Duncan Ferris
Mary M. Flory
Starting a cake business from home is a dream for many bakers, but turning it into a reality can be challenging. With so many hurdles to overcome and rules to follow, it can be tempting to abandon the thought of selling delicious cakes from the comfort of your own kitchen.
But this comprehensive guide will tell you everything you need to know about planning, licences, budgeting and even how to turn your home into a place of business. Read on to ensure that your boulangerie ambitions are not just pie in the sky.
Why start a cake business from home?
- Control your career: Being the boss of your own home-baking operation means you decide everything about how, when and why you work. This is particularly helpful if you need to work flexibly around commitments, such as childcare or a second job.
- From hobby to job: You may already be a baking hobbyist. Why not take that pastime and turn it from a spare-time passion into a full-time job?
- Spread some joy: Providing people with delicious sweet treats and other baked goods can be rewarding for the simple fact that these products can be the brightest point in a customer’s day.
- Work from home: Eliminate the commute by working from the comfort of your own kitchen.
Start a cake business from home in 5 steps
1. Research and choose your market
Before launching into the process of setting up your new home-based cake business, a little bit of background research is a good idea. Finding out more about your potential competitors and customers will help you understand how to build a business that can succeed.
Speak to customers and find out what they want. Sample the sweet treats being sold nearby and ask about which products are most popular. You may find out about some kind of niche that is not being catered for, or you may be able to identify areas where you can perform better than already established businesses.
Two important questions to keep in mind throughout this market research are:
- Is there enough demand for my products?
- What kind of customers can I aim to attract?
Armed with your findings, you can now work out the type of home cake-baking business you want to build. Here are a few ideas for any home baker to consider:
- Wedding or event baking: You could choose to specialise in making wedding cakes and other large cakes for special occasions. For this type of baking, you will need to be great at baking and decorating, as well as ready to listen carefully to customer requests and deliver custom designs.
- Packaged goods: You may want to make packaged products for businesses to resell to the customer. Note that pre-packed food is subject to general food labelling requirements, which require the product to be clearly named with a list of ingredients, allergy information, storage requirements and more.
- Dietary niches: With interest in veganism and vegetarianism growing, as well as an improved understanding of dietary conditions such as coeliac disease and lactose intolerance, thinking about dietary niches could make your business stand out. Vegan or gluten-free pastries or cakes could be your ticket to success.
If you want to start a bakery business in a commercial kitchen or high street shop, check out our article on how to start a baking business.
2. Create a budget for your cake business
The next step in setting up your bakery business from home is to create a business plan and budget. With this put together correctly, you will have a good idea of how much money you need to get started, how much money you need to earn and some key business objectives. In addition, business plans are often mandatory if you want to apply for a start-up loan or business loan.
For more information on putting a business plan together, check out our article on how to write a business plan.
Then there is your budget, which will need to be a comprehensive overview of all of your expenses. Some key things to remember include:
- Kitchen equipment: You may already have everything you need to get started, but you will likely need at least some new equipment. From rolling pins to whisks and refrigerators to ovens, there will be a variety of tools and appliances you will need for cake decorating, baking and storage.
- Renovations: Your home kitchen may need some adaptations before it can properly house your new business venture.
- Food and supplies: Ingredients will be a constant expense for your business, but also remember to consider the cost of other necessary regular purchases like cleaning supplies.
- Utilities: Running your business from home will likely result in an uptick in electricity, water and gas bills. Be sure to factor this, as well as the cost of any additional mobile phone, internet, security and insurance bills you may now be subject to, into your regular budget.
- Training: While you do not need formal training or qualifications to start a food-related business, it can be a useful way to improve or brush up your skills. A Food Hygiene Certificate is not mandatory, but the Food Standards Agency recommends gaining a food hygiene qualification before running your own business.
For a detailed guide on putting this budget together, take a look at the five-step guide to creating a small business budget.
3. Register your cake business
Next, it is time to pick a structure for your business. This is an important step, as it will impact many aspects of your venture’s future, including the legal status of your business and how you pay taxes. Here are some of the options:
- Sole trader: Sole traders are the exclusive owners of their business and can keep all profits after tax. This is a fairly simple business structure and is often chosen by freelancers and small business owners. However, as there is no legal distinction between yourself and your business, you are liable for any losses. Sole traders must register for a self-assessment tax return.
- Partnership: If multiple parties want to share the responsibilities of running and owning a business, they can start a partnership. Variations include business partnerships, limited partnerships and limited liability partnerships. All partnerships must have a ‘nominated partner’, who will be responsible for filing the tax return for the partnership. If you are the ‘nominated partner’, you must register with HM Revenue & Customs (HMRC). All partners will also need to submit tax returns as individuals.
- Limited company: A limited company allows owners to be legally and financially distinct from their business. Ownership is split into shares which are divided among shareholders. The company keeps post-tax profits. Limited companies should be registered at Gov.uk.
» MORE: Should I register as a sole trader or limited company?
Choosing a business structure is not the end of the registration process for food-related businesses. There is also the question of whether you need a licence to make and sell cakes from home. You don’t need a licence, but you are legally required to take some steps. That’s because any business that sells, cooks, stores, handles, prepares or distributes food must register with their local authority.
Business owners need to do this at least 28 days prior to opening, so some forward planning is required. On the bright side, there is no cost for registration and your application cannot be turned down by the authorities.
Once you have registered, you have to face the possibility of food hygiene inspections. These can take place at any time and will assess the hygiene of your preparation areas and procedures.
