How to Start a Bakery Business
If you’re a baker, you know that creating the perfect Instagram-worthy product is actually the culmination of a lot of time and effort — and the right recipe, of course. The same is true of running a bakery business.
You’ll need to gather ingredients like your equipment and employees, mix them together in the right sequence and add just the right amount of resources in order to create something truly special. We’ll list out the exact method in our ten-part recipe for how to start a bakery.
1. Choose your preferred type of bakery business
Retail bakeries
All retail bakeries sell baked goods directly to consumers, though some specialize in one kind of pastry or service. You could choose from the following types of retail bakeries:
- Home bakeries: Home-based businesses that often sell products online and ship goods to customers.
- Bakery food truck: Products are sold from a truck but are typically baked in an off-site kitchen.
- Bakery catering business: A bakery that specializes in catering would prepare baked goods for customers at a remote location, like hotels, weddings, events or even offices.
- Counter service: A bakery selling goods at a counter without a dining area.
- Specialty bakery: Features one type of baked goods, such as wedding cakes, cupcakes or gluten-free pastries.
- Bakery café: A combination of bakery and café that sells baked goods and provides a dining space for customers.
Wholesale bakeries
Rather than selling baked goods directly to customers, wholesale bakeries sell their products to other businesses, such as grocery stores, restaurants or caterers.
It’s important to note that wholesale bakery businesses are subject to different FDA regulations than retail bakeries. They also typically require a bigger output of product, which often means requiring more staff, more space, more equipment and more ingredients, all of which equate to higher startup costs.
2. Create your bakery business plan
Once you have some idea of the type of bakery you want to open, the next step is to create a bakery business plan.
Writing a strong business plan is essential because it will help you come up with a roadmap for how your business will run. It will also help you present your business concept to potential partners, like small business lenders, in a cohesive manner.
Business plans typically feature several different sections, including:
- Executive Summary: Typically written last, the executive summary includes a high-level overview of the information contained in your business plan.
- Company Overview and Description: Detail the problems your bakery business will solve and address what will make it unique among the competition.
- Market Analysis: This section is where you provide insights about your competitors. What are their strengths and weaknesses? How will your bakery compare?
- Business Offerings: Describe the products your bakery will sell and be sure to include any information about patented products, like signature recipes.
- Management Plan and Ownership Structure: Explain how your business entity will be structured and name who will be responsible for running the bakery. Who are the key players in management? How many staff will you need?
- Marketing and Advertising Strategy: Describe how you plan to attract customers to your bakery and get them to return over time. Also, describe how a sale will take place.
- Funding request: If you’re asking for funding, clearly state how much money you will need and how you intend to use the funds.
- Financial Projections: Provide a prospective outlook of your bakery for the next few years, using projected financial statements, like budgets, cash flow projections and balance sheets.
3. Obtain bakery financing
If your personal savings account isn’t large enough to start a bakery, there are several small business financing options that can help you access the capital you need. Here are some funding options that may be suitable for new bakery owners:
- Traditional business loans: Available from banks and alternative business lenders, most traditional business loan lenders ask that eligible businesses have at least a six-month operating history. That said, some lenders offer startup business loans with more lenient requirements.
- SBA loans: The Small Business Administration (SBA) partners with lending institutions to guarantee loans for small business owners who may not qualify for traditional financing. These loans come with perks like long repayment windows and capped interest rates, but also feature longer-than-normal funding times.
- Personal loans: If you don’t meet common business loan requirements, you could also consider a personal loan for business use. These loans can be easier to qualify for, but you’ll personally be on the hook for repayment, even if your business goes under.
- Crowdfunding: If you don’t want to take out loans, consider crowdfunding. Crowdfunding allows you to use a digital platform to raise money for your bakery. However, keep in mind that crowdfunding can take longer than other financing options and that some platforms operate on an all-or-nothing model, where you’ll only receive funds if you reach your total goal amount.
Your startup costs for opening a bakery can vary widely, depending on your location, staffing needs, menu and equipment requirements. In 2025, these costs ranged from $30,000 to $100,000 according to Wexford Insurance, a firm offering a wide variety of business insurance policies.
4. Secure a commercial baking space
Before you can start selling baked goods, you’ll need a space to do your baking. Here are some things to consider as you weigh your options:
Decide the type of baking space you need
Depending on what startup funds you have and how big an operation you plan to run, you can:
- Use your home kitchen: Selling baked goods out of your home is often the cheapest option, but be aware that there may be limitations on what and where you sell based on your state’s laws (more on that below).
