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How To Start A Cookie Business

How To Start A Cookie Business

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How To Start A Cookie Business

How To Start A Cookie Business

Are you able to whip up a batch of the most amazing, perfectly formed homemade cookies in no time at all? Are you happiest experimenting with flavor combinations surrounded by your cookie recipe collection, spatulas, bags of flour, chocolate chips, and rolling pins?  Are you always asked to bring baked goods to a party because yours is the best?

If that sounds a bit like you, then why not turn your passion into a money maker and start a cookie business? This is a great home-based opportunity to become your own boss and test the waters without the burden of high start-up costs.

While knowing how to whip up a batch of mouth-watering cookies is a given, you’ll need more than just baking skills to succeed in this industry. From understanding the industry to navigating the regulatory landscape and more, our guide will walk you through the process step by step. 

Business Description

A cookie business specializes in creating and selling a variety of delectable cookies. Whether it’s classic chocolate chip, gluten-free treats, or vegan options, the possibilities are endless. Apart from traditional cookies, you can also explore niche markets, such as gourmet or themed cookies.

A cookie business can range from a small, home-based operation to a full-scale commercial bakery. To make money, a cookie business generates revenue through the sale of cookies. This can be achieved through various channels, including direct sales to customers at a physical store, selling online through e-commerce platforms, or supplying cookies to wholesale clients such as cafes, restaurants, and grocery stores. Additionally, offering customization options, gift packages, and catering services can further enhance revenue streams.

The relatively low barriers to entry also make the cookie business an appealing opportunity for entrepreneurs. Startup costs range from $10,000 to $50,000, and the hands-on processes lend well to small-scale production out of home or rented kitchens. This ability to test concepts at local markets enables iterative growth, both in perfecting recipes and business practices.

Industry Summary

The cookie business industry in the United States is incredibly vibrant and continues to grow steadily. According to market research, the cookie industry generated over $11 billion in 2023 and is projected to grow by 9.1% annually through 2028.1

The growth of the cookie business industry can be attributed to several factors. First, the increasing demand for convenient, ready-to-eat snacks contributes to the popularity of cookies. Second, consumers are becoming more conscious about the quality and ingredients of their food, leading to a rise in demand for artisanal and healthier cookie options. Additionally, the rising trend of gifting cookies for special occasions and celebrations presents a lucrative market opportunity for cookie businesses.

While large companies such as Campbell Soup Co, Kellogg Company, Ferrero Group, and Mondelez International, Inc. dominate mainstream cookie sales, there is plenty of room in this vast market for independent startups carving out a niche in specialty or locally-made products. By leveraging their artistry and customer relationships, small cookie enterprises can bake up some tasty profits.

Step 1: Write a Business Plan

Starting a cookie business not only requires baking skills and creativity but also a business plan to help you navigate this journey more successfully. A business plan acts as a roadmap, offering direction and structure to help guide you through the startup process.

The marketing section is one area of the business to pay extra attention to. Here, you are prompted to research consumer preferences and identify trends so you can better tailor your products to meet specific demands. This research also helps determine whether there is a demand for another cookie business in your area, whether there are untapped niche opportunities, and how you can differentiate yourself from your competitors.

Another important area of a business plan is financial projections, where you will estimate the initial startup costs, forecast revenues, and assess the potential profitability of your cookie business. Here, you will also calculate the costs of ingredients, packaging, equipment, and labor so you can determine a profitable price point for your cookies.

Related: How to write a business plan

Step 2: Source Funding

Starting a cookie business requires not only a passion for baking but also the necessary funds to kickstart your venture. While the idea of securing financing may seem overwhelming, don’t worry; you’re not alone. Most entrepreneurs face this hurdle when starting a small business, and there are several options to consider. Let’s take a closer look at some of them:

Personal investment: The first source of funding to assess is your own personal savings. Before exploring external funding sources, it’s important to evaluate your personal savings and determine how much you can allocate toward financing your business. If your personal savings fall short of covering the startup costs, you’ll need to consider external funding sources.

Lenders: When seeking external funding, lenders are a common option. Most lenders typically require borrowers to invest between 15% and 25% of their personal funds into the total cost of the project. Additionally, they may require a good credit score and collateral. In some cases, if the bank requires additional security, they can utilize a Small Business Administration (SBA) loan guarantee to back the loan.

