So you’ve finally decided to act on those compliments and advice from your friends and family to take your baking hobby to a professional level? That’s great! So, how do you start a bakery or baking business from home here in the Philippines?
Do you think that most baking pros are deterring from turning their passion into business because of the staggering running costs of a store? If you find yourself in a similar situation, you should consider opening a bakery business at home!
Once you catch the baking bug, it isn’t easy to stop. So, why not start your little bakery or baking business from your home itself? The best part? The running costs are relatively low, and the process is much easier!
Let’s learn what it takes to start a bakery or baking business from home so that you can deliver those scrumptious gooey cookies to hungry bellies!
Pros of Starting a Home Bakery Business
Before we jump to the hows and whats, let’s help you understand the perks of opening a home bakery business. Here’s why a home bakery business is a profitable venture:
- The overhead costs of starting a home bakery business are relatively low.
- Home bakery business comes with incredible Opportunities and allows networking.
- Since the home bakery business is a sole proprietorship, you’re your boss! You can make the best decisions keeping in mind what’s best for your business and requirements.
- Home bakers can also participate in local community events to expand outreach.
- With starting a small home bakery business, you can polish your baking and business management skills!
Preparing a Bakery Business Plan
Whether your home bakery business aims to fuel your passion or supplement your monthly income, it is always wise to develop a business plan. A proper bakery business plan can be a guidebook to steer your home bakery towards success. And don’t forget, it should be pandemic proof.
A home bakery business plan should contain the following elements:
Company Description, Logo, & Mission
You need to finalize and plan a piece of detailed information about your home bakery business. Once your business starts operating, you’ll need to mention the types of bakery products under your roof and a mission statement.
Will your home bakery business deal with fresh bakery products such as cakes and cupcakes, or only cookies, muffins, and other extended shelf life products? Before you start your operations, you should specify the scope of your bakery to keep things simple and manageable. Additionally, designing your bakery logo is also a part of the process.
The next critical thing is coming up with a business name. Choose a lively business name that reflects your mission and values. Moreover, the business name you choose should have a scope for expansion. We also suggest you start with a quirky and unique name if you need to trademark it in the future.
Regardless of whichever name you choose for your business, it should be clear that you deal with baked products. Lastly, the brand name should be short & sweet and easy to remember.
You can use several online brand name generating tools to get excellent inspiration for your home bakery. Once you finalize the name, you’ll have to use it while registering your home bakery business.
Setting Up the Space
To get your home bakery business up and running, you’ll need the necessary baking equipment. It would help if you considered equipping your kitchen with a blast freezer, stand mixers, heavy-duty oven, and other professional-level baking tools based on your menu items.
Moreover, there are also small kitchen items that are mandatory for baking. For instance, you might need new cookie cutters, cake stands, and cake levelers. You might also have to invest in modifying and outfitting your kitchen. The existing kitchen might not have enough countertop space for prep up.
Another essential aspect of your bakery business plan is your target market and population. You have to identify your niche and target the customers with the best products! How will your home bakery better cater to the customer than your rivals? What needs or wants are your bakery products fulfilling for your customers?
The location of your home bakery also has a lot to do with your bakery sales. You should also watch out for the current trends in the world of baking. For example, currently, people are going gaga over miniature cupcakes on social media.
Obtaining Permits and Food Licenses
Depending on your geographic location, the permits and licenses will significantly vary. It would help if you relied on your local state laws to determine the food licensing and permit process. Many states make it mandatory for businesses of all sizes to comply with local health codes since it involves consumables.
If you are planning to open a home bakery business in the Philippines, these are the permits you might require:
- You’ll need to procure a Tax Identification Number (TIN) from the Bureau of Internal Revenue.
- Secure a Residence Certificate & Sanitary Permit or Mayor’s Permit from the local municipality of home bakery business address.
- BFAD Certificate from the Bureau of Food and Drugs (BFAD) or License to Operate (LTO) as a “food manufacturer.”
- You’ll also require business name registration in the Department of Trade and Industry (DTI) as you’ll be running the home bakery business on your own.
Defining a Clear Business Structure
Most new home bakery business owners mistake not establishing a clear business structure. It is essential to finalize the type of business structure you require. The business structure will also determine how you pay your taxes.
Typically, most home bakers want to start as sole proprietors. A sole proprietorship is one of the typical business structures. But remember that if your home bakery business absorbs employees or new business partners, you’ll have to alter the business structure.
If you expand your home bakery business in the future, you also might need to move out and require a physical outlet for your bakery business.
Creating Sales and Marketing Plans
Sales and marketing are two essential aspects of any business. You need to figure out ways to attract and retain your consumers. Do you plan to rely on referrals to get your home bakery business going? Also, do you know any local eateries that want to host your products?
One of the first aspects of your marketing plan should be to have a user-friendly website or point of communication. It is best to have a web designer look into the website development process. You’ll also require marketing materials such as business cards and engaging content to keep the customer flowing!
