How To Make Extra Money With A Home Bakery Business

Do you want to learn how to make extra money by starting a home bakery business? Here’s the equipment needed to start a bakery, food laws, tips on pricing your baked goods, and more. Please enjoy this guest post from Denise Treco. Denise ran a home bakery as a side hustle, and today she is here to help you learn how to start a successful home bakery business as well. Enjoy!

If you love to bake, you probably had some friend or family member tell you should open a bakery.

Maybe that is your ultimate dream—whether it is or not, there is a way to take your passion for baking and turn it into a profitable side hustle. I am talking about a home bakery.

Under cottage food laws, which vary by state, you can operate a home bakery. Before I go deep into the details of starting a legal home bakery, I will share a little bit about my bakery experience.

I became a first-time homeowner so that my mom could live with me after my dad passed away. You know how everyone tells you owning a house can be expensive with repairs, taxes, etc.? Well, everyone was right. 

I found myself in a position where I needed to make extra money outside of my 9-5 job as a marketing director for a nonprofit to support my mom and me. 

I guess I should go back a little further to say how much I enjoy baking.

I was the person in my family who brought dessert for every holiday gathering or friend’s party and always made a birthday cake for my colleagues.

It never really occurred to me to use my hobby as a side hustle until I thought about ways to make extra money.

I started a legal home bakery, where I earned about $1,500 to $1,800 per month. I followed all the steps below, and after three years, I grew my business into a retail bakeshop, which I owned for about six years before I sold it.

There are benefits to starting a home bakery, but it is essential to research and follow your local food laws.

The beauty of it is that you can build it slowly or move more quickly if money is imperative— and you get to do it all from home.

The investment is relatively low, assuming that you own an oven, cake and cupcake pans, cookie sheets, a mixer, and a smartphone with a camera.

If I could do it, you can too.

All you need is a passion for baking, a few essential tools, your tried and true recipes, and the ability to promote yourself and your work to find customers.

Let’s take a look at the steps you need to take to become a home baker and grow your bank account in the process.

Related content:

How to start a home bakery to earn extra money

All good things need a plan, so start dreaming about it and then start writing your dream down. 

The thing about plans is that they must be realistic, and during the first months of managing your very own home bakery, you will probably be overwhelmed.

The best way to plan for this is to take it one day at a time in the beginning. After you get experience working with a few customers, you can think a bit further and plan ahead.  

Later on, you might be in the position to decide whether you want to dedicate yourself to your business full-time or you prefer to keep it as a part-time, occasional job.

Some crucial first steps to starting a home bakery are:

1. Researching your local cottage food laws 
2. Determining what’s on your menu and where you need to work on fine-tuning your skills
3. Figuring out how to correctly price
4. Making yourself and your products known

Know your local food laws

You must understand the local laws in your area around owning a home bakery. You are allowed to legally bake and sell from your kitchen as long as you follow your state’s food laws. I should note that New Jersey is the sole exception.

These state regulations, called cottage food laws, are guidelines around licenses, inspections, what you can and cannot sell, how much you can earn, and if/how you can collaborate with businesses like local coffee shops, among other specifics. Visit Forrager.com for a detailed breakdown of the laws in each US state.

For example, Texas has no permits, licenses, or inspections beyond a required basic food handlers’ certification. Your gross annual income from the sales of these foods must be $50,000 or less.

Whereas in Oklahoma, the laws are fairly restrictive, with only certain types of baked goods allowed to be sold, and sales are limited to $20,000 per year, but no license from the health department is required.

You must learn what foods you can sell and what is not allowed. Generally, if a food requires refrigeration, freezing, or specific handling to remain safe, it’s probably not allowed. 

Another important note is that some states require that the home be visited, inspected, and approved before you start.

If required, a local inspector will check your kitchen to ensure that all the rules are followed. Knowing that an inspector would critique my kitchen seemed so scary when I was preparing for the visit. But I followed my state’s guidelines, and it was straightforward and, ultimately, stress-free. 

Some states require that the house is free of pets at all times. Others require simply that a pet is kept out of the kitchen. 

In many states, home bakeries need to have a Food Safety Certification and depending on the state, the rules to obtain one can vary. You may need to take a class, an exam and pay a fee. The training ensures that you know how to prepare and store foods safely and keep your kitchen sanitary.

Starting a new venture can be a little daunting at times.

My advice is to take really good notes on every conversation you have. If you talk to your local board of health to clarify one of the guidelines, note who you spoke to and the day and time.