Home equity loans: If you own a home, another potential source of funding is a home equity loan. This type of loan allows you to borrow against the equity in your home, providing you with the necessary funds to invest in your cookie business.

Friends and family: Another avenue to explore is seeking financial support from friends and family. While this can be a valuable source of funding, it’s important to approach it with caution. To avoid potential conflicts, it’s advisable to put any agreements or investments in writing.

Microloans: Another option to consider is microloan programs offered by nonprofit organizations or community development financial institutions. Microloans provide small businesses access to capital and can be particularly beneficial for startups with limited credit history or collateral.

Business credit cards: In certain cases, business credit cards can serve as a short-term financing option for your cookie business. However, it’s important to be mindful of the high interest rates associated with these funds if they aren’t paid back.

Related: Finding the money to start a business

Step 3: Register the Business

The next step is to properly register and make your cookie business legal. There are a few important tasks to follow, but keep in mind that each state has different requirements, so it’s essential to research the specific regulations in your area.

Business structure: The first decision to make is choosing a business structure. There are four main types of business structures: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

  • Sole proprietorship: This is the simplest form of business structure, ideal for individuals who own and run their businesses. The main advantage of a sole proprietorship is the ease of startup and low cost.
  • General partnership: If you’re planning to run the business with a partner, a general partnership is an option. It allows two or more people to share the profits, losses, liabilities, and management of the business.
  • Corporation: A corporation is a legal entity separate from its owners, providing personal liability protection. This means the owners are not personally responsible for the business’s debts and liabilities.
  • Limited Liability Company (LLC): An LLC combines the personal liability protection of a corporation with the operational flexibility of a sole proprietorship or partnership.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular LLC formation services include:

IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain health department permits: Depending on your location, you may need various licenses and permits to operate your cookie company legally. These might include health permits, food handler’s permits, and potentially a commercial kitchen license. Contact your local health department and regulatory agencies to understand and fulfill these requirements.

Comply with food safety regulations: As a food business, there are federal, state, and local food safety regulations to follow. This includes proper food handling, preparation, and storage practices. Regular health inspections might be necessary to ensure compliance.

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general business registrations needed before opening. These could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 4: Acquire the Kitchen & Set Up Operations

After rounding up the money and getting the business registered, the next step is a pretty fun one, where you commit to a location and start setting up shop.

The first task is to decide whether to run your business from home, rent a commercial kitchen, or open a retail storefront. Each option has unique requirements and cost implications. If you opt for a commercial kitchen or retail space, before signing a lease or purchasing, verify it complies with local health codes or can be renovated to do so. For those considering a home-based operation, it’s important to research whether there are zoning laws that would restrict operations. There are also cottage food laws in most states that allow relaxed requirements for small home-based businesses. Check with your local health department to learn more about the requirements.

Whether baking in a home kitchen or commercial facility, cookie entrepreneurs need to budget for the purchase of key equipment like standing mixers, sheet pans, cooling racks, dough rollers, etc. Specialty tools may include cookie presses, decorating supplies, and merchandising displays. Less expensive personal equipment may be fine in the beginning for some things, but commercial-grade equipment may be needed for other items that withstand heavy usage.

Last, having a consistent supply of quality raw materials is important. Depending on your volume, local grocery stores or warehouse clubs will often be fine starting out for flour, eggs, sugar, butter, and other ingredients, but as the business grows, a dedicated supplier may be a better choice. Also, don’t overlook finding suppliers for packaging materials like boxes, bags, and labels.

Step 5: Set Up Distribution & Marketing

Next, it’s time to plan how you are going to get your cookies into the hands (and mouths) of your customers. This means setting up distribution channels and creating a marketing strategy. A few considerations in this phase.

Set up distribution channels: Your distribution channels are the routes your cookies will take to reach your customers. Depending on your business model, consider potential options such as grocery stores, mass merchandisers, farmer’s markets, cafes, and online platforms. Each method has its unique considerations for packaging, delivery, and pricing. For example, if you plan to sell online, you’ll need to ensure your cookies are packed securely for shipping, and shipping rates are feasible. Also, before exploring larger retail partnerships with chains or distributors, mastering production quality and volumes at this “handcrafted” level allows for perfecting recipes, presentation, and packaging.

Build a strong brand: Branding is a way to differentiate your business from its competitors. Create a catchy business name, a professional logo, and a clear message about what your business offers. Also, consider trademarking your business name and logo to protect your brand.

