Starting a Cake Business: A Step-by-Step Guide

Here are the most important aspects to consider when opening a cake business:

1. Location — It’s a good idea to set up your cake business in busy areas with a lot of foot traffic and attract walk-in customers. Also, align your location with your target market and their preferences.
2. Find a niche or specialization — Stand out from your competitors with a unique offer such as custom-designed cakes, diet-specific offers, cultural or regional specialties, cupcakes, mini cakes, or cakes for special occasions such as birthdays, weddings, and anniversaries.
3. Invest in equipment — You will need various cake-making equipment such as ovens, mixers, refrigerators, baking pans and molds, scales, decorating tools, and storage solutions. 
4. Licenses and permits — Since you will be handling food, you will need a food service license and possibly a health department permit. Also, if you plan to bake cakes at home you will need a home occupation permit.
5. Find suppliers — Find reputable suppliers for all the fresh ingredients you need to make the cakes.
6. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
7. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
8. Online store — Take your cake business online and create a store where people can see and order cakes from you. Make sure you use platforms like Instagram and Pinterest to showcase your work, get listed on Google Business and Yelp, and optimize your listings.
9. Packaging — Protect your cakes during delivery and use packaging as marketing material.

Step 1: Decide if the Business Is Right for You

Before entering the baking industry, you need to know about the advantages and challenges that come with it. To help you determine if this is the best career path for you, here are some of the typical pros and cons of starting your own cake business:

Pros and Cons

Cake Industry Trends

For broader industry information, read this Step By Step article on starting a bakery. 

Industry Size and Growth

• Industry size and past growth — The global cake market was valued at $65.68 billion in 2023, according to market analyst Grand View Research. Thanks to increased urbanization and more disposable income, the US market has also been enjoying steady growth.
• Growth forecast — The global market is projected to grow about 3% annually through 2030.((https://www.grandviewresearch.com/industry-analysis/cakes-market))
• Number of people employed — As of 2023, more than 220,000 bakers were employed in the US, according to the Bureau of Labor Statistics.((https://www.bls.gov/oes/current/oes513011.htm))

Trends and Challenges

Trends

• Grocery stores and supermarkets are adding in-store bakeries
• Increase in bakery-cafes
• Rising interest in healthier and diet-related products, such as sugar-free, gluten-free, dairy-free, organic, and low-sodium options
• Online sales of cakes are rapidly increasing as more consumers appreciate the convenience of placing an order while at work or on the go

Challenges

• Shelf-life issues of ingredients
• Capturing fickle consumers

Popular Products

Here are the most popular types of cake consumed in the US in 2017((https://www.statista.com/statistics/235492/category-share-of-cake-sales-in-the-us-by-cake-type/)):

What Kind of People Work in Cake Shops?

• Gender — Around 54% of all bakers are female, while around 46% are male.((https://www.zippia.com/baker-jobs/demographics/#gender-statistics)) 
• Average level of education — 31% of bakers have a high school diploma while 26% hold a bachelor’s degree.((https://www.zippia.com/baker-jobs/education/))
• Average age — The average age of an employed baker is 41.7 years old.((https://www.zippia.com/baker-jobs/demographics/#age-statistics))

How Much Does It Cost to Start a Cake Business?

Startup costs for a cake business run from $2,000 to $7,000 or more, and vary depending on the equipment you already have. For instance, if you have a reliable refrigerator and oven, this reduces your costs. The amount that you spend on marketing will also fluctuate your start-up capital requirements.

You don’t need expensive equipment to bake cakes. Most of the necessary tools and equipment will likely already be available in your kitchen. You can easily buy any other items you need from Amazon or eBay, or from a local food and beverage supplier. In addition to equipment and tools, you’ll also need ingredients and packaging material. Finding a grocery or local dealer is your best bet for good deals on bulk baking goods. 

Start-up Costs	Ballpark Range	Average
Licenses and permits	$300–$500	$400
Insurance	$130–$260	$195
Marketing and advertising	$500–$2,000	$1,250
Website	$200–$1,000	$600
Software	$200–$500	$350
Equipment	$500–$2,000	$1,250
Raw Material	$100–$200	$150
Miscellaneous	$70–$540	$305
Total	$2,000–$7,000	$4,500

How Much Can You Earn From a Cake Business?

The median cake size is 10 inches in diameter, with an average sales price of $60. If you start out as a solopreneur working from home, you can expect a profit margin of about 60%, which means you’ll make around $36 for each cake sold. 

In your first year or two, you might sell 20 cakes a week. This would give you more than $62,000 in annual revenue, and a profit of around $37,000. After you scale up your operations with a production facility and a full-time staff, your margin will fall to 40%, but you might sell 100 cakes a week. This would give you more than $310,000 in annual revenue and a profit of nearly $125,000. 

