Five Tips for Starting a Successful Cake Business
By Jeffrey Nelson of Happy Cakes Bakery
A successful cake business can be an incredibly rewarding experience. You get the chance to express your creativity and individuality and provide delicious desserts for people celebrating an event or just indulging themselves. However, there are some things that should be considered before starting this endeavor. Here are five tips that will get you on the right path for a successful cake shop.
Tip 1: Take a personal inventory of resources, abilities, and goals and create a business plan.
The business plan doesn’t have to be some work of art, but it should include some basic information. When we started, we didn’t write out a formal business plan, but we did understand the basics of what is included in one. We knew that if we were going to invest money and, more importantly, time, into this endeavor, we had to make sure it at least had a reasonable chance of success.
Some things to honestly consider:
- What skills do you have and what value can you offer?
- Who is your customer?
- What are you going to sell?
- How are you going to provide excellent service?
- How are you going to acquire customers?
- What permits, insurance, or other legal obligations do you need to protect yourself?
- What are you expecting from the business financially?
- How much are you willing to invest to make it happen?
- What timeline are you looking at?
We were fortunate that we had a few thousand dollars to invest and that we didn’t need the income from the cake shop to survive. This gave us a lot of flexibility in what we were able to do and the speed at which we could scale our business. If you don’t have that much money, it isn’t the end of the world. We made all our cakes on an as-needed basis; the customer would call and order it and then we would collect 70 percent up front and make the cake. We’d use none of our own money on each cake in advance, so the risk was pretty low. We worked out of our home, and our training was watching free YouTube videos and paying $30 per month for Sugar Geek Show. That was it.
Tip 2: Find a location that makes sense. (Hint: This is probably your house.)
Home bakeries have so many advantages: from tax benefits to very low overhead that it’s almost crazy not to start there. You can build a brand, acquire clients, and gain skills all while not having to pay thousands of dollars in rent and utilities or sign a lease. That’s a win-win.
While there are other options like commissaries, shared kitchens, and full-blown retail businesses, it’s much easier to start in your home and get things figured out. The first few months will most likely not bring a flood of starving people dying for your cakes. It is a momentum game.
Tip 3: Don’t be afraid to spend money on marketing.
We’ve tried everything from promotional videos to infographics to help promote our business. The main driver of actual sales has been paid Facebook ads, but we’ve gotten traction in other areas.
We’re starting to get a steady flow of people to our website from Google and our My Google Business listing (very important!). Local outreach and networking are also great. For example, our kid’s school had a charity auction last weekend and we donated 250 cupcakes and six cakes to be auctioned off. That’s 250 potential new customers.
Tip 4: Understand the value of a customer and spend accordingly.
When running a business, it’s critical to understand the value of a customer, not only their intrinsic value but their potential dollar amount. Remember, their value is not only what they spend on one cake. A percentage of them will buy from you twice and a percentage will be lifelong customers.
Figure out how much revenue you make on average per cake. Once you know this number, you can start to look at your various marketing channels and see which ones make money. For example, we were spending about $10 per day on Facebook ads a few months ago. We realized that for every dollar we spent on Facebook marketing, we made about $3 to $4 more in revenue. Therefore, we upped our Facebook ad spending to $40 per day and guess what? We make a lot more cakes now and a lot more money.
Tip 5: Double-check everything.
Periodically, especially as you grow, make sure you’re double-checking what you’re doing. Things we regularly look at:
- Are we good on permits and insurance?
- Are our products priced appropriately in this market?
- How’s our website doing?
- Are we growing our social media? What else can we do?
- Do we have a plan in place in case someone can’t work?
Be patient. It takes time to build a successful cake shop!
Hopefully, these tips helped get the wheels turning in your head as you embark on your new adventure. It might take six months, it might take three years, but if you look at it as a process, it’s less important when you get there and more important that you are moving in the right direction.
If you have any specific questions, feel free to reach out to email@example.com and we’d be happy to help out in any way that we can! You can see more pictures of our beautiful cakes and also continue to follow our journey at Happy Cakes Bakery.