personal savings or rely on friends and family. However, a larger and more ambitious plan may require a loan or grant in order to get things off the ground. Find out everything you need to know in our guide to funding a small business. 

Remember to also have somewhere to put this start up capital. Setting up a business bank account is a key step for a new business owner, as it can make it easier for you to keep business and personal transactions separate. Sole traders can technically still use their personal accounts, but the moment you incorporate as a limited company or partnership, you are required to open a business bank account. 

The final key step is to open your bakery and find some hungry customers to buy your baked goods. Here are some great ways to get your products flying off the shelves:

• Word of mouth: Make sure your family, friends, acquaintances and everyone else know about your new business. Encourage them to tell everyone they know about the delicious new baked goods you are selling.
• Business cards and flyers: Get your name out into the neighbourhood by putting leaflets through letterboxes and pinning them up on notice boards. Distribute business cards to anybody who will take one. 
• Host a grand opening: If your business has a brick-and-mortar location, why not make a splash with your official opening? This might mean selling your goods at a cut price for a day to celebrate your new venture. 
• Be a vendor: You can use events in your town or city to spread awareness of your business and its products. Contact farmer’s markets, festivals and event organisers to organise a stall, though note that you will have to pay pitch fees.
• Do delivery: Can you get your food directly to customers’ doorsteps? People love convenience, so this can be a great way to supercharge your business. If you are selling fresh food to order, sign up to Deliveroo, Uber Eats and Just Eat. These companies take a commission on each order and may charge sign-up fees. 
• Social media: A Facebook page can build an online presence that allows you to interact with customers directly, while using TikTok, Instagram or YouTube could lead to increased popularity through viral content. If you think of good video ideas and can manage to film and edit them in a clean and eye-catching way, your baking business could be a viral hit.
• Ask for reviews: If people enjoy your products, you want to make sure they leave reviews on sites like Tripadvisor or Google Reviews.