I am often asked how I got started making cakes from home. While everyone may do it differently, here is how I did it and tips on what I would do differently.
How did I start making cakes?
Like most people, my cake making started as a hobby. I grew up around a grandmother that made cakes from her home. Her artistic creations always amazed me and I loved to watch her create cakes for all occasions. As an adult, I never believed that I could make cakes like my grandmother did but I considered myself pretty good at making cookies and bars. Every December I would make trays of these sweets for neighbors and co-workers. One year I saw pictures of a cake made by a co-worker and wanted to learn how to do the same for my grandchildren so I took classes at a local craft store. That was the beginning of a career in cake decorating.
How did it become a business?
After taking all the classes available at the craft store I started volunteering to make cakes for co-worker’s baby showers, birthdays or any occasion. While I never intended to start a cake business out of my home, I wanted to perfect my skills for cakes I planned to make for my family. Over the weekend I would make a cake that I wanted to try and would take it to work on Mondays for my co-workers to eat. After several months of doing this I started getting requests for birthday cakes for my co-worker’s children, grandchildren and other family members. Since I considered this “practice” I only charged the cost of ingredients for the cake.
Pros to starting this way –
- I got lots of practice;
- I could pick what cakes I wanted to do; and
- Did I say, I got LOTS and LOTS of practice!!!
Cons to starting this way –
- I could only do one cake a week while working full time;
- Most cakes were due on Saturdays so I had to work late on Thursdays & Fridays; and
- I worked 7 days a week.
What I would do different now –
- I would take one weekend off a month to prevent burn out; and
- I would charge $5 – $10 above the cost of ingredients.
Are you sure you want to start a cake business?
Before I even talk about getting a business license or health department approval I would recommend that you take your time to determine if starting a cake business at home is something that you really want to do. I would recommend that you do this for 2-4 months to see if the time you need to devote to this business is something that you can do. During this time you will also want to perfect your recipes, skills and techniques. Get your co-workers (or whomever you make the cakes for) to be very honest with you. Find out what they like/don’t like and what they would like to see different. Once you start making cakes you will find that vanilla and chocolate seem to be the two most popular flavors. So during this time of testing, be daring and try unique recipes.
Pros to do this –
- You have time to perfect the taste and look you want;
- You have time to decide if this is something you really want without too much cost; and
- You have time to slowly buy the tools that you need.
Cons to do this –
- You aren’t making any money for the time you devote to this;
- You will get feedback that you may not want to hear; and
- You may get requests that will take more time than it’s worth.
Let’s get started!
Now that you’ve taken the time and believe this is a business you want to get into, you will want to contact the appropriate agencies to see what is necessary to do it legally in your home. The laws are different in every state or country that you live in. Since I am in Texas, I will tell you what the rules are for here. You will need to contact your local government to see how they compare. These include:
- City Zoning Ordinances –
- Are home occupations permitted? If so, do you need a permit?
- Is there a zoning requirement?
- City Health Department –
- Do you need a health permit?
- Does your kitchen have to be inspected?
- Do you need a food handler’s card/permit?
- County Zoning Ordinances –
- Are there restrictions to having a business in your home?
- Does the County health department require a permit or inspections?
- Do you need to file a DBA (Doing Business As)?
- Local Deed Restrictions / HOA –
- Are you in a Home Owners Association that prohibits a home business?
- Are there local deed restrictions that prohibit a home business?
- State Laws –
- Are you going to be a Sole Proprietor or Limited Liability Corporation? If so, what paperwork is necessary to set up as this type of business? (Most home bakers are Sole Proprietors)
- State Sales Tax –
- The state wants their money too. You will need to get a federal EIN number and sales tax certificate number to file quarterly taxes that you collect.
In Texas, there is a Baker’s Law that permits you to bake cakes out of your home. This does not prevent you from having to collect and file taxes with the state. This only allows you to bake out of your home without having to meet the commercial kitchen guidelines. If you are in Texas there is one thing that you have to do differently. You will need to place a sticker or stamp on the boxed goods that say the items were prepared in a home kitchen. Be sure to check with the state or Google “Texas Baker’s Law” to check for updates that I may have missed.
If in doubt, contact all of your governmental agencies to ensure they have no additional requirements.
Other things you need to do –
- Bank Account –
- You want to open an account just for your business. Do not combine your personal account with your business account. This would get too messy and the IRS won’t be too happy.
- Get Liability Insurance for your business
- Create a website –
- Create a website where you can showcase all of your creations, list flavors and advertise. If you are small (and plan to have less than 15 employees) check out Microsoft Online (https://www.microsoftonline.com). They charge less than $10 USD per month for your website. You will also need to go to someone like GoDaddy.com to get your domain name (or website address).