What Barriers to Entry Are There?

In any food business, the biggest barrier to entry is often the stringent regulations and licensing requirements. Food businesses are regulated by the FDA, which provides a comprehensive guide on starting a food business.

Another barrier to entry includes developing new recipes to stand out in a crowded market. Consumer preferences and dietary requirements change from time to time. You need to establish an adaptable menu that you can customize according to your customers’ changing desires.

Step 2: Hone Your Idea

Now that you know what’s involved in starting a cake business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an Opportunity

Research cake businesses and bakeries in your area to examine their products, price points, and customer reviews, and see what sells best. You’re also looking for a market gap to fill. For instance, maybe the local market is missing a good gluten-free and vegan cake maker.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine What Sort of Cakes You Will Make

The next crucial step is determining what sort of cakes you will produce and sell. Would you like to offer a wide variety of pre-made and custom cakes? Or maybe you’d prefer to focus on a single type of cake, such as cheesecakes or sponge cake, and build your brand that way.

Chocolate is the most-searched-for type of cake online, followed by red velvet and carrot.((https://www.bakeryandsnacks.com/Article/2019/07/12/Top-10-The-world-s-favorite-cakes-revealed/)) It’s a good idea to do some research and determine if it is more viable, in your area, to focus on wedding cakes, birthday cakes, cupcakes, or some other segment. 

If you are new to cake baking, you need to spend some time developing recipes and designing a menu. However, if you are a seasoned cake baker, you may bring the recipes you developed over the years, reducing the time spent conceptualizing. You might also consider offering baking classes or online courses to boost your revenue. 

One thing to keep in mind is that sponge cakes last longer than most other cake types before they go stale, reducing your potential losses. Another money-saving option is offering frozen cakes, a market segment that has seen significant growth in recent years.  

How Much Should You Charge for Your Cakes?

Your prices will depend on which types of cake you choose to offer, as well as costs, overhead, and your target profit margin. Keep in mind that your prices will need to be in line with those of your competitors. 

Once you know your costs, you can use our profit margin calculator to determine your markup and final price point. Remember, the price you use at launch should be subject to change if warranted by the market.

Who? Identify Your Target Market

You could choose to concentrate on custom cakes, which would likely get you a lot of birthday orders. In that case, your target markets would be parents, offices, and residential communities, and you could find them on Facebook and LinkedIn. If you specialize in a certain kind of cake, you might want to focus on selling wholesale to local grocery stores, restaurants, and cafes, which you could find on Google Maps and Yelp. 

Where? Choose Your Business Premises

In the early stages, you’ll probably run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers and may choose to rent out a storefront or production facility. Find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Cake Business Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “cake” or “cakes,” boosts SEO
• Name should allow for expansion, for example, “Dessert Delights” over “Vegan Delights”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Here are the key components of a business plan:

• Executive summary — A brief overview of the cake business, highlighting its mission, goals, and key accomplishments
• Business overview — A detailed description of the cake business, including its mission, vision, values, and legal structure
• Product and services — Clearly outline the types of cakes and baked goods offered, emphasizing any unique or specialty items
• Market analysis — Evaluate the target market for the cake business, including demographics, trends, and potential customer needs
• Competitive analysis — Identify key competitors in the cake industry, analyzing their strengths and weaknesses to highlight the business’s competitive advantage
• Sales and marketing — Outline the strategies for promoting and selling cakes, including pricing, distribution, and promotional activities
• Management team — Introduce the key members of the cake business team, emphasizing their qualifications and roles in ensuring success
• Operations plan — Detail the day-to-day operations of the cake business, covering production, supply chain, and quality control processes
• Financial plan — Present a comprehensive financial projection, including startup costs, revenue forecasts, and a break-even analysis
• Appendix — Include supplementary materials, such as resumes of key team members, detailed market research, or any additional information that supports the business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider finding and hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose Where to Register Your Company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to cakes. 

If you’re willing to move, you could really maximize your business! Keep in mind that it’s relatively easy to transfer your business to another state. 

Choose Your Business Structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your cake business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole proprietorship — The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• Partnership — Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) — Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corporation — Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corporation — This refers to the tax classification of the business but is not a business entity. Either a corporation or an LLC can elect to be an S Corp for tax status. Here, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number or EIN. You can file for your EIN online or by mail/fax. Visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund Your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans — This is the most common method but getting approved requires a rock-solid business plan and a strong credit history.
• SBA-guaranteed loans — The Small Business Administration can act as a guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants — A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Angel investors — Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and family — Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding — Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal — Self-fund your business via your savings or the sale of property or other assets.

