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How to start a baked goods company from home (legally*)

As a full-time worker turned stay-at-home mom to twins, starting a business from home was my only option if I wanted to make some money. I had two tiny tots at home, any 9-5 income would have gone straight to childcare. It seemed pointless.

I worked with my husband for nearly 10 years at a company he started building when he was just a teenager. I was no stranger to entrepreneurship. My dad has had his own business for as long as I can remember as well as my grandpa. Actually, my dad met my mom when he worked for my grandpa back in the day. Self employment seemed like second nature to me. Plus, no job is as flexible as being your own boss.

It is a daunting endeavor and I feel so lucky to have already had some experience in the realm when I decided to start a business of my own. My business, baked goods, is entirely different then my husbands (custom cars and motorcycles) and my dad and grandpas (architecture). Although, I had some idea of what I was getting myself into, I had still had so much to learn (and still do!).

Prior to January 2013 in California, if you wanted to start a baked goods business legally, you had to open a storefront or rent a commercial kitchen space and then find a place to sell your goods. In January 2013, Governor Jerry Brown signed into law Assembly Bill 1616 (California Homemade Food Act) or the Cottage Food Act as most call it. This allowed  “individuals to prepare and/or package certain non-potentially hazardous foods in private-home kitchens referred to as β€œcottage food operations” (CFOs).” – CDPH (<~~~Get all the info here if you are from California). **Each state is different and may not have any type of Cottage Food Laws just yet. Do some research in your home state before you read any further.**

This law changed the game for home cooks and bakers interested in starting their own biz but not willing or able to fork out the cash for the overhead.

1. Research your areas Cottage Operation Laws

Not all counties and states share the same laws for Cottage Food Operations, some don’t even allow it at all. Research your county, city, parish or call your local health department and ask before you do anything else. If it’s allowed, they will have all the information you need to know. If you are in the OC like me, click here.

2. Decide where you are going to offer your home baked goods for sale

Do this before you get started acquiring permits and licenses. If you don’t have a place to sell your baked goods, you don’t want to fork out all the time and money it takes to get up and running for nothing. Local farmers markets are a great place to start. Everyone loves buying from locally owned and operated small businesses. Craft fairs, handmade boutiques, food fairs and local events are also a good way to get your name out there to the locals, obtain custom orders and make some money with little overhead. Wholesale of your goods to bakeries, coffee shops, cafes and stores is also an option. There may be special rules you have to follow under your Cottage Operation for this though. Do your research!

3. Apply for all required licenses

Again, research your county, city, state, parish requirements before diving in. Not all areas require all of this and some areas may require more. I can only speak firsthand for what California requires.

Apply for your Cottage Operation permit first. Make sure you can get it before moving on. Next you’ll need a Fictitious Business Name Statement. This is just a license to operate and use your chosen business name. You can use this to open a bank account under your business name. After you get that, you can apply for a business license. I learned this the hard way, I applied for my business license first and they asked for my Fictitious Business Name Statement. I had to go to the County Clerks office, file my paperwork and then head back to the City Licensing Department. Pain in the booty…

If you are going to be selling at an event, you may need to obtain a Food Facility Permit. Not all states require this. Again, check with your local health department. In California, it’s called a TFF or Temporary Food Facility. If you ask me, it’s total BS if you are selling prepackaged baked goods. I have a food facility already, my home kitchen, where all of my product is made and packaged. Setting up a booth with packaged goods is hardly a Food Facility of any kind…but…it’s all about the money…

4. Figure out your cost of goods and set your prices accordingly

You NEED to know what it costs you to make a cookie. You need to know the price of each egg that goes into your batter and each teaspoon of vanilla. If you don’t know this stuff then you may end up in real trouble. Figure this out before you set your prices. Shop around for the best deals on your supplies and ingredients. Get a Costco card, Sams card, restaurant supply store card and find the best deals. The lower your cost of goods, the more money you can potentially make. Just don’t sacrifice the quality of your ingredients to save a couple bucks!

You’ll also want to know what comparable products are being sold for so you can properly price you products. For example, when I first started I thought of where someone might go to buy French macarons. Bottega Louie in Los Angeles was the first place that came to mind. They sell French macarons for $2.50 a piece. Taking into account my cost of goods and low overhead, I knew I could beat that. I set my price at $2 a piece. BL has enormous overhead compared to me so I have an advantage there when pricing my product. However, they have a storefront, a beautiful one, so they have the advantage over me there.  

Don’t undervalue your product! Take into account your time and energy too. It takes a lot to make something special. Don’t give it away for practically nothing just to make a sale. 

5. Put together a menu and packaging

Figure out what you want to sell. It may be required to disclose all of that information when you apply for your Cottage Operation anyway. Decide how you want to package it (also a requirement for a Cottage Operation). Make sure your packaging reflects your product. If you sell gourmet truffles, you better box those beauties up in something special! This is also a great way to add a little to the price of your product. People are willing to pay more for a beautifully packaged box of truffles then a brown paper bag full of truffles. 

Shop around for packaging prices too! Every cent counts when you are starting and operating a business.

6. Market yourself

Start an Instagram profile for your business, a Facebook page, a Twitter account, a Pinterest account…everything you can think of. Make it easy for people to find you. Post frequently, show people your products and let them learn all about you. Check out The Shop Files for tips on making the most out of your social media accounts. I’m a frequent visitor of the site and it has helped me enormously. 

A great way to get your name out there is to join a local Facebook community group. My city has one ran by an individual, not the city itself. If your city or community doesn’t have one, think about starting one yourself, do a search and invite everyone that lives around you. Post about your new business and encourage others to post about their local businesses too. It’s a great way to network and help others grow along the way. 

7. Don’t give up!

It takes time to learn your new business and your new customers. Learn what sells and what doesn’t. Over time, you’ll learn what your customers want so you can add items to your menu or take things off. Experiment with new ingredients and new products. The best part of running a baked goods business from your home is the low cost. You can make mistakes that aren’t quite as painful as they would be if you had the overhead of a commercial kitchen space. Start small, be patient and do your research. You CAN do this! Just remember to have fun while doing it!

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