Always be professional and pleasant when reaching out to the county personnel in charge of cottage food operations. In my experience, it comes down to a small group of people who regularly deal with these issues. I found them to be very helpful and patient when I was confused and needed help.

Setting up your home bakery business

Choose a business name that no one else owns, with available social media handles and a website domain.

It’s also a good idea to have a personal connection to the name. Maybe a lovely story you can share with potential customers, use on social media, your website, or in the press.

Open a separate business bank account and track all your expenses. You may want to talk to legal and financial advisors about structuring your business, whether it be a Sole Proprietorship, LLC, or some other entity, and do some additional research about tax implications.

Essential tools for a home bakery business

If you are a hobby baker, you most likely have many of the necessary tools you need to start.

One mistake I made when I started is that I purchased a lot of stuff because “now I had a bakery business.” Truthfully, I could have waited until I needed them, but I got caught up in the idea.

The lesson here is that you may have to add tools or equipment, but be thoughtful about it before making those purchases. You would be amazed at how efficient you can become with constraints.

Here are the tools I found necessary:

1. Stand mixer (Yes, you can get away with a hand mixer, but a stand mixer is so much easier and will save you time.)
2. Oven 
3. Oven thermometer 
4. Cake and cupcake pans
5. Mixing bowls
6. Cookie sheets
7. Measuring spoons and cups
8. Spatulas
9. Whisk
10. Offset spatula

Depending on what’s on your menu, you might need more, such as a rolling pin and pie dishes, pastry bags, cooling racks, extra bowls for your mixer, silicone baking mats, or a digital scale.

Ingredients and supplies

The cost of ingredients can quickly add up when you become a home baker. Look at the price of a pound of butter. You will need to research options and look to buy all your ingredients at the lowest possible price.

And, all your baked items will need to be packaged or, at the very least, boxed. There are so many online resources available for supplies in addition to what you can find locally. 

Facebook groups and other online resources can be very helpful, especially for home bakers. Even Facebook groups have specific ones based on the state, where you can ask for help or clarification on local laws and source ingredients and supplies.

This is also where your menu comes into play, which we will discuss next. If you have a menu that requires eight box sizes or several specialty ingredients, you can see how quickly the expenses add up, and you also need the space to store it all.

How to decide on what products to sell?

Most home bakers become overly enthusiastic when thinking about their menu and don’t consider the potential challenges with having too many options.

Many new home bakers offer everything and the kitchen sink trying to hone in on what customers want.

It’s understandable but creates a strain on your time and resources. 

Let’s break this down.

Assume your menu has cakes, cupcakes, cookies, scones, and pies. And, you have orders on one day for a pie, a cake, 12 scones, and 12 cookies. That’s a lot of different doughs and batters you have to make, and you would need different sized boxes.

What if your menu had cakes, cupcakes, and cookies?  And your cakes and cupcakes were the same batters. You could double or triple your cake batter for multiple cakes and use that batter for cupcakes. You could measure your ingredients the day before or make the batter ahead of time. Small efficiencies add up over time.

Think about which of your baked goods get you consistent raves from family and friends. Is there an item you get asked to make over and over again? This favorite could be a signature item that becomes the cornerstone of your menu.

And be honest with yourself about your skill level. If you have never decorated a cake before, don’t start a home bakery with fancy iced cakes as your main menu item. One great thing about this business is that there are many menu options, including cupcakes, breads, cakes, scones, muffins, decorated cookies, drop cookies, pies, etc.

Don’t start with an overloaded menu, but aim to figure out a few types of treats to launch with. You can always add items as you go. You will have to be flexible as you find your rhythm and get feedback from paying customers.

Also, be sure to pay attention to what baked goods are available in your local area. Think about whether you can fill a need or put your unique spin on a product.

It is really important to remember: just because you don’t know how to do something now doesn’t mean you can’t learn. 

What about labels? 

You need labels.

I would put labels on anything, even on the cakes that I send to my friends.

People who will be eating your products need to read the ingredients to prevent a possible allergic reaction.

As with everything, each state has its requirements, even in the labeling department.

Generally, a label should contain at least these basic elements:

• Name of product
• A complete list of ingredients. This can be tricky because you will need to list even the ingredients in the ingredients. So, if you use Buttermilk, you should list everything in it. (Cultures, Milk, Sodium Citrate, salt, or what other ingredients you read on the label).
• Allergens like Milk, Gluten, Egg protein, Lactose, Nuts, Seeds., etc., should always be listed
• Quantity
• Your business name and address

Pricing your goods

Determining how much to charge for products freaks most people out. I get it, especially when starting, you have no point of reference. 

