You'll have to jump through several hoops to start a home-based catering business. Local regulations may limit what you can do and who you can serve. You'll need to buy the required equipment, secure financing, find your potential client base and market to its members effectively.
Rules and Regulations
Each state has its own requirements for setting up a home-based commercial food-production business. Your local public health department regulates what's permissible in your area. Zoning laws also may limit how you can restructure your house to accommodate your business, or whether you can see clients, have a staff or allow clients to park by your home. Check those regulations before starting your business, as if they're too restrictive where you live, it may not be a viable business to start at all. You'll also need a Food Service Operating License, usually obtained through local health authorities, and will likely have to host a food safety inspection to prove your facility is up to the acceptable standards.
In addition to your local government, your Homeowners' Association may have a say in whether you can set up your catering business at home, or what activities you'll be allowed to perform there. For example, you may be prohibited from using your home as a venue for events, or from placing advertisements, such as yard signs, on your property.
A catering business places more demands on your kitchen, and you'll need to purchase or lease any extra equipment you need to start your business. If you're confident enough in the demand for your wares -- for example, if you've been selling baked goods to local restaurants part-time and are looking to turn that into a full-time business -- you may need to invest in a separate kitchen. In some states, you'll be required to do that, since not all states allow residential kitchens to be used for commercial food production. This means planning for an area separated from the rest of your home by a solid wall and a self-closing door.
A catering kitchen must be separated from your home kitchen in use as well as location. You can't prepare your family dinner in the catering kitchen without breaking your local health department guidelines. Nor can you prepare foods destined for your catering business in your home kitchen.
However, one positive about a home-based catering business is that you can limit your start-up costs for equipment. Items like tables, chairs and linens can be rented for each event -- with the costs passed along to your customers -- rather than being purchased and stored. Needed supplies like baking mats or kitchen utensils can be purchased from supply shops in bulk.
Financing and Accounting
Unless you have sufficient cash on hand, you'll find yourself needing to borrow money to start your business. Starting small generally makes the most sense. FoodServiceWarehouse.com reports that a part-time catering operation based in your home can cost less than $10,000 -- even less than $1,000 in some cases. If you don't have that kind of capital on hand, a business plan can help make a convincing case to lenders that your operation will be worth funding, particularly if you can demonstrate that a market for your services already exists. List current customers, if you have them, as well as your target audience.
Once your business is up and running, keep a clear record of which expenses are related to your business and which are for your general residence. For example, if you can separate the utilities required to run a separate kitchen from those used elsewhere in the home, you can deduct those costs from your business income when figuring out your tax burden. If you use your personal car for business purposes, record the mileage that you use to visit clients and event venues -- you may be able to take that off your taxes as well.
As a smaller catering operation, you may find that obtaining clients is a challenge. Food tastings can help convince potential customers that you have the skills needed to serve them. Get involved in local events, bringing samples of your wares to the annual Labor Day party at the community pool or a holiday bazaar at the community center. Get the layout of the location beforehand, and bring food that will shine in that particular venue. For example, if you won't have the equipment to reheat items at the facility, it's a risk to bring samples of foods usually served piping hot. A professional-looking website and list of references also portrays you as a catering expert able to handle an important event properly.