Is there anything better than a homemade cake? That smell of freshly baked goods wafting through the house and the anticipation until you can try them. Baking is one of the most popular hobbies in the UK, and it recently ranked fifth in most popular cerebral activities in a YouGov poll, with 69% of participants enjoying it. (The 31% that don’t enjoy it almost certainly enjoy the products!)

In recent years, the baking industry has been changing in the UK. The industry as a whole is drifting towards niche baked goods that are healthy and high-quality artisanal offerings. This is promising, especially for small and home-based bakery businesses. The change from mass-produced baked goods to homemade selected items offers plenty of growth opportunities for startups and sole traders in the UK.

More and more people are taking the opportunity to turn their passion for all things patisserie into a business venture, and the good news is that anyone can do it.

If you’re considering setting up your own home baking business, we’re here to help. We’ve put together everything you need to know to start and run a home-based baking business successfully. This guide includes an overview of the UK baking industry, a step-by-step guide for getting up and running and answers to some frequently asked questions.

Ready to get your home baking business started? (Preheat the oven to gas mark 5)

Understanding the UK Baking Industry

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Before we dive into the specifics of how to start a baking business, it’s a good idea to get the lay of the land and see what market you’ll be joining.

The UK baking industry is a thriving sector. According to a report by IBISWorld, the bakery industry in the UK grew by 2.1% annually last year, reaching a total revenue of £8.4 billion in 2022. The industry is expected to continue growing, driven by consumer demand for premium, artisanal, and speciality baked goods.

The industry is also seeing a shift towards healthier options, with a growing demand for gluten-free, vegan, and low-sugar products. This trend opens up a whole new market segment for home bakers who can cater to these specific dietary needs.

But while the industry growth and development are good signs for new businesses, it also means you’ll face more competition and will need to stand out.

10-Step Guide to Starting a Successful Home Baking Business

Now that you’re up to speed with industry trends and the market you’ll be joining, it’s time to put together the ingredients for success. Our ten-step guide covers everything you need to do to set yourself up for success and make your bakery business thrive.

Step 1: Identify Your Niche and Develop Your Business Idea

The first step in starting your home baking business is to identify your niche. What kind of baked goods will you specialise in? Will you cater to the vegan market or the gluten-free market? You may want to focus on traditional pastries or exotic international desserts. Perhaps you want to make wedding cakes, themed cakes or artisanal bread.

Whatever it is, your niche should be something you’re passionate about and have expertise in. It should also be something that has a market demand. Do some market research to see what kinds of baked goods are popular in your area and what niches might be underserved.

You also need to think about your target audience. Due to the perishable nature of baked goods, most home baking businesses serve their local community and nearby areas. But this doesn’t mean that you can’t dream bigger. You can serve a much larger area with the right research and resources.

You just need to hone in on your business idea at this stage. It’s important to be realistic about your aims, but you can set your business goals later.

Step 2: Choose a Business Name

While some steps of setting up a bakery business can be a little daunting, this is one to look forward to. Naming your own business can be a really fun experience, and it’s a chance to get creative.

Your business name is the first impression potential customers will have of your bakery, so choosing a name that reflects your brand and the products you offer is important.

When choosing a business name, think about the following:

  • Relevance — The name should be relevant to your business and give potential customers an idea of what you offer. For example, if you specialise in vegan baked goods, you might want to include “vegan” in your business name.
  • Uniqueness — Your business name should be unique and not too similar to existing businesses, especially those in the same industry. You can do a quick Google search to check if your chosen name is already in use.
  • Simplicity — The name should be easy to pronounce, spell, and remember. Avoid using complicated words or too many words.
  • Future-proof — Choose a name that can grow with your business. For example, if you plan to expand your product range, avoid a name that is too specific to one product.

There’s a lot of scope to have fun with names for food businesses, so don’t rush to pick a name. If you’re struggling to come up with ideas, there are plenty of online tools to help. New AI tools like ChatGPT and business name generators can be a great starting point for names.

Read our complete guide to naming your business. 

Step 3: Business Plan and Budget

Once you’ve identified your niche and chosen a business name, it’s time to put it all together in a business plan. Your business plan is a roadmap that outlines your business goals, strategies for achieving them, potential problems and their solutions, and the structure of your business.

Here are some of the elements you should include in your business plan:

  • Executive summary
  • Company description
  • Market analysis
  • Organisation and management
  • Services or Products
  • Marketing and sales
  • Financial projections.

Check out our guide on how to put together a comprehensive business plan. 

When it comes to budgeting, you need to calculate how much money you need to start and run your business. Remember to include the cost of ingredients, packaging, equipment, delivery, marketing, and any other expenses you anticipate.

To create your budget, list your startup costs and your monthly expenses. Be sure to overestimate your expenses to be on the safe side. Once you have your total costs, compare them with your expected income. This will give you an idea of the financial viability of your baking business.

Don’t forget to factor in your time, too. Many home bakers underestimate how much time they will spend baking, cleaning, marketing, and dealing with customers.

Read our guide on how to create an effective business budget. 

Step 4: Register Your Business

With your business name and plan ready, it’s time to start registering your business officially. You’ll need to tell HMRC that you are self-employed. You need to do this even if you’re going to run your home-based business part-time as a side hustle. It lets HMRC know that you need to pay tax through self-assessment, and it is one of the statutory requirements.

In terms of registering your business, you have two main options: 

  • Sole trader
  • Limited company.

Setting up as a sole trader is the simplest company structure, and all you have to do is let HMRC know about your business. The majority of home baking businesses start as sole traders as there are fewer administrative tasks involved.

But there’s nothing stopping you from registering a limited company as soon as you start your business, and there are several benefits to going limited immediately: 

  • Limited liability
  • Tax advantages
  • Professional perception
  • Funding opportunities
  • Brand protection.