- Rent a commercial kitchen space: If you’ll be running a bakery that doesn’t require an eating area, like a catering company or a food truck, a commercial kitchen that lets you lease kitchen space by the hour is an option. But be aware that your lease may come with certain scheduling or food storage restrictions.
- Lease a building: If you want your own storefront and dining area, then leasing a building (or a space within a building, such as in a shopping mall) is often cheaper than buying and doesn’t lock you into a long-term financing agreement.
- Buy a building: Buying your own storefront often requires getting a commercial loan. If you can secure the financing, you’ll have more control over your space and you’ll be able to build equity — but you’ll also have less freedom to move to new locations and you’ll be on the hook for repayment even if your bakery goes out of business.
All commercial kitchens are subject to regulation, but each state’s department of health sets certain rules governing the sales of food items produced in your home kitchen, known as cottage food laws. These laws regulate things like which foods you can sell from a home kitchen and where you’re allowed to sell your wares. They may also be called “home food processing rules” or “baker’s bills.”
Check with your state’s cottage food laws to see what rules apply to you and how to comply if you’re running a home-based bakery.
Choose the right location for your bakery
If your bakery’s success hinges on getting multiple customer bases in the door, the location you choose can make or break your success. Here’s what to look for when touring spaces:
- Demographics: Who makes up the main demographic in the area? Are they your target market?
- Accessibility: Is the location easily accessible to potential customers? Is it walkable or do you need a car? Is there parking? Is there an ADA accessible entrance?
- Proximity to Suppliers: How close are you to your future suppliers? Is there a loading area where they can drop off deliveries?
- Competition: How many other bakeries are in the area? How close are you to them?
- Size and Space Requirements: Is there enough room for prep work and food storage, as well as customer dining? Will you have space to grow as your bakery gets more popular?
- Health Regulations and Zoning: Is the location zoned for commercial use? Does it comply with local codes and regulations?
- Safety and Crime Rates: What is the local crime rate? Would having security cameras or other equipment make the space feel safer — or even help lower your business insurance rate?
Design your layout for the space
Here, your goal will likely be to create a space that feels both inviting and easy to navigate. When laying out the space, be sure to consider the following elements and how your future customers and employees will interact with them:
- The kitchen
- Baking equipment (e.g., ovens, refrigerators, prep tables)
- The counter and cash register
- Display cases
- Eating areas (e.g., tables, chairs, couches)
- Restrooms
- Entrances and exits
5. Get the appropriate bakery permits and insurance policies
All business owners are subject to various laws and permitting at the federal, state and even local levels. It’s a good idea to reach out to a local small business attorney to see what specific regulations might apply to you. Here are some of the most common:
- Business license
- Employee Identification Number (EIN)
- Certificate of occupancy
- Food service license
- Sign permit
- Building health permit
- Food handler’s permit (also known as an employee health permit)
- Resale permit and/or seller’s permit in states that charge sales tax
- Music license if you plan to play music
- Liquor license if your bakery will sell or serve alcohol
In addition, it’s a good idea to purchase business insurance for your bakery. You may want to consider the following policies:
- General liability insurance: Protects against third-party claims of injury, like slips and falls
- Property insurance: Protects your property, equipment and inventory from events like theft or fire
- Workers’ compensation insurance: This insurance is typically mandatory if you have employees. It provides benefits to employees who are injured while on the job.
- Liquor liability insurance: If you’re planning on selling alcohol or alcohol-infused baked goods, this protects against any incidents that may occur after consuming those items.
6. Purchase bakery equipment
Equipment is often the second-biggest startup expense — behind rent — for bakery owners. No matter what kind of baked goods you sell, you can anticipate needing to invest in some equipment to get you started.
Your costs will depend on the specific items your bakery offers (for example, a patisserie will need a variety of pan sizes, heavy-duty mixers, thermometers and specialized small pastry tools) as well as the size of the space. Here’s a look at the price ranges you can expect if you’re buying your big-ticket equipment new:
- Oven: $400 to $15,000
- Mixer: $100 to $2,500
- Dough sheeter: $2,200 to $4,000
- Refrigeration: $1,000 to $14,000
In addition to these costs, don’t forget to account for the cost of baking smallware, such as rolling pins, mixing bowls and spatulas. You’ll also need to plan around facility changes like adding extra ventilation or installing display cases.