The pricing formula has a few key components to factor in:

• The cost of the ingredients
• The number of hours that it took you to prepare the product
• The expense of the packaging materials
• The cost of gas and electricity used (make assumptions to start)
• Extra services like delivery
• Your profit

Your friends and family will probably be among your early clients.

At first, you might even bake for free, but try to avoid doing that once you launch the business. Make sure not to bake for free too often because the ingredients cost money, your time costs money, and the whole idea is to make more money!

Placing a number on your work can be difficult. Most people tend to undervalue their work because they don’t recognize the value of their time. Don’t fall into this trap!!

If you factor in taking the order, shopping, preparing, baking, decorating, packaging, and dishwashing, the time quickly adds up.

You need to remember that if someone went to a retail bakery and selected a cake, they would pay the amount as marked. A customer wouldn’t question it. There shouldn’t be a negotiation for your prices just because you are a home bakery.

In the beginning, you might want to start lower than your target, but you still need to charge a reasonable price. Most of your customers will recommend your services to friends and family, and they will also talk about money and share how much it costs. 

You may choose to offer discounts to family and friends. Once you launch, determine your friends and family policy so you can set expectations and avoid confusion and hurt feelings. 

Pricing your products too low might create a vicious circle in which all customers will expect to pay a lower price. If you are way undercharging, customers might also think that your product quality reflects the low price. You don’t want to build a reputation as “the cheap baker.” 

Proper pricing is a skill.

The more you do it, the better you get at it. Be thoughtful at the start, and as you gain confidence and skills, you can evaluate your prices as you go.

Marketing your home bakery

Now comes a crucial part that will be one of the most significant factors in your success: marketing.

You need customers who will buy your baked goods.

While your early customers will be friends and family, the goal is to build awareness to bring in a regular stream of buyers.

Here are several ways to start marketing your bakery:

• Tell everyone you know that you have started a bakery business. This might be hard at first because you may be shy about talking about yourself. Look at it that you are providing a valuable service that people need. Your baked treats will add something special to holidays, birthdays, and anniversaries.
• Treat your customers well—every time. Exceptional customer service is a potent marketing tool. Forbes shared a study that said people are more willing to share positive experiences than negative experiences on social media. If you go above and beyond for your customers, they will remember it. And recommend you.
• Create social media profiles on Facebook and Instagram, where you share your menu, photos of recent orders, testimonials, and show your personality. Ask your friends and family to like your posts, share your page, and comment on your posts. This might not seem like it will bring you customers, but it will help the algorithms learn that you are an active business.
• Leverage local Facebook groups. There is a Facebook mom group in my town that allows businesses to post once a week. Increase your visibility by being active in the group. Always follow the rules of the group; otherwise, you could be kicked out.
• Network and collaborate with other businesses. Join your Chamber of Commerce and bring samples of your products to a meeting. Talk to other professional people, like photographers or florists, so that you can refer business to each other.
• Get involved in your local community and offer your services for local events. Do you know someone who is involved in your local PTA? 
• Use testimonials from satisfied customers on social media to build social proof. Encourage customers to leave reviews.
• You can also give your friends a few business cards to spread around to people who might need your services.
• Build a website as your home base. You don’t have to start with a website but plan to add it when you can. You can begin with a simple page that contains the essentials—where you are located, what you sell, and how to contact you. Having an easily searchable presence online is essential. Think about how often you turn to Google to find a nearby business. Since you don’t have a storefront, a website can also help to legitimize a home bakery.

Final thoughts

It’s easy to assume everyone has your baking passion, talent, and interest.

Over the years, I have met many people who hate baking or simply do not have the time or interest. Those are your customers! But because it may be easy for you doesn’t mean you shouldn’t value it. 

Starting a home bakery can be an immensely satisfying journey. Being able to support a family by doing what you love isn’t something that many people experience. 

What’s particularly attractive about a home baking business is determining how much work you take on. You could earn $500 a month or more, depending on how busy you want to be.

A home bakery is the type of business that can start small, as simple as selling a cake to your neighbor, but can expand to a full-time business if that’s your goal. 

The most important thing to remember is that it’s your business. It’s up to you to make the rules about how your business best fits into your life.

About the Author: Denise Treco is the founder of Whisk Warrior, the bakery business coaching and support system aspiring and experienced home-based bakers turn to when they want to transform their business. Snag a pricing cheat sheet to solve one of the most confusing aspects of a home bakery business: how much to charge.

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