Develop marketing strategies: With the distribution channels and branding in place, you can build a marketing strategy that is relevant to your customers. Here, you can develop a strong company brand, labels, and packaging. If operating online, launch a website that highlights products, custom order options, company personality, and values. You can also use social media platforms like Facebook and Instagram as effective marketing tools. Engage with your potential customers, respond to comments, and create engaging content or eye-catching cookie images that will entice them to try your cookies.

Step 6: Prepare to Open!

Starting a cookie business involves not only the core steps that were previously mentioned but there will be some minor tasks to take care of. These tasks may vary depending on your specific needs and circumstances, but we have listed some of the more common ones below.

Hiring: If you plan to hire employees for your cookie business, it’s important to research the requirements and responsibilities of being an employer. This may include understanding labor laws, payroll obligations, and any necessary permits or licenses.

Business insurance: Consider obtaining different types of insurance coverage, such as general liability insurance, product liability insurance (specific to the food industry), and property insurance to safeguard your business assets.

Setting up bookkeeping: Whether you decide to hire a bookkeeper or use accounting software, setting up a system for handling daily transactions, taxes, and financial statements will help keep your financial house in order.

Opening a business bank account: Separate your personal and business finances by opening a dedicated business bank account. This will help you track your income and expenses more efficiently and make it easier to manage your finances come tax season.

Accepting credit cards: Offering multiple payment options can make it easier for customers to purchase your cookies. Setting up a credit card processing system like one from Square or Stripe is an easy way to do this.

Preparing for the grand opening: Plan and prepare for the grand opening of your cookie business. Consider factors such as marketing promotions, organizing an opening event, creating buzz through social media, and ensuring you have enough inventory and staffing for a successful launch!

Starting a cookie business can involve various costs, which can vary depending on your chosen business model and the equipment you already have available. To provide an example, let’s look at starting as a home-based cookie business. In this model, a rough estimate to get started could range from $2,000 to $10,000.

Kitchen modifications: One of the most significant expenses when starting a home-based cookie business could be modifying your kitchen to meet local health and safety regulations. This can include costs for renovations or equipment upgrades, and you can expect to spend between $500 and $2,000 on these modifications.

Equipment and supplies: Depending on what you already have on hand, equipment for baking and packaging cookies, such as mixers, baking sheets, cooling racks, and packaging materials, need to be purchased and can cost approximately $500 to $2,000. Additionally, consider expenses for utensils, measuring tools, storage, and any specialized equipment you may need.

Business registration: Depending on your location, the legal structure of your business, and local licensing, the cost of business registration can vary. On average, you could expect to pay around $100 to $1,000 to register your business.

Insurance: Liability coverage for a home-based baker may run $400 to $600 annually.

Marketing: Initial marketing efforts for your cookie business might include creating a website, designing a logo, and advertising. The cost for these initial marketing efforts can range from $500 to $1,000.

While it is challenging to provide a precise estimate of the profitability of a cookie business, let’s look at some industry statistics and assumptions of a small home-based cookie business that sells at farmer’s markets and local events.

Revenue: Let’s assume you sell your cookies at $2 each and attend two farmers’ markets or local events per week. If you sell 200 cookies per event, your weekly revenue would be 2 * 200 * 2 = $800. Over a month, this amounts to approximately $3,200.

Expenses: The cost of ingredients for a batch of cookies can vary widely depending on the recipe, but let’s assume it costs $5 to make a dozen cookies, or about $0.42 per cookie. If you’re making 400 cookies per week, your weekly cost for ingredients would be 400 * $0.42 = $168, or approximately $672 per month.

Other recurring expenses include market stall fees, which can range from $25 to $100 per event, so let’s use a middle-ground estimate of $62.50 per event. This would amount to $500 per month if you’re attending eight events. In addition, you would have credit card processing fees, vehicle expenses, marketing, and office supplies that add an extra $200 per month.

This brings your total monthly expenses to $672 (ingredients) + $500 (stall fees) – $200 (other expenses) = $1,372.

Profit: Subtracting your expenses from your revenue gives you a monthly profit of $3,200 (revenue) – $1,372 (expenses) = $1,828.

What is the NAICS code for a cookie business?

The NAICS code for a cookie business is 311821, which is classified as cookie and cracker manufacturing.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?


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How To Start A Cookie Business

How To Start A Cookie Business

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