How to start a cupcake business

by Startacus Admin

Nothing quite says ‘wholesome small owner-run enterprise’ like a cupcake business. It’s a business model which has had a major overhaul thanks to the internet, and this has encouraged more and more people to trade in their briefcase for a baking tray,roll up their sleeves and get baking.

Aside from the obvious benefits of an unlimited supply of sweet tasty treats to munch on, there are loads of reasons why setting up a cupcake business is proving just too tempting to resist:

• You can operate it from your home with minimal renovations needed
• Startup costs are relatively low
• Allows you to be creative
• Is a very simple business model
• Provides great flexibility, allowing you to choose your working schedule
• A great starter business which can be grown and diversified into other areas of baking if it takes off.

Having said this, setting up a cupcake business is far from being ‘a piece of cake’, but never fear, this quick guide should get you thinking about some of the more important details.

Market Research

Everyone loves cupcakes right? So what’s the point of doing market research?

Do not be tempted to skip this step. Yes everyone loves cupcakes…thats’ a given, but undertaking market research is about much more than just establishing whether or not your product is something that people will want to buy. If completed correctly, your market research should help you to answer some key questions which need to be addressed at this early stage. Think about things like;

• What kind of cupcake business do you want to open? (Duh, one that sells cupcakes!) But...will you sell your product online or within a more traditional retail space? Will your cupcake business be a hybrid of the two, selling both on and offline?
• Will you only be meeting customers’ cupcake needs, or will you be branching off into other baked goods as well?
• Will your cupcakes be targeted at the general public or for use in events such as weddings?
• What opportunities are there in your local area to help spread the word about your new business? Does your local council operate any events where you could exhibit?
• If you will be focussing specifically on catering to events such as weddings, is there a high enough number of wedding venues in your area to support this?
• If you will be offering a cupcake delivery service, how will they be distributed, what will your delivery range be and will you charge an additional fee for this?
• Are there any businesses which already provide a similar service in your local area?
• How do the similar businesses in your area operate? Do they use the internet within their business model? How much do they charge for their services? Are they busy? Where do they attract most of their customers from?

Of course this section could go on and on, but the important thing to remember is that you shouldn’t pin down the specifics of the business until you have taken all of your market research into consideration. This way you will be in a good position to make an informed decision that will give your business the best chance of flourishing.

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Planning and Development

At this stage there are a number of details which need to be hammered out and plans which need to be made. Doing this will give you a clear vision of the businesses that you want to have and the model by which it will operate.

(Of course you also need to turn yourself into a master baker… we can't really help you with that, but we will gladly eat the misfires!)

To start solidifying your business vision, start thinking about things like;

• Have you written a business plan? If you haven’t is there anyone who could help you with this? It might be worth speaking to someone who already runs a business particularly someone who has experience of food production and distribution.
• Have you made a decision about where your business will be operating from? Is the location which you have chosen conducive for use in commercial food production?
• Many people choose this type of businesses because of the opportunities to operate it from their existing home but you must be realistic about the size of your location. Is there enough room for the equipment? Are there storage areas where your product may be kept before distribution? Is there an an appropriate storage location for the ingredients?
• Are there any renovations or alterations which need to be made to your chosen location to ready it for the production and distribution of your product?
• Are you going to have a speciality, for example weddings or children’s parties? If so, it is important that you solidify this now as it will have a significant influence on a number of key decisions from this point onwards.
• What will you name your business - Try to think of something catchy that will stick in people’s minds, for example if Startacus were to open a cupcake business we would call it Startacakes.
• How do your competitors market themselves? What can you learn from them and how can you ensure that your cupcake business is the one which appeals more to your target market? Are there any clever marketing strategies that you could employ?
• Start thinking about where you will advertise your new cupcake business. Are there any local papers or journals that you could write for about your experiences of starting the business? Startacus would be very happy to hear from you.
• Will you be working for the business full time from the get-go or will you be undertaking a day job for the time being?

Marketing

You could be baking the best cupcakes the world has ever seen, but the fact of the matter is, if no one knows about them, you won't sell a single one. This is where your marketing campaign comes in. You may think that this term is somewhat convoluted for a cottage industry like a cupcake business, but you mustn't be complacent, as failing to exact a proper marketing campaign could mean the difference between success and failure. Here are a few examples of the kinds of things that you should be considering;

• Have you written up a marketing strategy yet? If not, do you know anyone who may have experience of putting one together?

• How do you plan to announce your business’ arrival into the world? A press release, a launch day and perhaps a feature in a local paper - is your story of setting up a cupcake business particularly inspiring or unique? If you need some inspiration, check out Carol Drake, whose cupcake business was borne from her battle with breast cancer. http://startacus.net/culture/self-employed-stories-alices-cupcakes-the-interview

• How can you use the internet to promote your business? This is an important factor to consider even if you are not going to be carrying out any online transactions because of the sheer numbers of people which the internet can give your business exposure to.

• Will you be having an online retail space? If so, do you plan to have this custom designed or will you be using an online retail service provider?

• In what ways do you plan to use social media to increase the exposure of your business? It’s a good idea to have active social media pages such as Twitter and Facebook.

• If you put the work in you should be able to build up a significant following on social media sites. You should seek to capitalise on your work’s visual appeal by showing it off on sites such as Pinterest.

• If you have expertise in baking and/or cake decoration are there any sites or communities for which you could write?

• Who will be managing the online/social media promotion of the business? (If you need a little bit of help getting to grips with the notion of social media as a business tool then take a look at our guide on using it to promote your startup.

• How do your competitors go about marketing themselves? What can you do to ensure that your business is the more appealing choice for your target market? Are there any clever marketing strategies that you could employ to tempt business away from them?

• Could you set up shop at a local event? Is there a local food market where you would be able to raise awareness of your business?

• If you plan to cater to particular events such as weddings, are there any specific events taking place in the local area where you could give a bit of exposure to your business?

Business practicals

These are the little things which tend to get forgotten about or put off repeatedly whilst people get on with the more urgent aspects of setting up a business…but this often leads to a major headache further down the line which can seriously affect your ability to operate your business successively. So it’s really important that your get your head around all of the fiddly business practices as soon as you can!

• Make sure that you get all licences required to make and sell food and drink in your council area - You can find out what requirements there are, by speaking to your local licensing authority.

• Remember that you have to register your premises with the environmental health service of your local authority at least 28 days before opening.

• Do you have a good knowledge and understanding of food hygiene and safety recommendations/requirements? If not, have you considered taking a course to ensure that you are as up to date with these issues as possible?

• Remember that you are legally obligated to register your businesses with HMRC no matter how small it is. You must also register as an employer (since you will be technically employing yourself)

• Hopefully this avalanche of information doesn’t put you off. Yes - setting up a cupcake business is a lot of hard work, but it’s also loads of fun, and just think how popular you will be with all your friends and family!

If however your concern for your waistline outweighs your desire to sell baked goods, then maybe you would like to check out some of these other startup business guides?

How to start a b&b

How to start a landscape gardening business

How to start a sweetshop

How to start a cleaning service

*information provided correct at time of publication but please do check current legislation as rules and regulations do change*

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Published on: 9th April 2014