Has anyone ever opened an in-home bakery?

Well, mine is more like a "cakery" hahah, and I'm just getting set up right now at the moment, but I'm planning on "opening" sometime next week. I've been baking for several years and every time I make a cake for an occasion or someone's birthday, people have always told me "you should charge for these things!" so I've finally decided to turn baking into a business.

I've already set-up a website that I'm currently working on, and I pretty much have all of my advertisements and layout outlined already. My main concern is the question of profit. Of course, the charge will vary because of cake size, ingredients, etc. but I'm not sure as to how much profit I should add in there. Like, for example, if a cake cost me $8 to make all-together, should I charge $16, or more like $12?

I haven't opened an in home bakery, but I have been in the restaurant business for a long time, so maybe I can be some help.  First, you have to find out how much the cake really costs to bake.  Don't use the cost of the whole bag of flour, for instance.  Start keeping track of how much each item is by portion.  Generally you measure say, sugar, by cup.  Figure out how much you are paying per cup of sugar.  Add all the ingredients, no matter how insignificant they may seem, even that pinch of salt, together.  Then figure out how much your time is worth.  Minimum wage right now is 6.55, so if it takes you half ah hour to make the cake, and 15 minutes to clean up, then another 5 minutes to decorate the cake, you have 40 minutes in.  Add this to the cost of the cake.  Also add in how much the box you put the cake in was.  This is your true cost for the cake.  Now decide how much of a profit you want to make.  I would say a 50% markup isn't a bad place to start since you don't have much overhead right now.  Good luck with your bakery!

Ummmm ... I think to have any type of food related business you need to have your kitchen approved by health inspectors in order to be able to sell them publicly... ?

When I was doing my undergrad, I made cakes for weddings and birthdays to get a little money on the side.  There are a few different ways you can set up your pricing structure.  Most of mine ended up pretty expensive, because I do a lot of intricate buttercream and gum paste decoration.  (Wedding cakes often ended up a few hundred dollars).  I usually charged materials + $12/hour.  If you're going to be making set kinds of cakes (not custom) you'll want to look around at local bakeries and make sure your prices are competitive.  Have fun!

Yup, I think there are a ton of regulations on the kitchen you can use before you are able to sell from it.  

Not only that, but selling things (especially food) leaves you very open to lawsuits if things go badly....so having protection of an LLC is probably a good idea (which, you would need to set up and read about).

In Washington you have to obtain a food handler's license, a cheap way for the state to charge your said business. 

But as for the prices of the cakes, cost is one thing that you must take into account, like you said an $8 cake (sell for 12 or 16).  Well you want to cover the cost of the cake itself, doesn't take a genius to figure that out.  But take into account the amount of effort, detail and time.  If it took a long time with a lot of detail, charge upwards of 16-20 dollars.  If it was rather quick and easy charge the 8-10. 

After you start to generate some money, or unless you front a small start up fund, you should look into buying in bulk, from costco or a place like that to cut the actual cost of making the cake. 

I have worked in the hospitality industry for several years and food cost is almost always about 25%, or they're aiming for 25%. So your costs either need to come down or your prices need to go up.

Well, I "offically" opened for business on Tuesday and I already have four orders! I'm delivering my first this morning and it is absolutley beautiful. It is a half-chocolate, half-vanilla four-layer cake with vanilla bean buttercream frosting, details and piping, custom writing, and edible flowers. I can try to put up a picture of it...

Before I could get a price on that one, the woman offered to pay me $50+, but I probobly would have only charged about $30-35... although it was TWICE as big as the cakes I usually make.

This weekend me and my mom are going to do some bakery shopping and go to Sur La Table (to buy sheet-cake pans, baking utentils, goodies, etc.) and Whole Foods (to get gourmet chocolates, organic ingredients, etc.) to get us fully stocked and ready.

I really do hope you have looked into permits and insurance.  

Some states are really strict.  My sister tried doing the exact same thing as you in CA but had she been caught the fines would have been outrageous, so she stopped. And she was only word or mouth advertising.  Since you are actively advertising on the internet, you will get caught.

And all it takes is one bad ingredient in a cake and you could be looking at a major lawsuit due to e-coli or salmonella or something. Lawsuits can take your home.  That's why you need to set up an LLC, it will protect your private assets, make it where you can only be sued for your business assets. 

 It sucks to think that you would have to take these precautions, but its true.  In a day and age where someone can sue McDonald's because their food made them fat....  It really is one of those better safe then sorry, i'd buy a cake without complaint, but other people might not be so kind.

zebulancherry: I HIGHLY advise you call your local Department that deals with business licenses and look into what you are required to have. If this is a small time deal with family and friends, then it's not a huge thing...

But if you're looking into starting to sell to strangers and you start making more money off this, you more than likely will need a business license, need to have your kitchen inspected and approved by a health inspector, get insurance, and if your Mother is going to be your 'employee' helping you make these things, then she needs to be paid and you need workers' compensation insurance.

I'm not joking about these things, I work for my State's Dept. that deals with this stuff, and believe me, they take it all VERY seriously.

