Setting up a baking business is exciting, but it can be tricky to know where to begin. From telling the taxman and registering your premises, to Instagramming your beautiful bakes, our 10 steps will get you started.
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Setting up a bakery business from home
1. Register as self-employed
When you’re starting a business you need to tell HMRC you’re self-employed so that they know you need to pay tax through the Self Assessment system. You need to do this even if you’re going to be running your home baking business part-time or if you have another job.
To set up as a sole trader - the simplest business structure - telling HMRC is all you need to do to register your business. If you want to set up as a limited company instead, the process is a bit more complicated. See our step-by-step guide to setting up a limited company for more information.
2. Make sure your kitchen is up to standard
As you’d expect, your premises need to be clean and kept in a good condition. You need to be following good food hygiene practices in your kitchen, including protection against contamination and pest control. However, your home baking business won’t be measured by the same standards as a big commercial premises like a restaurant.
3. Register your premises
When you’re setting up a food business, you’re required to register your premises with the local authority’s environmental health service at least 28 days before you start trading. This doesn’t cost you anything and your registration can’t be refused. Someone will come to your home and check your food preparation area. To get contact details for your local authority, use the food business registration tool on the government’s website.
4. Sort your home baking insurance
Business insurance is an important consideration when you’re setting up your baking business. Public liability insurance and product liability insurance (usually sold together) can cover you if you’re sued by a member of the public for injury or damage.
For example if someone falls ill after eating one of your cakes, or if you knock over an expensive vase when you’re delivering a cake to a customer’s home. There’s also stock insurance and tools insurance, plus employers’ liability insurance if your home baking business will have any employees. Go to our home baker insurance page to get started.
5. Tell your landlord or mortgage lender
If your home is rented, you need to get permission from your landlord to run your business. However, the law says that your landlord can’t unreasonably withhold or delay their permission. If you own your home, you may need to get permission from your mortgage lender to run your home-based baking business.
6. Think about standing out
There’s a large number of baking and cake making businesses out there, so you need to think about how you’re going to differentiate yourself. You could specialise in vegan and/or gluten-free bakes, for instance, or concentrate on children’s party cupcakes or wedding cakes.
Since cakes are difficult to transport, you need to have a good sense of your local market, as most of your customers need to be close enough for in-person delivery or collection.
7. Develop an online presence
You make a product that looks beautiful, so photographs are going to be key.
Set up a simple website with important details like what you do, where you’re based, and how people can place an order, and add plenty of mouth-watering photos. There are tons of website builders to choose from, including WordPress, Squarespace and Wix.
Also set up a Twitter account, a Facebook page, and an Instagram account for your business, and keep them updated with posts and photographs. It’s also important to interact with other people on social media, so spend a few minutes each day liking and commenting on other people’s posts, and following relevant accounts.
8. Get out and about with your baking business
Although you’re setting up your baking business from home, it’s a good idea to get out and about to tell people about your business and develop a reputation locally. Consider applying for a stall at local events, including food markets and fetes. You can offer people free samples, sell cakes, and give out flyers and leaflets to promote your home baking business.
9. Keep track of your ingoings and outgoings
Since you’re running your own business, you need to keep track of your income and your business expenses so that you can enter this information when you complete your tax return. Our guide to tax-deductible expenses should help you figure out which expenses you can subtract. Remember that you need to keep your receipts as HMRC may ask you to produce evidence of your expenditure. There’s lots of small business accounting software available that can help you to manage your business finances.
10. Market your business
People need to discover your wonderful cakes, so it’s important to think about marketing strategies. As well as going to local events with your cakes and using social media to reach potential customers, think of other ways.
If you’re specialising in wedding cakes, you may be able to put flyers in a wedding dress shop, or develop a relationship with a local wedding venue, for example. If you’re making vegan cakes, perhaps you can get permission to put flyers in a local vegetarian restaurant, or write a guest post for a popular vegan blog. You could also try Google Pay Per Click (PPC) ads or Facebook advertising, although remember to narrow the audience down to your local area so that the adverts are only appearing for people within your delivery zone.
Have you got any more questions about setting up your home baking business? Ask them in the comments below.