If purchasing everything new is cost-prohibitive, equipment leasing may allow you to use the equipment you need at a lower price point, even if you won’t own it outright. You could also consider buying some used bakery equipment.
7. Create and price your bakery menu
Next, it’s time to work on pulling your bakery menu together. Here’s how to make it happen:
Decide what your bakery will offer
Think about what type of bakery you want to open. Will your bakery focus on selling cookies, breakfast pastries or dishes that are traditional to your heritage? Whatever the answer, research other bakeries in your niche and learn what they offer. Consider how your bakery can fill a gap in the market or capitalize on current trends.
Once you’ve decided on your menu items, create a list of what you plan to offer. This is the time to work on testing your recipes — you’ll need your cookbook for the next step.
Calculate how much it costs to make your baked goods
For each item you’ll offer, you’ll need a list of ingredients with the amounts broken down by item. Start by figuring out how much flour, butter and other ingredients you’ll need to make a batch, and then work backwards to find out how much of each ingredient you’ll need per item. Next, figure out the value of each ingredient to price how much you’re spending to make each individual item.
For example, if your supplier offers a 50-pound bag of flour for $35 and each cookie uses 38 grams of flour, then each cookie uses about $0.06 of flour.
You’ll want to do this for every ingredient in each recipe. This step can be time consuming, but it can help prevent you from taking heavy losses if your baked goods are underpriced.
Now that you have the cost of ingredients for each recipe, you’ll want to add in overhead. This can be tricky to price — you’ll want to factor in the cost of your equipment, any leases or debts, insurance, employees and other expenses. You can start by breaking down the monthly cost of running your business, and further break that down into the daily cost. From there, you’ll need to make estimates about how many sales to get an initial estimate for overhead. You may find that you need to refine this once your bakery opens and you have a better idea of how much you’ll sell.
Add a profit margin
Now that you have an idea of what each baked good costs you, you need to add in profit to get a price.
Most bakeries operate with profit margins of 5% to 10% after all expenses are accounted for, meaning you can expect to pay $90 to $95 for every $100 in sales you make. However, some bakeries may operate with higher margins. Luxury baked goods may command profit margins of 15% or higher.
Once you have a price, compare your figure against local competitor prices for similar items. If necessary, work on refining your menu until you feel that what you offer is competitive in your market.
8. Hire and train your bakery staff
Unless you’ll be running a solo shop, you’ll likely need to hire employees to help your business, In particular, you may need:
- Front-of-house staff: These employees will take orders, work your point of sale system and keep customer dining areas clean.
- Back-of-house staff: These employees will prep ingredients, cook or bake your menu items and wash dishes.
These staff members will each need to be trained on your bakery’s policies and procedures. While not all of them need to have culinary chops, it’s likely a good idea to make sure that anyone who is responsible for reproducing your menu items has some formal training or equivalent previous experience.
In some circumstances, you may also need to hire a few employees that have specialized skill sets. For example, if you want your bakery to be known for its cakes, consider hiring a cake decorator.
9. Market your bakery
Your potential customers need to know about your bakery in advance of opening day, so it’s smart to put time and effort into marketing your bakery. While your business plan should outline the main components of your marketing strategy, here are some tips to help you get started:
- Research your target demographic: Learn how they like to interact with advertisements and what makes them more likely to move forward with a sale. Then, let those insights dictate how you market.
- Create your brand: Every detail from the paint colors on your walls to the plates you select to the font on your menus is representative of your brand. Make sure they all work together cohesively.
- Focus on only a few marketing channels at first: Once you know whether your target demographic prefers newspapers, streaming ads or social media, focus your budget on the marketing channels that will have the most impact.
- Set realistic goals for your marketing campaigns: Setting achievable goals — like gaining a set number of followers or achieving a specific open rate for your emails — will help you measure your success and can help you pinpoint which areas of your strategy may need to be reevaluated.
- Consider hiring help: If marketing isn’t your thing, don’t be afraid to outsource these tasks. Just be aware that doing so often comes with an added cost.
10. Host a grand opening
Once you’ve gotten the word out about your bakery, it’s time to host a grand opening. In addition to having your baked goods ready for sale, you may want to offer extra incentives to help your customers experience more of your menu and cultivate repeat business.
For example, you could offer a coupon for a free cookie to the first 100 customers who show up at your door. Miniature free samples can also do the trick while keeping your costs under control.
Requesting feedback as customers exit your grand opening is also a smart move. It can help give you a better idea of what’s working and what needs improvement, so that you can make targeted adjustments going forward.
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