Start a bread bakery by following these 10 steps:
- Plan your Bread Bakery
- Form your Bread Bakery into a Legal Entity
- Register your Bread Bakery for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Bread Bakery
- Get the Necessary Permits & Licenses for your Bread Bakery
- Get Bread Bakery Insurance
- Define your Bread Bakery Brand
- Create your Bread Bakery Website
- Set up your Business Phone System
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your bread bakery. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a bread bakery?
The costs associated with opening a bread bakery business are substantial yet manageable. In total, business owners can expect to spend between $10,000 and $50,000 up front. This money goes toward:
- securing a kitchen for baking
- purchasing all necessary equipment
- getting ingredients
- marketing the business
- acquiring all necessary permits and insurance
For business owners who have limited startup funds, there are ways to save a lot on the first two expenses.
Many business owners have started bread bakeries in their home, baking in the kitchen. The baked bread is then delivered to wholesale customers or sold at local places that agree to let the bakery set up a table. Alternatively, some cities have commercial kitchens that local businesses can rent by the hour.
To reduce equipment costs, business owners can either rent a commercial kitchen or purchase used equipment. Used kitchen equipment is much more affordable than new items, and it sometimes is just as good. However they acquire it, business owners need access to the following equipment: a mixer, an oven, storage containers, a work surface, baking pans and trays, a refrigerator, a freezer, proof boxes, and baking utensils.
What are the ongoing expenses for a bread bakery?
The ongoing expenses for a bread bakery include the cost of the bakery’s space, utilities, and ingredients. If a business has employees, the profits must also cover their wages.
Who is the target market?
The target market for a bread bakery business is anyone who has some discretionary income. Almost everyone eats bread in some form, but people need some discretionary income to afford certain artisan or sandwich breads.
How does a bread bakery make money?
A bread bakery business makes money by selling loaves of bread. Loaves may be sold retail or wholesale.
How much can you charge customers?
Artisanal breads typically sell for between $5 and $10. Rise & Shine Bakery prices its loaves at $6 or $7 depending on the type, which is representative of many businesses in the industry. Wholesale prices for restaurants and retailers are lower.
How much profit can a bread bakery make?
A bread bakery business won’t normally be a million-dollar venture, but it can provide a handsome income. Columbus Bakery in Syracuse, NY sells a few hundred loaves each weekday and around 1,000 loaves on Saturday and Sundays. The bakery specializes in sandwich (rather than artisanal) bread and charges less than artisanal bakeries. Still, it brings in several thousand dollars each week.
How can you make your business more profitable?
A bread bakery business can increase profits by offering baking classes, publishing a cookbook, or opening a deli. Of these options, opening a deli has the greatest potential, but also carries the most risk.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Bread Bakery Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your bread bakery is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a break bakery business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A bread bakery business is generally run out of a home or commercial kitchen. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a bread bakery business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your bread bakery business will be in compliance and able to obtain a CO.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a bread bakery
The best way to market a bread bakery business is by word of mouth. Bread bakeries should make the best possible breads so that people will tell their neighbors and friends. Encouraging online reviews and building social media profiles can also help a business build its local reputation.
How to keep customers coming back
Of course, word of mouth advertising only works after a business has customers. To acquire new customers, a bread bakery can offer free samplings at local retailers where its bread is sold.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Nextiva
Nextiva is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start A Bread Bakery In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Anyone who enjoys baking bread may like running a bread bakery business.
This is a business that can be started as a part-time endeavor. Bread ought to be delivered soon after baking to ensure maximum freshness, so business owners shouldn’t plan on baking one day and delivering three days later. Business owners can, however, limit their deliveries to one or two days of the week.
For example, a bread bakery might start out only delivering on Saturdays. That would allow the business owner to bake on Friday nights.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a bread bakery?
A typical day at a bread bakery business involves baking bread, which includes prepping ingredients, actually baking the loaves, and cleaning up equipment. Once baked, the bread is sold in person or delivered to customers.
In most cases, the baking activities start well before dawn so that bread is as fresh as possible.
What are some skills and experiences that will help you build a successful bread bakery?
Bread bakery business owners must both know how to bake bread and how to run a bakery.
Most people who consider this type of business already are good bakers, but anyone’s skills can be further refined. Many bakeries throughout the country offer bread-making classes that can help business owners further improve their breads and add new kinds of breads to their product line. Wide Awake Bakery and Le Pain Quotidien are just two examples of bakeries that offer classes.
There are also classes that teach the business side of running a bread bakery. The Institute of Culinary Education offers a bakery-specific class, and IAP Career College has a Bakery Owner Certificate.
Alternatively, business owners may be able to find a current bread bakery owner who is willing to serve as a mentor. Many bakers who are in other areas (and, therefore, not competitors) will help aspiring business owners, and spending some time with them will yield insights that few classes can provide.
What is the growth potential for a bread bakery?
The necessity to sell only fresh bread limits how large bread bakery businesses can grow. Most bread bakeries have a single kitchen where they bake, and they serve a defined geographic location. For example, Elmore Mountain Bread has a single facility (which isn’t open to the public). Ithaca Bakery has two locations, but bakes all of its bread at just one.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a bread bakery?
Opening a bread bakery business presents two unique demand challenges that many business owners don’t anticipate.
First, bread baking has seasonal highs and lows. Bread bakeries are busiest during the summer and winter holidays. Summer is a time when people are out shopping and eating, and it also is a busy time for catering. The winter holidays are a time when people purchase treats and host events. Spring, fall, and the rest of winter are slower periods that business owners must accordingly plan for.
Second, friends and family will be asking for discounts -- especially if they used to get bread for free. Business owners need to decide whether they will offer a friends and/or family discount, and then any discount must be applied consistently. Bread baker Michelle Green says that true friends and family will understand they can no longer get great discounts because the business must earn a profit.
How and when to build a team
Most bread bakeries start out as one- or two-person operations. Business owners that hire employees usually do so after there’s more demand than they can meet themselves, and when profits support an employee’s salary.