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Validating Your Bakery Business Idea

These areas are just starting points — there are many different types of bakery businesses. Once you’ve identified the type of bakery you’d like to run and what you want to sell, you need to validate your business idea.

Start by checking you have the right skillset. Bakers work long hours and need sufficient technical skill to make great products. You’ll need to deal with employees and customers too, and there’s a lot of planning that goes into running a successful bakery.

The thing to learn here is that it’s okay to say “no” to your first, second or third bakery business ideas. Very few entrepreneurs get it right first time. In fact, getting it wrong is often a badge of honor! Still, you don’t want to waste too much time, energy or money on the wrong initiatives, so ask and answer these questions honestly to find the right way forward.

Before committing too much time, energy and money into your new bakery business, it’s important to test the marketplace.

Identify your business’s unique selling points (USPs)

You need something that’s going to help your bakery stand out, whether that’s the quality of your products, the range of what you sell, the ambiance of your location or something else.

Look at who your competitors are in the space

Having competitors is a good thing as it shows there’s a market, but if there are too many local challengers, you’re likely to struggle without a really good unique selling point. Don’t just look at other bakeries, you also need to see how many grocery stores and regular cafes you have in your area.

Understand your customers

Talking to customers will help you find out what they’re looking for, so you can tailor your products and offerings accordingly.

Get involved with local business communities and discussion groups

There are plenty of great communities and discussion groups. Get involved in them and learn the ins and outs of your chosen market before committing.

Your Bakery Needs a Business Plan

You need to define how you’re going to run your bakery business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight business plan. It will help you get your thinking in order and show your commitment to your bakery business.

You will also need to look at financial projections for your bakery business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others?

If you can, try to plan your revenue for the next month, three months, year and two years. It’s vital to take into account the cost of setting up a bakery business in the first place, also factoring in utility, staff and other costs.


An executive summary with the most important points from your business plan


Your goals and what you hope to achieve with your Airbnb business


A description of your business, background information and context


A market analysis and likely demand


An overview of how your business is structured


Your business model


How you will market and sell your offerings


Financial projections, revenue and profitability



We’ve got the perfect guide to writing your business plan.

choose right structure for a bakery business

Choose the Right Business Structure and Register Your Bakery Business

There are five main business structures you can have in the US, and it’s important to choose the right one. We’ve shared your options below. They are:

Sole Proprietorship

If you don’t choose to form a legal business entity for your bakery business, you will be a sole proprietor by default. This won’t give you the legal protections you need, so we do not recommend this.


This is a type of business that is formed when two or more people work together without creating a more formal business entity. Like a sole proprietorship, it may not give you all the protections your bakery business may need.

Limited Liability Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your bakery business.

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organization.

C Corporation

These are the largest and most complex types of businesses and are far more than the average entrepreneur or business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your bakery business.

In most cases our recommendation would be to create an LLC. We have a complete guide to everything you need to do, and we can set one up for your bakery business. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

Setting up Your Bakery Business Operations

Once you've legally created your bakery business, you’ll need to get some other things in place.

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

The Complete

Rules, Regulations and Taxes for Your Bakery Business

You will need to explore local, state and federal licenses and permits, especially around food preparation and hygiene. We can also help out with researching your business licensing needs.


Taxes are a fact of life if you’re in business, and there are various ways you will need to file and pay them. This can include self-employment tax, state income tax and federal income tax. Depending on where and how you’re selling products and services, you may also be liable for sales and use tax.

As a rule of thumb, we recommend holding back around a third of your earnings to pay your taxes. We can also prepare and file your tax returns for you.

Maintaining Your Bakery Business

There are certain forms and legalities you need to follow to keep your bakery business in good standing.


File an Annual Report

Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.


Pay estimated taxes

You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).


Renew Business Permits and Licenses

Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.


Prepare Your Taxes

You will need to work with your accountant to prepare all the taxes you need to pay.


File your taxes

You will need to file your taxes once a year.


Pay payroll and sales taxes

If applicable, you will need to make payroll and sales tax payments on a regular basis.

Insurance for Bakeries and Other Baking Businesses

Most bakery businesses should have comprehensive business insurance. There are various types.

Workers Compensation Insurance

Workers’ compensation insurance provides coverage for job-related illnesses, disabilities or injuries that affect employees. Regulations for this insurance vary from state to state. It typically covers areas like medical costs, loss of earnings, compensation and retraining.

General Liability Insurance

This insurance protects your bakery business from claims due to being sued. This may include injury to members of the public, property damage, personal liabilities, legal defense and more. It can help protect your business from financial penalties and bankruptcy. This type of insurance could be essential to your bakery business as you [rewrite]...

Home and Auto Insurance

If you are working from home, for example on the administration of your bakery business or driving a vehicle for work, check whether your existing home and auto policies cover you for work use of your home or car. If not, you should either expand your policy so you’re covered or get dedicated business insurance.

Groups and Forums for Your Bakery Business

Here are some useful places where you can connect with other bakery entrepreneurs.

Useful Online Tools for Bakery Owners

Here are some really great online tools for managing your bakery business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.

Please note: This post contains affiliate links and we may receive a commission if you make a purchase using these links.


A bakery is a great way to provide amazing food to friendly people, and is an industry that’s still seeing growth in the US. If you can find a great niche, understand your competitors and put together a solid business plan, you will have every chance for success