Looks like the OP is 15? Probably Mom's job to get the license, etc.

Since she ignored the posts before her last one about the health code issues I'd say she doesn't really seem concerned. 

Original Post by nasuoni:

if your Mother is going to be your 'employee' helping you make these things, then she needs to be paid and you need workers' compensation insurance.

I'm not joking about these things, I work for my State's Dept. that deals with this stuff, and believe me, they take it all VERY seriously.

 lol, not trying to be rude, but that just saids funny...

I agree with what everyone is saying in hear except for this, you should take it seriously to some degree, i.e looking into getting a license to sell food at the most.

But there is no need to start paying taxes for her "business".  Also no need to put her "employee" or mom on the payroll.  And its almost absurd to suggest setting her mom up with workers comp., you know just in case she burns herself while baking and decides to sue her daughter.... lol, sorry, this is coming off as rude and I apologize for that.

Its like your applying the same rules that it takes to set up a restaurant to a kid trying to sell lemonade...  Not to trying to say the OP is a 5 year old kid selling lemonade, but they are both relatively small businesses that probably won't be prosecuted by local and state laws for not following the all ir the guidelines..

okay, so it's not a big deal right? No one will prosecute, come after, or in any way harm her little business right?

Sure. And thinking like that is a sure fire way to get you set up for failure.

Here are some links that might help you, zebulancherry.

If this is something you're taking seriously, and you want to be a responsible business owner, and not some kid baking cakes for the fun of it....I suggest you look into the realities of starting a business.

I'm not trying to scare you, simply make you aware of what you must do to protect yourself and your Mother from any harm by any agency or person.

FDA says "Examples of FDA-regulated Foods...Bakery goods, snack food, and candy"

All the laws that are enforced by the FDA

This page might help with registration with the FDA

Also, insurance is very important to look into.

You more than likely will not have to worry about taxes, as you have to make a certain amount of money a year as an individual before you have to pay taxes.

All of these things are for if you're serious about this being a real business, and not something you're doing part time for a little extra cash.

The question about profit is simple. How much are people willing to pay for a cake? $12? $18? $40? Charge what people will pay. You will make more profit on some cakes than you will on others, and as long as you're making an overall profit, it's alright and you'll be able to stay in business. Make sure to take into account the price of running your oven, mixer, the water, etc,. into the cost of the cakes as well. Running ovens/mixers/additional water is all part of the cost of the cake afterall.

All I was getting at was that I don't think that she  was going to start a full time job creating and managing a baking business.  She is a teenager, looking to bake cakes for people that are willing to pay, calling it a cake business just makes it a little more fun. 

Its not like she will be placing orders to dozens of people a week and will be having bulk baking materials sent to her house. I imagine that her business reach will extend to family, friends and locals from her neighborhood.  Like I said she probably wants to come off as professional and make a some a fair amount of coin doing something that she loves, but I don;t think that a 15 year old is or has to meet all the obligations that a full fledged legitimate bakery would... 

Not to say that your bakery isn't legitimate, a bakery is a bakery is a bakery, I simply meant the difference between someone running a bakery to support themselves and their family (a much bigger operation) as opposed to a teen looking to make a little money doing something that she loves...

Now yes, she should learn that there are rules and regulations to follow when it comes to work, jobs, business.  But she is still young for most of that stuff, I don't think the FDA is going to come and kick down her door and fine the hell out of her for not following all of the guidelines suggested.  In reality we are both making this a much bigger deal than it actually is and on that note I will stop responding to this becaue I am obviously kicking a dead horse.

Enjoy your baking zebulancherry, and good luck

Thanks osainto, you pretty much hit the hail on the head there. I'm not trying to make loads of cash or anything, I just love baking and since I already bake cakes quite frequently, I figured I might as well charge a little since I put in tons of effort for time and decorations. Plus, my mom and dad don't want to spend a fortune on baking supplies that don't even get anything in return... other than mighty tasty cakes of course. x)

Original Post by osainto:

  In reality we are both making this a much bigger deal than it actually is

Not really. By advertising online the OP is  representing herself as a business - not a lemonade stand. As such, she may be liable for all manner of problems if one of her cakes causes someone an illness. Just sayin'.

I'd say your biggest concern should be getting approved/inspected by the health department. I've had food poisoning a few times, once from french fries. Sometimes it's very hard to know if there is contamination. If you are using eggs in your cakes there is a chance of samonella - people sue over this ALL THE TIME. If you're not even approved by a health inspector you could be sued, your parents held liable and they might lose everything, including the house you are cooking in.

Miam, just thinking about the smell that would permeate the house !

Patrick

I am all for home businesses and bettering yourself....if you have a talent, utilize it.  That said....some people get very strange at another's success.  There are zoning regulations that could potentially get your parents in trouble.  Also, the above referenced Board Of Health could be called. 

I wouldnt advertise on the internet.  I would also not 'charge' for the cakes.  I would call it a 'donation'.  Not sure what state you are in, but cakes around here (NJ) like that go for way more than $12.00.  Try $20-30 depending on the size and complexity of the design and icing.

I hope you are planning a future in culinary arts?