Thanks to the continuing popularity of celebrity cooking and baking shows on the television, there has been a growing upsurge in people seeking out more artisan and specialist food suppliers. This move away from standard supermarket fare and mass-produced bread and baked goods has sparked a rise in the number of independent locally based artisan baking businesses springing up across the country.
There is no doubt that shows such as the Great British Bake Off have inspired many people with baking skills to try their hand at running their own small bakery business, but starting up a high-quality bakery in your local town goes hand in hand with the ever-growing cafe culture that has been developing over recent years across the country. What could be a more winning combination than coffee and cakes!
But it is not only the demand for home-made cakes and freshly brewed coffee that is fuelling the growth of independent bakery shops, but it is also the demand coming from the younger generation for more unique, artisan, locally produced food and drink that has good provenance and use high-quality ingredients.
For this generation eating and drinking is an experience with a backstory. No longer are young people satisfied with buying produce from faceless supermarkets that don’t have a story to tell. They would rather go to their local bakery to pick up a loaf of fresh stoneground bread that was baked in-house that morning using pure ingredients and no chemical preservatives than to pick up a loaf of pre-sliced plastic bread from a supermarket.
What’s more – they are prepared to pay three or four times more for a hand-baked artisan loaf than a supermarket equivalent.
Is it financially viable?
The British public is looking at baking products in a whole new way, so if you have a passion for bread making or are obsessed with baking cakes, then you could be looking at a very rewarding business to start. You get to benefit from doing something you enjoy and being paid to do it!
Currently, the UK bakery market is worth in the region of £3.6 billion, according to figures produced by the Federation of Bakers. That equates to an average of 11 million sales of baked goods every day, including bread, cakes and other bakery items. That is a big market to take a small slice of your own from.
While you may have pound signs floating around your eyes at the thought of the potential revenues you can enjoy from starting up your own bakery business, there is no denying that it takes a lot of hard work and sweat to actually get a new bakery venture off the ground.
However, when compared to the costs of setting up and running other types of local retail businesses, starting up a bakery business is more affordable in a lot of cases. Of course, you don’t necessarily have to jump in and splash the cash on renting a small shop in your local town right away. You could start off small and put it into your plans for growth to open a bakery outlet at some point in the future.
Let’s look at some ways to start up your own artisan bakery business so you can decide which approach is the best fit for your needs.
Qualifications and training
While you don’t actually need any professional qualifications to start up your own bakery business, it would be wise for you to take up some basic training to help sharpen your knowledge and skills. For example, you may be really talented at baking cakes, but your cake decorating and sugarcraft skills may need perfecting.
Your local college may offer part-time or evening classes in baking, sugarcraft and cookery skills. You can pick up a lot of handy tips and short-cuts from more experienced experts in your field, so it is worth brushing up your skills and developing new techniques to help you become more productive and confident in your work.
You could go the whole hog and decide to go to catering college for a professional qualification before starting up your bakery business, but again this isn’t compulsory. However, if you have a long-term plan for growth and want to develop and expand your business to include opening a restaurant, a hotel, or a number of small cafe outlets around your region, then training such as this will give you a good grounding in all aspects of working in the food and drink industry.
Taking up a business course will also be useful for you so you can get to grips with all the day to day tasks of running a business, including basic bookkeeping and accounts, marketing, tax and financial planning as well as remaining compliant with HMRC rules and regulations.
Setting up your bakery business
To sell your baked goods commercially, you will need to have at least a basic food hygiene certificate and have your kitchen facilities inspected and approved by your local council. Your kitchen is very much front and centre to the success of your business. Without appropriate baking facilities, you cannot hope to make a start or make your business a success.
The bakery industry is very diverse, so you need to decide what sort of bakery business that you want to start and operate. Think about this when you write your business plan as you will be using this as your step by step guide to follow when setting up your business.
Obviously, the type of bakery business you set up will reflect your skills and passions, so if you are into your artisan bread baking, but the thought of baking cakes scares you silly, then start with what you know and are good at. You could look at employing or going into partnership with a talented cake maker a little further along the line once you have established your bread baking business, to begin with.
On the most part in the UK, bakery businesses can fit into one of four rough sectors:
Let’s go into a little more detail about each type so you can get an idea of whether or not this type of operation would best suit your skills and available budget.
Counter bakery services
This is the name given to bakery services that operate directly to the public usually via your own small commercial rental space. You can look at renting out a small workshop or warehouse space in an industrial park or retail park and fit the space out with your ovens and prep tables. You only need a simple counter where customers can walk in and place an order with you, then come back and collect it when ready.
This sort of bakery operation is an ideal first stepping stone because of the low set up costs and overheads. Although your bakery ovens may be your most expensive outlay here, remember that if and when you decide to move to different premises, you can take your equipment with you.
Online bakery services
Probably the cheapest option to get going with is to sell your baked goods online through your own bakery website and online shop. If you want to keep your business small and have no plans to expand and take on staff, then selling online is a fantastic option because you can start off from home using your own kitchen to bake to order.
A lot of home-based bakery entrepreneurs start off this way. Quite often they will make enough money quickly to re-invest into adding a kitchen extension or building a dedicated bakery workshop in the garden should they decide to slowly grow their business and take on some help dealing with increasing demands.