If you’re looking for more guidance on registering your business, we can help. Let us know whether you would like to start a limited company or go solo so we can guide you accordingly.

Step 5: Register Your Premises and Keep Up to the Standard

Next, you’ll have to register your premises with the local authority’s environmental health service at least 28 days prior to trading. The good news is that it does not cost you anything, and the chance of your registration getting refused is low. 

You can get your local authority’s contact details and apply for a licence using the food business registration tool.

Your local authority will be examining your food preparation area. And hence, your premises should be kept clean and in good condition. You’d be expected to follow good hygiene practices on your premises, including pest control and protection against contamination. 

The good news is that the same code won’t measure your home-based business as that of a restaurant or hotel.

Step 6: Figure Out Your Business Insurance

Business insurance plays a key role and is an important consideration for setting up a business. In your case, you can go for public liability insurance or product liability insurance that could cover you if someone sues you for damage or injury.

It covers if you or your employee smacks over an expensive product at your customer’s place while delivering your cake or if someone falls ill after eating one of your items. There are also employers’ liability insurance and tool/stock insurance that you might want to look at for additional protection.

We offer (through our partners) business insurance for startups. Let us know once you are ready; we would be happy to guide you from then on.

Step 7: Inform Your Mortgage Lender or Landlord

Whether you rent or own your property, it’s important to ensure you have permission before starting your business. This applies to both renters and homeowners: 

  • Renters — You should discuss your plans with your landlord/landlady, explain the nature of your business, and ensure it doesn’t violate your contract. Landlords should refuse permission without a valid reason. Getting written consent to avoid any issues going forward is a good idea.
  • Homeowners with a mortgage — If you’ve got a mortgage, you’ll need to let your lender know about your intention to start a business. This is to avoid any violation of your mortgage terms. Again, it’s good to get written consent from your lender.
  • Homeowners without a mortgage — If you own your own home outright, there’s typically more freedom to start a business without consent from anyone. But checking any local laws before moving forward is a good idea. 

Before speaking to your landlord or lender, check your contract and ensure you understand the terms. 

Step 8: Attract Local Attention and Be Distinct

As we’ve mentioned, the home baking industry is booming, so there’s a lot of competition across the board. This means it’s crucial to differentiate yourself from the crowd. 

As you’ve already identified your niche, you’ll know what you want to focus on, but you’ll need to showcase that to potential customers. Whether your speciality is children’s cupcakes, wedding cakes or vegan cakes, you must build your reputation locally. 

You can do this by letting your neighbours know about your business. Consider opening a stall at local events or offering people free samples. You can also try giving out flyers and leaflets to promote your startup.

Step 9: Develop an Online Presence and Market Your Business

Developing an online presence is vital to expand your business and bring in more customers. You can set up a simple informative website with basic details like where you are based, what you do, your offering with excellent photos and finally, how they can contact you.

If you’re a local business, you can use your website to showcase your work and act as a digital business card for potential customers. But you can also use it to boost sales by using local SEO techniques. Here are a few things you can do: 

  • Create pages targeting local keywords, i.e. vegan bakery in (location)
  • Setting up a Google Business Profile with service areas
  • Get featured in local publications with links back to your website. 

If you’re looking for more help with marketing, you can take advantage of our web services. We offer logo design and website design services to help you quickly establish your worldwide online presence. 

Step 10: Do the Bookkeeping and Be Compliant 

Now that you’re running your own business, keeping track of your income and business expenses is very important. You should also keep the receipts as HMRC might request you to produce evidence of your expenditure for tax purposes.

If you’re looking for guidance on how to manage your business finances and tax, we’ve put together some expert guides: 

We take immense pleasure in providing your startup with the complete solution it needs — from company formation to bookkeeping/accountancy services and much more. We will inform HMRC about your startup and take care of your self-assessment.

Through our extensive experience in this area, we will get you going with your startup venture immediately. Whether you dream of starting a limited company or going self-employed, we’re here to turn your dreams into reality.

Home Baking Business FAQs

There’s nothing quite like starting your own business. If baking is your passion, starting a home baking business allows you to do what you love every day and become an even better baker. This 10-step guide should give you everything you need to get your business off to the right start, but you’ll undoubtedly have questions. 

We’ve put together some of the most frequently asked questions about starting a home baking business to help you out: 

How profitable is a baking business?

Profitability depends on many factors like product pricing, cost of ingredients, overhead costs, and the demand for your goods. Home-based baking businesses often have lower overheads, leading to higher profitability. But how much profit you make mostly depends on your cost management and sales. 

Is it legal to sell cakes from home in the UK?

Yes, selling cakes from home in the UK is legal, but you need to register your food business with the local environmental health service at least 28 days before trading. Your premises will also be inspected to ensure it meets food hygiene standards.

Do you need a licence to sell cakes in the UK?

While you don’t need a specific licence to sell cakes in the UK, you do need to register your home as a food business at least 28 days before you start trading. This registration is free and is usually a straightforward process with the local authority’s environmental health service.

Do I need insurance to sell cakes from home in the UK?

Yes, it’s advisable to have business insurance, especially public and product liability insurance. This covers you if a customer becomes ill from your food or if there’s an accident related to your business, such as a delivery mishap. Insurance is crucial for protecting yourself and your business.

Set Your Home Baking Business Up Today

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If you’re ready to get your home baking business off the ground, we’re here to help. At Mint Formations, we’ve helped thousands of businesses set themselves up for success. We have a wide range of services designed for startups, including:

Get your baking business off to the right start by exploring our company formation packages today. If you have any questions, please feel free to reach out to our friendly team, and we’ll do everything we can to help. 

Want to register your UK limited company today?


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