Here are some marketing routes for a home bakery business:
- Social media and online marketing
- Word of mouth
- Bake sale day at local venues and events
Strategizing and Finalizing the Pricing
You should think about the pricing of your menu items thoroughly. The rates you set at the beginning of your business will determine the first impression of your consumer. You don’t want to charge too high as it can deter many customers from picking your bakery products. On the other hand, you don’t want to underprice and reduce your profit margin significantly.
Home bakers should also consider their efforts, time, and other resources to set up a home bakery. You can extend the benefits of reduced overhead costs to your customers. Remember, you can create your bakery’s USP in taste and variety instead of pricing.
You can consider the following figures while deciding the price of baked goods for your home bakery:
- The yield of your recipes: How many cupcakes or cookies can one typically produce?
- Cost of ingredients: How much do you spend buying flour, eggs, cocoa, sugar, and others?
- Cooking time and expertise level: You should not waste your pro-like baking skills for minimal costs! Make sure to consider your baking expertise and dedicated cooking time and divide it with the recipe yield to find the labor cost per piece.
- Cost per serving: You can find the cost per serving by dividing the price of ingredients by the yield per recipe.
Investments for Starting a Home Bakery
It is a wide belief that you can start a home bakery with minimal investments, such as buying an oven and ingredients, but there’s more to it. Even with a home bakery, there are several costs involved in starting a bakery or baking business at home. Here’s a breakdown of home bakery business investments:
- Space: If you are 100% sure that your kitchen can handle the heat of your home bakery business, you’re good to go. Apart from the kitchen, you also require space for arranging and storing your raw materials and baked items. So, if you need additional space for storage, stocking, or preparation, you’ll have to account for those costs as well.
- Licenses: The licensing part depends on your local government rules and regulation. The Philippines requires many documents and permits, which we have already discussed above.
- Equipment: Based on your daily sales expectations, you’ll need to determine the size of ovens, refrigerators, and equipment such as mixing bowls, spatulas, baking tins. Once again, the tools will depend on your menu items. You’ll have to consider the variety of baking products and accordingly purchase baking equipment.
- Ingredients: You’ll need to make a monthly shopping list for ingredients depending on your menu items. Some baking ingredients are cheap and readily available. However, it might be costly and challenging to source unique baking ingredients.
- Marketing: You need logo designs, business cards, letterheads, and more such marketing materials. Though most of these are highly affordable, the marketing costs will grow as the business expands.
- Packaging: Food packaging is one of the most significant parts of the bakery business. Whether you are delivering doorstep or takeaways, the packaging should be impressive. Packaging involves paper carry bags, cake boxes, liners, muffin boxes. For starters, you might need to invest money to maintain a stock of at least 100 pieces of each packaging material.
- Miscellaneous Costs: Various costs such as transportation are tricky to factor in as they depend from individual to individual. The miscellaneous costs also account for varying prices of monthly materials.
Unlike a home bakery business, starting up a small-sized bakery can require extensive investment. There is no hard and fast rule for the investment amount for opening a small bakery. The cost of opening a small bakery largely depends on multiple factors such as the size of the store, location, equipment costs.
One of the best parts of being a home baker is that you have very little investment and a whopping revenue. Considering that your home bakery business is at its peak, you can earn anywhere between $3500 to $5,300 in a month.
The average recorded monthly income for bakers is around $5,389. However, note that the monthly payouts of a home bakery depend on several factors such as sales and menu pricing.
One of the critical aspects that determine the success of every home bakery or baking business at home is the menu pricing. Incorrect pricing can jeopardize your business and leave the customers with a negative impression.
It would be best to consider the overhead costs while pricing your baked goods. After you’ve summed up the amount for each baked item, make sure to add some extra amount to make sure you earn profits. All in all, fix the pricing at something that is a win-win for your business and its customers!
To check your pricing, you can use of recipe cost calculator.
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One of the significant perks of opening a home bakery business is that you don’t need to go through the hassle of finding and setting up a store. If the kitchen in your home is big enough, you can operate from there. Also, some rules and regulations home business owners have to follow.
Check with the local government for the licensing and permit requirements. Once the legal part is over, you have to invest some efforts into market research and building your brand. With our guide, you’ll have assistance in every leg of your journey to start a bakery or baking business at home.
Just in case you need help in creating your cake contract, read this article: Cake Contract Terms and Conditions.
Good luck with your new venture!
Over the years, HICAPS has helped bakers and businesses make delicious products by offering ingredients like ChiffonAide Cake Oil, Magic Whizk Instant Whipping Cream, Red Velvet Emulco Flavor and Color, Ube Yam Emulco Flavor and Color, and HICAPS Buttercream Prime Butter Blend.
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- About the Author
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Mervin Manalo is a Chemical Engineer who graduated from De La Salle University in Manila, Philippines. He has over 20 years of experience in the food industry and currently serves as President and CEO of HICAPS Mktg. Corp., a provider of prime baking ingredients.
He also attended a mini MBA program at Guthrie-Jensen, which helped him broaden his business knowledge and skills. Under his helm, HICAPS expanded its business and helped more clients grow thru the years. He loves technology and new trends and is always looking for ways to improve his products and services.