Your best bet for funding a cake business is likely personal assets and friends and family, though if you have an exciting concept you could also give crowdfunding a shot. 

Step 8: Apply for Business Licenses and Permits

Starting a cake business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

Since you intend to launch a cake business, you will also need to go through the FDA to get approval. The FDA has a set of guidelines for acquiring licenses and permits to operate your cake business:

• Small Entity Compliance Guide: Registration of Food Facilities
• Registration of Food Facilities and Other Submissions
• FDA Guidelines for Labelling Food Products

You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your cake business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability — The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business property — Provides coverage for your equipment and supplies.
• Equipment breakdown insurance — Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation — Provides compensation to employees injured on the job.
• Property — Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto — Protection for your company-owned vehicle.
• Professional liability — Protects against claims from clients who say they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP) — This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential Software and Tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

Many excellent software tools, such as BatchMaster, FlexiBake, Bake Diary, and Cake Boss, are focused on baking and can help you with sales, inventory, pricing, design, and more. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, FreshBooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences of filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop Your Website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Tempting social media content — Utilize Instagram and Pinterest to display your exquisite cake designs, attracting and engaging a broad audience.
• Website and local SEO — Employ local SEO techniques to ensure those searching for “cakes near me” or “custom cakes” find your bakery easily. Optimize your bakery’s online presence to dominate local search results, ensuring easy access for nearby customers searching for custom cake orders.
• Online ordering system — Implement an easy-to-use online platform that highlights your cakes’ customization options and streamlines the ordering process.
• Striking branding and packaging — Develop unique branding and packaging that make your cakes visually appealing and memorable.
• Seasonal promotions — Launch promotions during holidays and special events to draw customers looking for festive cakes.
• Engaging email newsletter — Regularly send updates about new flavors, promotions, and baking classes to keep your customers connected and informed.
• Baking blog — Share recipes, decorating tips, and the latest trends in cake design to showcase your expertise and engage with your audience.
• Customer creations and testimonials — Highlight real customer experiences and reviews to demonstrate the joy and satisfaction your cakes bring to various celebrations.
• Cake tasting events — Organize tasting sessions for potential customers, particularly targeting those planning significant events like weddings.
• Baking workshops — Conduct cake decorating classes to build community and deepen customer loyalty through interactive learning.
• Local vendor partnerships — Collaborate with event planners, florists, and venues to offer bundled services and mutual promotions.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your cakes meet their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your cake business could be: 

• Gorgeous custom birthday cakes at great rates!
• Frozen cakes — fresher longer 
• The cupcake of your dreams 

Networking

You may not like to network or use personal connections for business gain but your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a bakery, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in cakes and desserts for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in cakes and pastries. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a cake business include:

• Pastry chefs
• Sales lead
• Marketing lead 
• General manager

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Cake Business — Start Making Money!

For many people, celebrations aren’t complete without cake. So, a birthday party isn’t complete without the celebrator blowing the candles on a cake. Newlyweds must slice their cake together during their wedding reception, and so on. The cake industry is enjoying steady growth so you should have no trouble finding customers, especially if you can offer something unique and unforgettable. Of course, it has to taste good too!

Now that you have the necessary knowledge, you’re now ready to start your entrepreneurial journey. It’s time to get out there, roll up those sleeves, and start baking and selling beautiful cakes.

FAQs

Is a cake business profitable?

A cake business can be an extremely profitable venture, even if you are a solopreneur and operate from home. You will not have any significant operating expenses because there is no need for rent or equipment to purchase.

Is it hard to start a cake business?

Starting a cake business can be challenging due to the need for baking skills, creativity in design, and knowledge of business regulations and marketing. However, with passion and proper planning, it can also be a rewarding venture.

Can I sell cakes from home?

Yes. The process of starting a cake business from home is easy and requires little capital. You can deliver the product to clients’ doorsteps or even have the client book their preferred courier, which reduces overhead expenses. You can also accept orders online through your website or social media channels.

Is cake baking a good business?

Cake baking is a good business, because it will allow you to be your own boss while also ensuring consistent revenue. It’s also good for people who want to make some extra income from their side hustle, or those looking for artistic and innovative work that offers plenty of opportunities to learn new skills along the way.

What makes a cake business successful?

A cake business is successful when it offers high-quality cakes, unique designs, excellent customer service, effective marketing, and profitability.

How do I attract customers to my cake business?

To attract customers to your cake business, use social media to showcase your cakes, collaborate with other businesses, attend wedding fairs, offer tastings and consultations, and encourage word-of-mouth referrals.

How can I make my cake business unique?

To make your cake business unique, specialize in a niche, offer personalized and custom cakes, experiment with flavors and ingredients, incorporate alternative designs, and emphasize quality and attention to detail.