Poor performance in these inspections may result in your business being banned from using certain equipment or processes. This is obviously not desirable, as it would limit your business’s capabilities and damage your reputation. You can recover from these bans though, with improved performance in future inspections potentially leading to restrictions being lifted.
If you want to be prepared, make sure that you and any other employees or food handlers are well trained in food hygiene and have a strong understanding of UK food safety rules.
4. Fund your cake business
Starting a cake business from home might sound like a modest way to launch a new business venture, but you will probably still need some money to get started. Think about some of the below options as potential sources:
- Personal savings: You may be able to afford to simply use your own money to start your business, but make sure you don’t push your finances too hard.
- Friends and family: If they are willing to help out, gifts, investments or loans from friends and family can be a welcome source of funding. Always have a written agreement regarding any repayment plan or equity in the business on offer, so all parties understand the terms of the deal.
- Small business grants: A relevant start-up business grant may be available and there are specific grants for businesses in Scotland, Wales and Northern Ireland.
- Government business loans: You can take advantage of government business loans to kickstart your new venture.
- Business loans: Traditional business loans can give you major funding, but can be tricky to secure when you’re just starting out and may come with challenging repayment terms. But there are start-up-friendly business lenders you can approach. Even when you have no trading history, you may be able to secure a business loan if you have a strong business plan and projections.
- Angel investors: Sometimes, a new business can attract the attention of angel investors. These are generally wealthy investors who want to gain a return on their investment through equity or convertible debt.
- Crowdfunding: You can also secure funding in the form of many small investments or gifts from lots of different parties. This is called crowdfunding and is often conducted through an online campaign.
To manage this money, you will need a business bank account. This is normally a requirement for limited companies or partnerships, while sole traders can often continue to use a personal account, if their bank allows it. However, having a designated account for business looks professional and can help to distinguish between personal and business transactions.
5. Find and feed your first customers
Finally, the most crucial step in the creation of any business is actually finding some customers. It can be difficult to start attracting punters, so here are a few imaginative ways to attract people to your business:
- Spread the word: Tell friends, family and everyone else you know about your new business, encouraging them to try your goods or recommend them to others.
- Put pen to paper: Use flyers and business cards to spread the word of your business even further, posting them through letterboxes, pinning them to noticeboards and handing them out to pedestrians.
- Be a vendor: Get a stall at local events, markets or festivals in order to sell your homemade products. You will probably have to pay a pitch fee for this stall, but you could make money and spread awareness of your business.
- Offer delivery: Customers crave convenience, so if appropriate why not offer delivery of your baked goods? You can sign up to delivery sites, such as Deliveroo, Uber Eats and Just Eat, though they will take commission from each order and may charge sign-up fees.
- Social media: If you are baking from home, you probably lack a shop window in which to display your goods to passers-by. Turn social media channels into a virtual shop window by showing off your products on TikTok, Instagram and YouTube. It’s not easy, but some baking businesses have managed to attract millions of views.
- Get reviewed: Positive feedback on review sites, such asTripadvisor and Google Reviews, can lead to new customers. If people have a good experience, encourage them to rate your bakery.
Turning your home into a workplace
While it is perfectly legal to start a baking business in your own home, there are some steps you should take to transform your home into your workplace. As we have already noted, you will need to ensure that you adhere to rigorous food hygiene standards.
However, you should also ensure that you inform your mortgage provider or landlord of your intention to start a business in your home.
For mortgage providers, working from home should not be a problem, but they may wish to check that you are not using the majority of the property for commercial purposes. If this is the case, your provider may want to implement a commercial mortgage rate.
For renters, check what your rental agreement says about starting a business in the home and also be sure to inform your landlord.
In either instance, it is generally legal to start a business in your rented home as long as:
- the business is not an illegal trade
- it is not forbidden in your lease
- your business does not cause difficulty or annoyance to neighbours
- you continue to live in the home
It is also worth noting that you may have to pay business rates on any part of your property that you use for commercial purposes.
Those in England or Wales should call the Valuation Office Agency (England: 03000 501 501 or Wales: 03000 505 505) to check whether it has ascribed a rateable value to the portion of your home being used commercially. Business owners in Scotland should check with their relevant local assessor (found through this list), while those in Northern Ireland should contact Land and Property Services (0300 200 7801).
Do you need insurance to sell cakes from home?
Insurance is a key consideration for any new business and at-home baking is no exception. While home contents insurance will protect office workers who work from home, you may need business insurance in a kitchen workspace, so you’ll need to check your level of cover with your current insurer.
You might consider public liability insurance, which should protect your business against claims made by members of the public who have been hurt or suffered property damage due to your business.
In addition, product liability insurance can protect you for instances where your product has caused harm or damage, such as customer illnesses after consuming your food.
You should also be aware that any business with employees is legally required to have employer’s liability insurance (unless they are a close family member). This will protect against claims made due to workplace accidents and injuries. You can be fined for hiring employees and not having this type of insurance.
In order to protect your kitchen and working space, check whether you need business buildings and contents insurance to protect your property and equipment against loss and damage. You can also buy equipment insurance to cover the cost of expensive items you’ve bought for your new business. Your landlord is generally responsible for building insurance if you are a tenant, but it’s worth checking the small print to see whether you need any extra cover for your kitchen-based business.
Finally, home-baking businesses can also secure goods in transit insurance to protect themselves against product loss, damage or theft when they are on the move for delivery to customers.
Image source: Getty Images
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