How to Start a Small Bakery

Small bakeries must offer products that attract neighborhood buyers.

The U.S. Bureau of Labor Statistics (BLS) estimates more than 151,000 people worked as professional bakers in 2008, and predicts a 4 percent increase in general number of people working in food-services industries by 2018. Although automation is expected to trigger layoffs in the food industry, with large manufacturing "contract bakers" taking over much of the production for commercial stores by 2018, the BLS says a market will exist for veteran bakers with specialized skills and baking talents. A small bakery offers a talented baker such an opportunity for a viable career.

Things You'll Need

• Business plan
• Building purchase contract or lease
• Business license
• Insurance
• Formal credit letter
• Business tax identification number
• Business communication services
• Incorporation paperwork
• State tax permit
• Customer payment systems
• Baking equipment
• Display fixtures
• Exterior Sign
• Baking supplies

Instructions

1. Develop a business plan for your bakery. According to the U.S. Small Business Administration (SBA), a business plan typically includes defined goals, market analysis, company organization, cash-flow analysis, current and expected balance sheets, an income statement; and a narrative on how allocate the available resources. Design the plan for potential lenders as a blueprint for your immediate, short-term and long-term business goals. The thread through the document illustrates how you would pay your expenses by operating your business. The SBA offers templates for writing business plans on the agency's website.

2. Research possible locations for the bakery. Site-location analysis involves research on consumer tastes, bakery competition, and competition with other stores selling baked goods. The data collected helps identify your consumer market and the likelihood of success your bakery will have when pitted against the local competition. Location analysis also includes the mode of transportation used by your customers and storefront preferences. When making a large economic investment, as in a small bakery, hire a local business insight research professional with experience in bakery operations to conduct the research and data collection. Use this official report to select your bakery location.

3. Obtain appropriate licenses and registrations. Small business operations require obtaining official federal tax identification numbers and business insurance. Part of the legal paperwork for the bakery also includes formal registration as a sole proprietorship, partnership, corporation or a limited liability company, or LLC. The bakery requires a cash register and a charge card acceptance system, if accepting credit from customers. Open your business bank account for all purchases associated with your bakery. Avoid co-mingling personal and bakery funds by using the special business account exclusively for bakery purchases and expenditures.

4. Apply for financing at least a year before you plan to open and also begin research into leasing or purchasing a bakery building at the same time. Use your business work plan for a loan application and also for funding to purchase equipment for your bakery. Your business plan itemizes the personal assets the bank requires to qualify a loan. Shop commercial interest rates to obtain the best interest rates and services. Obtain a reference letter from your lender to use when purchasing other equipment, communication systems and supplies on credit.

5. Shop for equipment at commercial equipment stores and auctions and set up your bakery. Select basic equipment to begin your operation and avoid buying or leasing top-of-the-line items. If purchasing equipment, rather than leasing, shop at restaurant stores offering used equipment or business auctions to save even more start-up costs. Once your equipment is in place, open your bakery.

References

• U.S. Bureau of Labor Statistics; Occupational Outlook Handbook, 2010-11 Edition; Food Processing Occupations
• "Papers in Resource Analysis"; A Comparative Business Site-Location Feasibility Analysis Using Geographic Information Systems and the Gravity Model; Jesse K. Pearson; 2007
• Small Business Administration: What is a Business Plan and WHy Do I Need One?
• U.S. Small Business Administration: Learn About Your State and Local Tax Obligations
• U.S. Small Business Administration: Business Structure and Tax Implications
• U.S. Small Business Administration: SBA Loan Programs

Resources

• BLS; Occupational Employment and Wages, 2010; Bakers
• SBA.GOV: Essential Elements of a Good Business Plan
• SBA.GOV: Finding a Niche: Make Your Business Plan Stand Out
• SBA.GOV: Templates for Writing a Business Plan
• SBA.GOV: Tips for Choosing a Business Location
• SBA.GOV: Getting a Tax Identification Number