- Get started on Social Media –
- The best form advertising is word of mouth. Sign up for Facebook, Twitter, Instagram and Pinterest to advertise your creations. You will get more business from word of mouth than you will from any newspaper advertising!
- Get Business Cards / Brochures –
- Every cake I sold I would tape a 3″ x 5″ plastic baggie on the top of the box and put one brochure and 5-15 business cards in it, along with the receipt, for the customer to pass out. I purchased mine from Vistaprint.com but you can create your own on your computer also.
- Create a Business Plan –
- If you have big dreams and hope to someday start a storefront where you will have lots of employees and be the next Cake Boss, then you will need to create a business plan. Look online for lots of ideas on how to create one. This will be necessary if you ever plan to get a business or bank loan.
Notes on Recordkeeping –
Starting a business requires you to maintain receipts for items you sell as well as items you purchase. I have a 3 compartment file organizer that I labeled “Income Receipts”, “Expense Receipts”, and “Tax Receipts”. There are several versions of these files that you can make or purchase. Get one that works the best for you.
Income Receipts –
These are receipts for cakes and bakery products that I sold. While the receipt does not need to be itemized, you will want the tax listed separately. It will make it much easier to calculate how much you have to pay to the government each quarter.
Expense Receipts –
These are receipts for bakery ingredients, tools, pans, etc. that you will need to make the cakes.
Tax Receipts –
These are the receipts that you will use to claim your home business on your federal taxes. While filing your taxes, you will need to know your utility bills, the size of your home office (if you have one), gas receipts (if you deliver cakes) along with mileage records.
If you plan to use an accountant, contact your accountant to see what is the best method for him/her.
Where to buy supplies?
If you have a hard time finding supplies, here is a list of the online sites that I purchase almost all of my supplies. They are in order of where I buy from the most though I love them all!
- Country Kitchen Sweet Art – http://www.countrykitchensa.com
- Pastry Chef – http://www.pastrychef.com/
- Kitchen Krafts – http://www.kitchenkrafts.com/
- Global Sugar Art – http://www.globalsugarart.com/index.php
- Cookie Cutter – http://cookiecutter.com/
- Cake Deco – http://www.cakedeco.com/
While you’re buying supplies, think about what form of packaging you plan to use. Do you want to use white boxes or do you want pink boxes? Figure out what forms of packaging you plan to do.
Pricing your cakes is probably the hardest part for everyone. Many bakers either don’t value their work enough or value it too much for the area in which they live. The best way to start is to research what other bakers in your area are charging for their cakes. A good rule of thumb is to calculate the cost of making a cake and multiply it times 3 or 4.
In order to adequately do this you will need to create a spreadsheet, either by hand or on your computer, and list all of your ingredients. Divide the cost of each ingredient by the number of cakes you can make with it. For example:
Ingredient – Weight – Cost – Price per Cup (8 oz) Price per cake
Flour 5 lbs (80 oz) $3.49 $0.18 $0.36
Sugar 4 lbs (64 oz) $2.49 $0.04 $0.08
Be sure to include frosting ingredients also.
Review your recipes and make sure you calculate the cost based on the quantity you need to make the cake. Once you do this for all of your ingredients (cake, special fillings, frosting, cake board, decorations, box, etc) you have a base price. Multiply that base price by whatever multiplier you plan to charge (3 or 4). If you are new to cake making and want more experience, then just double the base price. Charge what you are comfortable with. Remember, you won’t make everyone happy. If the price is too low, the client will be happy but you won’t be.
There may be some things you want to charge even more for. I would charge more for cakes covered in fondant, any filling that wasn’t buttercream, and square cakes. These items all took more time and so I believe the client should pay more for them.
What is your expertise?
As your name gets out and people start calling, you’ll get requests for items that you don’t want to do or didn’t plan to do (i.e. cake balls, cake pops, cupcakes, decorated cookies, cookie bouquets, etc.). Instead of trying to do it all, determine the niche that you want to do and stick with it. By trying to do everything you will have to buy more tools then you may need or want. Excel in the area that you find the most enjoyment and stick with just that.
Pros & Cons for a cake business out of your home –
- You can pick or choose what cakes you want to make
- The overhead expenses are lower than if you had a storefront
- You can schedule time to be with family or after school activities
- Orders are rarely boring
- You rarely have weekends that you don’t work
- You need to stay on top with your skills and equipment at all times
- You always have customers that want a custom cake for grocery store price
- If there are orders, you have to work even when you get sick
- You have customers that think you can create a cake in a few hours
I have tried my best to cover all the basics for starting a cake business out of your home. I hope this helps each of you thinking of starting your home business. If there is something I missed, please let me know. I’d love to hear what you think.