Eat-in bakery services
This is where your skills as a baker fit perfectly with the popular cafe culture in this country. You can look at renting out a town centre retail shop and turning into a bakery that offers coffee, tea hot chocolate etc. and have tables and seating so that weary shoppers can sit down to enjoy your baked products.
You need to factor in the sometimes high town centre rents and business rates to make sure this is a viable option for you. It will be worth it if you plan to build your brand and open more small outlets around other towns in your region.
Speciality bakery services
What we mean here by a speciality bakery service is one that is quite unique and is probably the rarest of choices to start up. To operate a speciality bakery you need to develop and sell exactly that – something unique that no one else on your doorstep is doing. Or if they are, you can guarantee that your products are of a higher quality and far outclass your competition.
We are talking here about creating bespoke wedding cakes and one-off celebration cake designs that you tailor to your individual customers. These are one-off creations that you don’t go on to make and sell to anyone else.
Specialist bakery services can be quite flexible in that you can choose to keep it small and create your masterpieces from home, or you can hire a small shop in your local town so you have a shop-front to display all of your amazing creations.
You can also build up a loyal customer base where your customers will refer your services to their family and friends so you build a reputation as an outstanding community baker that bakes to order. Or you could set up an online shop and take orders through there. However, you have to consider your delivery area and may need to limit your delivery options to a reasonable distance from your premises where you can safely deliver your cakes without risks of damage in transit.
When considering starting your bakery business from home, should you rent your home then you will need to gain written permission from your landlord to allow you to run your business from home? Although your landlord cannot withhold their permission without good cause, it will make operating your business run more smoothly if your landlord is aware and is happy for you to do so.
Funding your business
Whether you decide to use your savings to start up your bakery business or seek financial help from a bank or other business lender or asset funder, you may find that your available budget can often dictate at what level you can start out at.
Remember though that you will not only need to budget for your baking equipment and tools but also cover your overheads such as premises rent (if applicable), business rates, utility bills such as power and water, as well licensing and business insurance.
Once you have paid out everything that you need legally and physically, then you still need to source and pay for all of your baking ingredients and stock items. Never underestimate how much you will need to put aside for this. Baking your cakes or loaves of bread can sometimes not be as straight-forward as you imagine. You may experience many batch failures, burnt or collapsed cake fails along the way that will need crippling for waste.
While you may want to budget as closely as you can to keep stock costs down to a bare minimum, make sure that you keep a little bit more stock than you think you need just in case you experience any accidents along the way.
Your startup costs would be hard to predict here because they will vary greatly depending on the type of bakery business you want to start and also the regional variations in rents, rates and business insurance.
Don’t forget about setting up a separate business bank account for your business to keep your personal finances separate from that of your business generated income. You should also look at setting up a merchant account such as Worldpay to enable you to take credit and debit card payments from your customers.
The legal side of your bakery business
To operate any commercial business in the UK regardless of whether it is a bakery or a building firm, you will need to inform HMRC that you are starting your business and need to register with them as self-employed. Registering with HMRC will notify them that you will be paying your personal tax through the self-assessment system. Registering as a sole trader means that in the eyes of the law you are your own business and so will be solely responsible for all of your business-related activities.
Going down the sole trader route is the most common way for anyone starting up their own bakery business from home. However, there are a lot of risks that come with being a sole trader. For example, should anything go wrong with your business, you will be putting your own personal assets and finances at risk.
Should you need to close your business for whatever reason, you will need to pay off all of your creditors and suppliers using your own money. Should you be sued by anyone for food poisoning for example, then you will have to cover any compensation claims made by yourself.
How to protect yourself and your business
There is a perfect solution to help you protect yourself from any negative effects happening in your bakery business. This is to take the simple step to register your bakery business as a limited company with Companies House.
What this means is that you will be separating yourself from your bakery business. Your bakery business will become its own legal entity in its own right, therefore protecting yourself and your personal assets and finances from risk.
Should things not work out with your business for whatever reason and you need to close it down, then any outstanding debts owed by your company will be paid off by the money that your company holds. This means that if your company doesn’t have enough cash reserves to cover all of its business-related bills at the time of closure, then your business creditors cannot come after your personal money to clear the debt.
As your business will be a ‘limited liability’ company, then as a shareholder you will only be held liable for your company debts up to the value of the shares that you hold in your own company. So for example, if you registered your business as a limited company with a share value of £1.00, then each of your company shareholders will only need to pay £1.00 for every share that they own towards the company debt.
How to register your bakery business as a limited company
Making the decision to form a limited company is a sensible choice to make for your business because it puts in a level of protection for yourself that cannot be achieved by being a sole trader. Registering your business can be made really easy for you by taking advantage of our help.
Your Company Formations are here to do all the hard work for you. In most cases, we can get your bakery business set up as a registered company with Companies House within the same working day. You can use our expertise and over 100 years of collective knowledge in the company formations process to get your company registered correctly the first time.
If you are unsure about what information you need to give us to get your company registered, then do not hesitate to contact us for our help. We would be pleased to discuss your business needs and offer our advice about the right path to take for the success of your new bakery business.
Call now on 0207 689 7888 and one of our friendly team members will be happy to help you!